The year so far has been a period of huge change for investors as they have had to contend with a sharp rotation away from the cosy comfort of growth stocks, which have performed so consistently well for the past decade.
This abrupt shift has caused many to look for pastures new, in some cases for the first time ever, and search for value portfolios that have held up well in the current conditions.
Income funds are a natural home for these value stocks for two reasons. Firstly, companies that pay dividends usually do so because there are not the huge growth opportunities in their sector and therefore there is excess cash to return to shareholders.
Secondly, a higher the dividend yield can imply that the company is on a lower valuation, as the market believes the income comes with a lot of risk.
As such, investors have been allocating more to sectors that specialise in income, with the IA UK Equity Income sector experiencing net inflows for the first time in May.
Below, Trustnet looks at the funds in both the IA UK Equity Income and IA Global Equity Income sectors that have attracted money from investors this year.
Within the UK sector, Vanguard FTSE UK Equity Income Index proved the most popular among investors, with a net £271m added to the portfolio in the first six months of 2022.
The passive fund tracks a UK income benchmark and is heavily weighted to oil and financials as a result – two sectors that have held up well so far this year.
Asa result, it has been the best performing fund over the past year, up 14.5% at a time when the FTSE All Share has made 6.4%.
Source: FE Analytics
The top active fund from the sector, meanwhile, was TM Redwheel UK Equity Income, which has struggled so far in 2022 (down 5.1%) but is coming off the back of an incredibly strong 2021, when it was a top-quartile performer, up 24.8%.
Allianz UK Listed Equity Income and GAM UK Equity Income were the only other funds in the sector to take in more than £100m in the first half of the year.
Meanwhile, in terms of outflows, IA UK Equity Income funds that focused on multi-cap investing (buying companies that range from the FTSE 100 to the FTSE Small Cap and Aim indices) struggled.
Source: FE Analytics
Mid- and small-caps have lagged behind in 2022, with only the mega cap companies in value-driven sectors performing well.
As such, IFSL Marlborough Multi Cap Income was the most sold income fund in the first half of 2022, while Premier Miton UK Multi Cap Income and ASI UK Income Unconstrained Equity also made the list.
Turning to the IA Global Equity Income sector, Fidelity Global Dividend came out on top as the most bought fund after taking in £773.9m.
It is the second biggest fund in the peer group, behind only BNY Mellon Global Income, which topped the outflows list. The BNY portfolio was the only fund in the sector where investors pulled out more than £100m, as the below table shows.
Source: FE Analytics
Elsewhere, there was some respite for Baillie Gifford in this study, after three of the Edinburgh-based investment house’s funds appeared in the most sold global funds earlier this week. Baillie Gifford Responsible Global Equity Income took in £444.1m over the first half of the year.
TB Evenlode Global Income broke the mould of quality-growth funds being sold off, taking in around £250m, while the Trojan Global Income fund added a further £195m to its assets under management.