While the first port of call for investors in the UK market is the UK Equity Income sector, there are a handful of funds in the IMA UK All Companies sector with a yield of more than 3 per cent and decent growth potential to match.
Here is a selection that may be worth considering:
CF Liontrust Macro UK Growth – 3.4 per cent
FE Alpha Manager Jan Luthman and Stephen Bailey’s £117.1m portfolio has a yield only 0.3 percentage points lower than that of Neil Woodford’s Invesco Perpetual Income fund, even though it does not have a specific income focus.
The bulk of its assets are currently invested in mega cap blue chips, although it has 9.39 per cent in the FTSE 250 and 6.13 per cent in the FTSE Small Cap.
Mid cap company Anglo Pacific is among the managers’ top-10 holdings.
Performance of fund vs index and sectors over 10-yrs
Source: FE Analytics
According to FE data, CF Liontrust Macro UK Growth has returned 187.64 per cent over the last decade, vastly outperforming the average UK growth and UK Equity Income funds, as well as the All Share.
It has also beaten both sectors and the index over five years, although over three it has performed in line with each one.
It has a top-down focus, meaning that it pays more attention to sector calls rather than stocks. It is currently overweight healthcare and oil & gas.
The fund has a minimum investment of £1,000 and a total expense ratio (TER) of 1.56 per cent.
Standard Life UK Equity High Alpha – 3.04 per cent
Manager Ed Legget is usually associated with high-Beta portfolios that perform best when the markets are rising.
While Standard Life UK Equity High Alpha fits this mould, it has the added advantage of offering investors a competitive yield – currently 3.04 per cent, which is higher than a handful of UK Equity Income funds, and income-focused multi-asset portfolios such as Jupiter Merlin Income.
Performance of funds vs sector over 5-yrs
Source: FE Analytics
According to FE data, the fund is up 21.26 per cent, significantly beating both its sector average and benchmark, albeit with a lot more volatility.
The £44m portfolio is very much a multi-cap fund, with 49.2 per cent invested in the FTSE 100, 39.9 per cent in the FTSE 250 and the rest in the FTSE Small Cap and non-recognised indices.
Legget was appointed manager of the portfolio in November 2006. His fund has a TER of 1.61 per cent.
JOHCM UK Opportunities – 3.04 per cent
The five crown-rated JOHCM UK Opportunities fund is also yielding 3.04 per cent, but unlike Standard Life UK Equity High Alpha, it is one of the most consistent and least volatile in the IMA UK All Companies sector.
FE Alpha Manager John Wood and co-manager Ben Leyland’s fund invests across the market cap spectrum, with FTSE 100 giants such as Glaxo and Vodafone as well as smaller companies in the index such as Compass Group and Smith & Nephew among its top-10 holdings. It also has a slight overweight in mid caps.
The fund is a top-decile performer in the UK All Companies sector over a five-year period and a top-quartile performer over three.
It is also one of the least volatile portfolios of its kind: in 2008, it lost 18.96 per cent – a full 13 percentage points less than its sector average.
JOHCM UK Opportunities has a TER of 1.29 per cent, but charges an annual performance fee of 15 per cent on any returns above its FTSE All Share index.