According to research by Rostrum, the fund is the second most-recommended fund among advisers, behind only Invesco Perpetual High Income.
The equity part of the £2.6bn portfolio is now managed by Ciaran Mallon, one of the less well-known of Invesco’s managers, raising the question whether investors should be considering alternatives.
Rob Morgan of Charles Stanley Direct says that he doesn’t know Mallon as well as he would like, although he thinks that the bond team – FE Alpha Managers Paul Read and Paul Causer – is strong enough for investors to keep faith with it.
"We will be looking at it, but I am not worried about it," he said. "I don’t anticipate too many changes to the portfolio."
"The first thing to say is that the majority of the assets are under Paul Read and Paul Causer, so there’s no problem there. Paul Read and Paul Causer have done a tremendous job on the bond side."
"To be honest, they have generally taken the reins of that fund and have tended to decide on the equity allocation of the portfolio."
It’s not hard to see why the fund is so popular: it has produced the best returns in the IMA Mixed Investment 20%-60% Shares sector over three and five years, with a top-quartile yield. Over the last year it has paid out 5.04 per cent, according to FE Analytics.
Morgan says that the members of Invesco’s team are all long-term managers, and he would expect Ciaran Mallon to continue in the same vein. However, there is no question the manager’s record falls a little short of Woodford’s.
FE data shows the £563m Invesco Perpetual Income & Growth fund has returned 81.76 per cent since Mallon took over in July 2005. The average return in the sector is 75.25 per cent.
Woodford’s Income and High Income funds have beaten this figure, both returning more than 114 per cent.
Performance of funds vs sector since July 2005
Source: FE Analytics
Some investors may not share Morgan’s confidence, therefore, and it would certainly be reasonable to start looking at alternatives. The Invesco fund’s performance has been so good that there are few that fit the bill.
Jupiter Merlin Income
"The other one that I like in that area is Jupiter Merlin Income, a very different type of fund," Morgan said.
Jupiter Merlin is a range of funds of funds, the largest of which is the income one, at £4.7bn.
It has gone off the boil in the last year, with its returns hit hard by the emerging markets crisis; however, its long-term track record is excellent.
The fund has returned 72.51 per cent over five years while the average fund in the IMA Mixed Investment 20%-60% Shares sector is up just 49.12 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
It has paid out 3.14 per cent over the last year, according to FE Analytics data, substantially less than the Invesco fund.
One of the major drawbacks is the cost: the ongoing charges on the fund are 2.33 per cent compared with 1.56 per cent for Invesco Perpetual Distribution.
F&C MM Navigator Distribution
Another fund of funds with a similar performance profile is the £753.2m F&C MM Navigator Distribution, run by Gary Potter and Rob Burdett.
The fund has paid out 4.94 per cent over the past year and has produced top-quartile returns over three and five years.
Over five years it has made 66.42 per cent, according to data from FE Analytics. It has had a rougher time over three years, though its poor performance in 2011 has been offset to some extent by its strong returns this year.
Over three years the fund has returned 20.58 per cent to the sector’s 16.58 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
Like the Merlin fund, it is much more international in focus than the Invesco portfolio, making it a hard sell as a strict alternative.
Invesco Perpetual Distribution has a 63.25 per cent weighting to the UK, including equities and fixed interest. The F&C fund has only 24.37 per cent in the country.
It is another expensive fund, however, with ongoing charges of 2.41 per cent.
Aviva Distribution
A fund with a similar footprint is the £105m Aviva Distribution fund, run by Chris Murphy and James Vokins.
It invests directly in equities and bonds, and currently has 72.5 per cent in the UK. Like all the funds on the list, it is at the upper end of its equities range.
The fund gets much less attention than the others on the list, but has done well in FE's rating systems and has five FE Crowns.
It has made 27.3 per cent over the last three years compared with 16.58 per cent from its sector.
Performance of fund vs sector over 3yrs
Source: FE Analytics
This is the ninth-best result in the sector, while the fund’s five-year returns put it sixth. However, the fund falls down slightly on yield. Over the past 12 months it has paid out 2.97 per cent, although the current headline yield is a healthy 3.5 per cent.
It also has the advantage of being much cheaper, with ongoing charges of just 1.39 per cent.
Newton Managed Income
The £158m Newton Managed Income fund is another one that often slips under the radar despite outstanding results. It has five FE Crowns and has an FE Alpha Manager in Tim Wilson.
It is another fund of funds, but is different from the others in that it is fettered. This means it only buys other Newton funds, which keeps charges low: they are currently at 1.4 per cent.
It is cautiously positioned, with 38 per cent in bonds and a further 18.5 per cent in cash. It is an international fund, with only 18 per cent in the UK.
