UK Equity Income leaps ahead of other IA sectors

If anything, the macroeconomic uncertainty may be spurring investors towards these areas, with the Investment Association (IA) revealing UK Equity Income was the best-selling area in August with £520m of net retail sales.

The sector, which has topped the rankings for eight of the past 12 months, recorded more than double the net retail sales of the next most popular sector – Targeted Absolute Return – which only managed £242m of sales. Meanwhile, Global Equity Income just sneaked into the top-10 sectors, with a much lower £54m of net retail sales.

The IA suggests while market volatility may have made investors more cautious in August, as sales were lower overall, some sectors remain popular. “In terms of asset allocation, investors appear to be sticking with equities – particularly equity income funds – while withdrawing money from bonds, perhaps in expectation of an interest rate rise,” it said.

A continued focus on domestic equity income, rather than a more global portfolio, is not surprising given much of the market volatility has emanated from overseas, particularly emerging markets.

Performance figures support this choice, with the IA UK Equity Income sector delivering a steady 55 per cent average return for the five years to September 30 2015, compared with the 42.8 per cent return from the IA Global Equity Income sector.

Within these broad sectors there are those that have surged ahead and those that have struggled, although all the funds in both categories have delivered a positive return in the past five years.

The UK Equity Income sector provides the widest range of returns, with the Fraser Mackersie and Simon Moon-managed £588m Unicorn UK Income fund topping the list with a five-year return of 111 per cent, data from FE Analytics shows. It also sits in the top 10 of the sector across one, three and 10 years.

At the other end of the scale, the much smaller £10m Elite Charteris Premium Income fund delivered a less promising 2.4 per cent, while the Scottish Widows HIFML UK High Income vehicle is second to last across five years with 18.4 per cent. Meanwhile, the Global Equity Income sector is led by Jacob de Tusch-Lec’s £2.4bn Artemis Global Income fund, which has delivered a table-topping five-year return of 79 per cent.

With the outlook for equities likely to remain volatile for the rest of 2015, diversified equity income funds look set to stay a firm favourite with investors.

Nyree Stewart is features editor at Investment Adviser

EQUITY INCOME IN NUMBERS

£520m

Net retail sales for the IA UK Equity Income sector in August this year

8

Number of months in the past year that UK Equity Income has been the best-selling sector

42.8%

Average return from the IA Global Equity Income sector for the five years to September 30 2015