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The equity income funds we're picking amid the turmoil
Income fund managers are falling like nine pins with Tineke Frikkee of Newton Higher Income the latest to go. Here's a reminder of our favourite funds.
Markets
There has been another important management change in the UK Equity Income fund sector.
Hot on the heels of news that Tony Nutt will step back from running the Jupiter Income fund next month has come the announcement that Tineke Frikkee has been replaced as manager of the £2.2 billion Newton Higher Income fund.
The fund has struggled to keep up with its main rivals in over the past three and five years with its performance hampered by a high yield target that put investors’ capital at risk. Recently, Frikkee has held 8% of the fund in cash, a large position reflecting her concerns about the future prospects for company profits and dividends.
Last year, in a bid to improve performance, Newton cut the fund’s income target to increase the number of stocks it could choose from. That prompted our Citywire Selection team to place the fund under review. It was dropped from their list of recommendations at the start of this year.
Frikkee, who has managed Newton Higher Income since 2004, passes the reins to Richard Wilmot, the manager in charge of the Newton UK Equity fund, which absorbed the group’s Income and Growth funds in a bout of corporate spring cleaning this year.
Wilmot is currently A-rated by Citywire for his three-year performance figures whereas Frikkee was last rated in June 2011.
Newton has said it will relax the fund’s methodology yet again. Where previously the fund bought stocks that yielded 15% more than the general stock market and sold them when their yield fell in line with the average of companies on the FTSE All Share index, it will now buy at 75% of the market yield and sell at 50%. This relaxation will allow the new manager to pick companies he thinks will grow their dividends over time. The previous limits meant the fund was picking stocks near the upper end of their ability to pay good dividends.
Linked to this is another change. The fund's income yield, which once stood at 7%, will be cut again over the next 18 months and move to a new target of just 10% above the FTSE All Share yield over three years. The index currently yields 3.6% meaning the fund would aim to pay an income of around 4% a year if the strategy was adopted today.
Citywire's favourite income funds
Our Citywire Selection team have picked eleven equity income funds they like.
These include Newton Higher Income’s stable mate, the Newton Global Higher Income fund run by James Harries.
Most of the Citywire Selection picks are UK funds, including the sector leader Invesco Perpetual High Income run by Neil Woodford, which has a tremendous long-term track record.
Less well known but equally impressive over shorter time periods are the Trojan Income , Artemis Income , Threadneedle UK Equity Income , JOHCM UK Equity Income and Neptune Income funds.
You can find out more about these funds by following the links to their fact sheets. Five of them also appeared in our ISA 2012 income funds special report.
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Look up the funds
- Newton Higher Income GBP Inc
- Newton UK Equity GBP Inc
- Newton Global Higher Income GBP Inc
- Invesco Perpetual High Income Inc
- Trojan Income O Acc
- Artemis Income R Inc
- Threadneedle UK Equity Income C1
- JOHCM UK Equity Income GBP Acc Retail
- Neptune Income A Acc GBP
Look up the fund managers
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A new look at fund charges and why they matter
by Gavin Lumsden on May 17, 2013 at 13:49
8 comments so far. Why not have your say?
Ian Burgess
Dec 10, 2012 at 17:21
And what has happened to Tineke Frikkee? Given her cards?
report thisrik
Dec 10, 2012 at 21:20
All telling us what a waste of your hard earned paying a fund manager is!
report thisRuth Colvin
Dec 11, 2012 at 18:50
I bought into Artemis Income in Q4 2010 at 165.51p. Todays price is shown as 171.3p on H Lansdowne - is it possible to reconcile your demonstration of the Artemis increase in value to the data available to me?
report thisthe scout
Dec 14, 2012 at 16:17
I think it is down to timing. HL prices are the latest prices whereas Citywire's data is based on prices two or three weeks old.
report thisblueit
Dec 15, 2012 at 09:58
chelverton, unicorn are they too adventures
report thisTony Peterson
Dec 15, 2012 at 15:44
The terrible performance of fund managers is caused the scale of their offtakes, not their amusing strategies. But holding 8% in cash - how silly can you get.
Even an idiot like me can outplay them.
report thisTony Peterson
Dec 15, 2012 at 15:45
Sorry, that should have been "by the scale".
report thisChairman2
Jan 07, 2013 at 08:16
Biggest problem for me is concentration
all the funds invest in largely similar portfolios
and I have several which I hold directly.
The level of risk is just so great.
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