Top Equity Income Funds with Yields Exceeding 4.75%

Introduction to High-Yield Funds

As interest rates surged post-pandemic, cash became a formidable alternative to dividend-paying equities. Recent findings from Trustnet reveal only five equity income funds that boast yields over 4.75% without compromising on total returns, making them a prime consideration for investors seeking income.

Current Landscape of High-Yield Funds

According to Moneyfactscompare, the annual equivalent rate (AER) for easy access savings accounts stands resolutely at 4.75%. This rate sets a healthy benchmark for investors exploring equity income options, particularly within the IA UK Equity Income and IA Global Equity Income sectors.

Out of 22 investment strategies within these sectors that yield above this threshold, only a select few have produced commendable total returns that rank in the top quartile of their respective peer groups.

Overview of Leading Funds

1. Schroder Income Maximiser Fund

Topping the list is the £881m Schroder Income Maximiser fund, achieving a remarkable yield of 6.9% alongside a total return of 122.5%, ranking it sixth in the IA UK Equity Income sector. The fund’s strategy leans heavily towards consumer discretionary and staples, notably holding Sainsbury’s and Tesco, while eschewing prominent financial stocks like HSBC.

• Performance Insights:
  • Target yield: 7%
  • Investment Focus: UK equities with covered call options
  • Historical Performance: Top-quartile returns across one, three, and ten-year periods

Despite recent leadership changes, this fund remains a standout in performance.

2. Man Income Fund

Next in line is the Man Income fund, currently yielding 5% and boasting a total five-year return of 108.8%. The fund, under the adept management of Henry Dixon, aims to consistently exceed the FTSE All Share yield while enhancing capital appreciation over longer periods.

• Investment Strategy:
  • Focus on companies trading at distressed levels
  • Opportunities in bonds when they present better value than equities

Dixon’s disciplined approach has served investors well, particularly through strategic overweight positions in energy and financial sectors during favorable market conditions.

3. JOHCM UK Equity Income Fund

Led by Clive Beagles and James Lowen, the JOHCM UK Equity Income fund yields 4.9% and delivers the third-best performance in its sector over the past five years. This fund emphasizes strict dividend yield discipline, targeting shares that exceed the FTSE All Share yield.

• Team Performance:
  • Established team with a proven track record
  • Preference for undervalued stocks, leading to potentially significant long-term gains

Despite periods of volatility, the fund’s focus on smaller companies may lead to rewarding outcomes.

4. Jupiter UK Income Fund

The £1.6bn Jupiter UK Income fund, managed by Adrian Gosden and Chris Morrison, presents an attractive yield of 4.82% with a five-year return of 114.3%. This fund emphasizes sustainable cash flow generation, ensuring that income is prioritized without risking capital.

• Investment Approach:
  • Concentration on a manageable portfolio (around 45-60 holdings)
  • Commitment to a premium yield while protecting capital

Analysts commend this small but efficient management team for their expertise and past successes.

5. Jupiter UK Multi-Cap Income Fund

Rounding out the top five, the Jupiter UK Multi-Cap Income fund, another offering from Gosden and Morrison, delivers a yield of 5.22% alongside a five-year total return of 104%.

Performance Over Time: Visual Insights

Below are performance charts comparing these funds against their sector benchmarks over five years, illustrating their resilience and strong positioning within the equity income landscape:

1. Schroder Income Maximiser Fund
   

2. Man Income Fund
   

3. JOHCM UK Equity Income Fund
   

4. Jupiter UK Income Fund
   

Conclusion: Making Your Move

For investors seeking robust income options without sacrificing total returns, these five equity income funds present viable pathways. By carefully evaluating their strategies, historical performance, and management expertise, investors can choose wisely in line with their objectives, especially in a market landscape where cash yields are increasingly competitive.