Interactive Investor

Funds and trusts with yields above 5% that are also top performers

Income has risen up the investment agenda due to higher interest rates and runaway inflation. Sam Benstead looks at some fund ideas to benefit.

30th October 2023 10:20

by Sam Benstead from interactive investor

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Heading into 2024, the inflation rate in the UK is predicted to have dropped to around 5%. This makes a 5% income target a good benchmark for investors keen for their investments to help fund their lifestyle and hold onto their real value.  

While achieving a 5% yield from a fund used to be difficult requirement, rising interest rate rises have pushed UK and US government bond yields to around that level, making the task far easier.  

But just hunting for a high yield is not enough – investors should also pay attention to which funds are the top performers relative to their peers in the hope that the best-performing fund managers can continue to do well.  

I narrowed down the Investment Association’s fund universe of more than 5,000 funds to just 31 that currently yield more than 5%, and which have beaten three-quarters of their peer group over the past decade. 

These are the funds that made it into this exclusive club.  

Equity funds 

Data from FE Analytics revealed five equity funds that made the grade: Rathbone Income (5.04% yield), Janus Henderson Japan Opportunities (5.8% yield), Liontrust Latin America (6.84% yield), Schorder Income (5.27% yield) and Man GLG Income Professional (5.73% yield).  

Despite all being top performers among peers, returns for investors have been mixed due to the range of sectors that they invest in.  

The best performer over a decade has been Janus Henderson Japan Opportunities, which has risen 137%. The worst has been Liontrust Latin America, which is up just 28% over 10 years. 

In terms of size, Janus Henderson Japan Opportunities and Liontrust Latin America are small funds, with around £30 million invested while the other three are larger, with Man GLG Income Professional and Schroder Income with more than £1 billion in assets.  

Bond funds 

Owing to rising interest rates, the bulk of the funds meeting this strict criteria invested in bonds, which made up 18 of the 31 funds represented.  

The highest yielding funds include TwentyFour Dynamic Bond (9.56% yield), Gam Star Cat Bond (8% yield) and Aegon High Yield Bond (7.9%) yield.  

Large funds to make the list include Royal London Sterling Credit (£2.2 billion in assets and 5.1% yield), Rathbone Ethical Bond (£2 billion in assets and 5.1% yield) and M&G Emerging Market Bond (£1.7 billion in assets and 6.9% yield). The Rathbone and M&G funds are both members of ii’s Super 60 listed of recommended funds.  

Note that the yields on these bond funds are the distribution yields, which represent a snapshot of the income the portfolio is currently paying out, expressed as an annualised figure.  The yield to maturity of the bonds held in the portfolios are likely to be higher as we are going through a period of rising interest rates.  

Mixed asset funds 

Five mixed asset funds made the cut. Mixed asset funds, as the name suggests, generally own a mixture of stocks and bonds, but can also branch out into other areas, such as commodities. They are often used as a “one-stop shop” for investors looking to outsource their entire portfolio to a professional fund manager.  

Funds making the cut include Invesco Monthly Income Plus, which yields 6.7% and has nearly £2 billion invested, as well as Premier Miton Multi-Asset Distribution, Premier Miton Cautious Monthly Income and AXA Framlington Managed Income. Yields are around 5.5% on these funds.  

Money market funds 

Finally, two money market funds made the list. They aim to give investors cash like returns by investing in bonds maturing soon (normally a couple of months), as well as cash deposit accounts. 

The funds were L&G cash Trust (5.3% yield) and Royal London Short Term Money Market fund (5.24% yield). 

While money market funds are considered “cash-like”, they are not the same as having money in a bank account, or even in a UK government bond. 

The Bank of England and Financial Conduct Authority have raised concerns that in the event of a big market event, there may be a rush for cash, and money market funds may have liquidity problems if they are faced with too many withdrawal requests. There is also no £85,000 FSCS protection that the government guarantees on bank deposits.  

FundYield (%)SectorAsset ClassOngoing charge figure (%)Fund size (£million)
Rathbone Income 5.04IA UK Equity IncomeEquity0.78681
Janus Henderson Japan Opportunities 5.8IA JapanEquity0.8632.6
Liontrust Latin America 6.84IA Latin AmericaEquity0.8934.5
Schroder Income5.27IA UK Equity IncomeEquity0.891,155.6
Man GLG Income C Professional5.73IA UK Equity IncomeEquity0.91,438.7
Royal London Sterling Extra Yield Bond7.13IA Sterling Strategic BondFixed Interest1,486.4
Aegon High Yield Bond 7.93IA Sterling High YieldFixed Interest0.61528
Rathbone Ethical Bond5.1IA Sterling Corporate BondFixed Interest0.662,074.2
Royal London Sterling Credit 5.1IA Sterling Corporate BondFixed Interest0.532,238.1
TwentyFour Dynamic Bond 9.56IA Sterling Strategic BondFixed Interest0.791,508.5
Schroder Strategic Credit6.77IA Sterling Strategic BondFixed Interest0.77643.5
Janus Henderson Secured Loans 7.1IA Specialist BondFixed Interest0.7176
Liontrust Sustainable Future Monthly Income Bond 6.15IA Sterling Corporate BondFixed Interest0.56534.1
GAM Star Cat Bond8.1IA Specialist BondFixed Interest1.082,756.3
Schroder High Yield Opportunities 8.04IA Sterling High YieldFixed Interest0.72430.7
BNY Mellon Responsible Horizons UK Corporate Bond 5.55IA Sterling Corporate BondFixed Interest0.422.6
Royal London Corporate Bond5.26IA Sterling Corporate BondFixed Interest0.561143
M&G Emerging Markets Bond6.94IA Global EM Bonds - BlendedFixed Interest0.681,736.9
Schroder Strategic Bond 6.06IA Sterling Strategic BondFixed Interest0.65195.4
abrdn High Yield Bond Platform5.84IA Sterling High YieldFixed Interest0.75222.4
Jupiter Monthly Income Bond6.58IA Sterling Strategic BondFixed Interest0.65190.4
Artemis High Income6.44IA Sterling Strategic BondFixed Interest0.74774.6
Schroder Sterling Corporate Bond 5.03IA Sterling Corporate BondFixed Interest0.62536.1
WS Wise Multi-Asset Income5.8IA Mixed Investment 40-85% SharesMixed Asset1.7878.1
AXA Framlington Managed Income5.16IA Sterling Strategic BondMixed Asset0.67274.5
Invesco Monthly Income Plus 6.66IA Sterling Strategic BondMixed Asset0.721,935
Premier Miton Multi-Asset Distribution5.42IA Mixed Investment 20-60% SharesMixed Asset1.19640.6
Premier Miton Cautious Monthly Income 5.31IA Mixed Investment 20-60% SharesMixed Asset0.89132.2
VT Momentum Diversified Income 5.62IA Mixed Investment 20-60% SharesMixed Asset1.52153.1
Royal London Short Term Money Market 5.24IA Short Term Money MarketMoney Market0.16,119.4
L&G Cash Trust 5.3IA Short Term Money MarketMoney Market0.152,690.8

Source: FE Analytics, as of 20 October 2023. Funds have yields above 5% and are in the top quartile of performers versus peer group over a decade. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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