Funds to hold alongside this top-performing UK value trust

With their focus on resurgent sectors such as financials, it’s value and income funds in the UK that have generated some of the best returns in recent years.  

Temple Bar Ord (LSE:TMPL) is a good example of both: a value play with a 3.8% yield, it’s one of the top UK funds by five-year performance. 

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That in turn has made it one of the most popular UK funds: Temple Bar is one of three active UK funds to sit in our latest Top 50 Fund Index for the first quarter (to be published next week), alongside City of London Ord (LSE:CTY) and Artemis SmartGARP UK Eq I Acc GBP.  

The fund has been one of the best ways to ride the UK market recovery of recent times, and would be well positioned to take advantage of further success here. 

But it’s not a catch-all portfolio for UK markets, and other names would do well to broaden out your exposure here. 

What makes Temple Bar different? 

Temple Bar has a few notable traits. There’s the value approach, where the investment managers buy shares that they believe trade at a discount to the intrinsic value of the underlying business. Ian Lance and Nick Purves, who work for fund firm Redwheel, have been at the helm since November 2020.  

The duo look to avoid so-called value traps, where shares are only going to stay cheap or get cheaper, by favouring businesses with strong cash flows and robust balance sheets. 

Temple Bar will also tend to hold lots of large-cap shares, with some exposure to mid caps. 

Its recently published 2025 results showed that its top 10 holdings list at the end of the year included FTSE 100 constituents Shell (LSE:SHEL), NatWest Group (LSE:NWG) and Aviva (LSE:AV.), as well as FTSE 250 names such as Johnson Matthey (LSE:JMAT) and ITV (LSE:ITV). 

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A few other details set it apart from some rivals. Temple Bar has the flexibility to hold up to 30% of its portfolio in shares listed outside the UK and makes good use of that.  

Its overseas allocation came to around 27% at the end of 2025, with holdings including NN Group NV (EURONEXT:NN), TotalEnergies SE (EURONEXT:TTE), Macys, South Korea’s Woori Financial Group Inc ADR (NYSE:WF) and Hana Financial, as well as the likes of Carrefour (EURONEXT:CA). The use of foreign shares stems from a desire to diversify and widen the opportunity set for the team. 

The trust’s board has pointed to the fact that the UK equity market is shrinking, and recently noted that if needed they could look to increase the 30% limit on exposure to foreign shares. 

Finally, Temple Bar stands out because it has taken up an enhanced dividend policy where it can use capital to boost its payout. For now, just Temple Bar and Dunedin Income Growth Ord (LSE:DIG) take such an approach. 

Meanwhile, the trust’s shares might not scream value after such a successful run. They trade at a small premium to net asset value (NAV), as we see with City of London. 

Style and size 

Large-cap UK shares have had a real return to form, with small and mid-cap names also doing well but at times struggling to keep up.

Temple Bar does have some mid-cap exposure but it could make sense to have more of a focus on companies further down the market cap spectrum.  

That makes sense for diversification purposes – both in terms of which parts of the UK market might do well, but also in terms of where your portfolio gets its income. A common bugbear of UK income investors has been that dividend payments are concentrated among a few blue-chip companies. 

As such, some of the so-called multi-cap income funds, which try to look beyond the biggest names in the market, might serve a purpose in your portfolio.  

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As we noted in January two names, Premier Miton UK Multi Cap Income B Inc  and Jupiter UK Multi Cap Income W GBP Inc, have generated a good level of income in recent times. Their total returns have also been strong in the last year. 

Investment trust fans might already be familiar with the team behind the Premier Miton fund, given they also run Diverse Income Trust Ord (LSE:DIVI). The trust’s board recently proposed to offer shareholders an option to exit or roll over into this open-ended fund. 

Investors might more generally want broad exposure to small-cap funds, with a couple of options including BlackRock UK Smaller Companies D Acc and Montanaro UK Smaller Companies Ord (LSE:MTU).  

These do contrast with funds such as Odyssean Investment Trust Ord (LSE:OIT), which build a much more concentrated portfolio and seek to agitate for improvements at their investee companies. 

Where’s the value? 

If Temple Bar looks to buy into unloved companies, its own shares trade on a pretty healthy valuation and its share price dividend yield is roughly in line with its sector average. With the warning that this might be a value trap in itself, investors can find more contrarian picks if they wish. 

If we look at the Association of Investment Companies’ (AIC) UK Equity Income sector, the small and mid-cap focused Chelverton UK Dividend Trust Ord (LSE:SDV) trades on a 6.6% discount and a dividend yield of 7.4%. 

Dunedin Income Growth, with its own enhanced dividend policy, has a share price dividend yield of 6.3%, while CT UK High Income Ord (LSE:CHI) has a yield in excess of 5%. Investors should, of course, do further research beyond these metrics, too. 

It’s important to note that the enhanced dividend policy, which has proved a popular trait across the investment trust and features for both Temple Bar and Dunedin Income Growth, has its fair share of critics.  

City of London manager Job Curtis argued last year that using capital to help fund dividends was “like robbing Peter to pay Paul”. Meanwhile, funds that use capital, rather than reserves, to fund dividends could in theory end up selling into a losing market to generate that income. 

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There’s a chance more UK income trusts could adopt such an approach, especially if UK-listed companies continue to carry out prolific buybacks and focus less on dividends. But funds that prioritise a “natural” income, such as City of London, could serve to offset Temple Bar’s approach. 

Finally, we have pointed to Temple Bar’s liberal use of shares listed overseas, and funds such as Dunedin Income Growth and Fidelity Special Values Ord (LSE:FSV) have also done so, if to a lesser extent. But many UK funds are fully or almost fully invested in UK-listed shares.  

One notable example is the beaten-up Finsbury Growth & Income Ord (LSE:FGT), whose style contrasts with Temple Bar’s but also whose manager, Nick Train, has jettisoned exposure to overseas shares in recent years as a bet on just how unloved the domestic market has looked.