Inflation falling to just 1% is great news for income investors – meaning that it is easier to get a real rate of return on your savings. Using Morningstar Direct we screened funds that had been awarded a Gold, Silver or Bronze Morningstar Analyst Rating and identified those with a yield of 5% or more. We selected five funds for your perusal below.
Threadneedle High Yield Bond
This Bronze rated fund is an attractive choice for investors looking for a high-yield bond fund. Since launch to the end of Aug 2014, the fund has outpaced its peers by a wide margin although it is behind the benchmark. The fund has participated well in the very strong markets of 2012 and 2013, although it is behind its benchmark in part due to the managers’ cautious stance on peripheral debt.
Henderson Preference & Bond
Preference and Bond is a sound choice for investors seeking a flexible, actively managed strategic bond fund that also provides a reasonable income, according to analysts, who awarded the fund a Silver Rating. As a mature fund, launched in 1978, income payments have been a significant part of the fund's overall return, and income remains an important focus of the fund managers as they aim to meet investors' expectations.
AXA Global High Income
Analysts believe the team’s composition and expertise place the fund in good stead to deliver outperformance through time. With this in mind, they have awarded the fund a Bronze rating. The fund incorporates investments in higher-yielding, higher-risk parts of the market, but they are mitigated by the managers’ mindfulness of the aggregate risk characteristics of the benchmark and their desire to build the portfolio around a stable core.
Newton Asian Income
This fund’s appeal owes in part to the expertise of Jason Pidcock, who has 20 years' investment experience and was one of the first fund managers in the UK to launch an Asian income fund in November 2005. The manager is mindful of the importance of capital preservation as well as capital growth. The strategy combines a strict yield discipline with Newton’s global thematic approach based on the belief that no company or market should be considered in isolation. It is rated Silver.
Schroder Strategic Credit
This fund is an attractive choice for the more cautious high-yield investor say analysts, who have rated it Bronze. The investment approach is underpinned by the manager’s belief that significant opportunities are created by investors’ inefficient processing of company information. The unconstrained approach is enhanced by its flexible mandate on the use of derivatives, including gilt futures, which are used to hedge out much of the fund’s duration risk.
Artemis High Income
This Silver Rated fund is an amalgamation of bonds and equities, but it must have a minimum of 80% invested in bonds, leaving up to 20% invested in equities if desirable. The fund is managed primarily to sustain an enhanced running yield and, as such, managers Adrian Frost and Adrian Gosden tend to have a preference for higher-yielding securities to achieve the fund’s income objective with the understanding that the aggregate credit risk is higher.
