Revealed: the only four British income funds that have managed to grow investors’ cash pots

In a difficult year for the stock markets, these have outpaced their rivals..

This year has been tough for British income funds, as companies cut or reduced their dividends to conserve cash during the pandemic.

As well as having lower payouts, the share prices of many of these companies also dropped as investors were quick to sell, creating a double-whammy for the income funds that owned these businesses.

Research by Liontrust Asset Management found that the challenging year has impacted the long-term return of British income funds. Just four of the 75 eligible funds available to investors have managed to grow their investors’ cash pots as well as pay a reasonable level of income over the past five years.

Liontrust Income, managed by Robin Geffen, is top of the pile. An investor that bought into the fund with £1,000 five years ago would have been paid £262 in income, while the cash pot would have grown by £50, giving a total of £1,312.

The £316m fund made full use of the 20pc limit it can hold outside of Britain, with almost 19pc invested in America. This strategy has helped to mitigate some of the losses of its British holdings this year.

The next best was the £156m ASI UK Income Equity fund, run by Aberdeen Standard and managed by Charles Luke since 2016.

The fund has been reliable in down markets: in 2018 and 2020, when the average British income fund fell by 11pc and 22pc respectively, the Aberdeen Standard Life portfolio lost 8pc and 12pc. The fund also did well in 2019, making 26pc when its average rival made 20pc.

Helping the fund this year has been its high level of holding cash; the portfolio currently has 14pc held back.

Had investors bought into the fund five years ago, £1,000 would now be worth £1,281, with £231 coming from income and £50 from capital gains.

Third is the £647m Montanaro UK Income fund managed by Charles Montanaro. The portfolio has 4pc held in cash and 9pc held outside of Britain in European companies, which have performed better this year.

The fund also invests in smaller and medium-sized companies. Although these have been hit hard this year, they have recovered in recent months, with the FTSE 250 index of Britain’s medium-sized businesses now ahead of the FTSE 100 for the year.

Over the past five years, the fund would have made investors £266 on an initial £1,000 invested, with £186 paid in income and £80 made from capital gains.

The final fund on the list is the £3.5bn Trojan Income fund managed by Francis Brooke. The manager aims to pick the best companies in the best sectors, avoiding areas such as oil and banks, which have been among the worst-hit this year. Companies in both sectors have been forced to cut or stop dividends.

The fund includes a large number of consumer brands such as Unilever and Reckitt Benckiser as well as pharmaceutical giants AstraZeneca and GlaxoSmithKline, which have performed well during the pandemic.

The portfolio would have paid investors £186 in income on an initial investment of £1,000 five years ago and made £17 in capital gains.

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