Why bond yields are rising, and why it matters
Bond funds haven’t enjoyed a great start to the year. The average UK Gilt fund is down 7.2% over the...
After a decade of low interest rates and the Bank of England showing no signs of increasing them again anytime soon, the challenge of searching for income has never been harder for investors.
The climate is worse when you consider figures from the Office for National Statistics which show the average weekly household expenditure in the UK last year was £572.60, the highest weekly spend since 2005, after adjusting for inflation*. That means a monthly expenditure of almost £2,300 per household.
To help those looking for a decent monthly income from their ISA choice, we’ve highlighted five funds, with a current yield in excess of 4%, which could help pay some of those household bills.
This strategic bond fund is Invesco’s flagship fixed income offering. Managers Paul Causer, Paul Read and Ciaran Mallon can use the full flexibility of the mandate to invest where they wish with the macroeconomic environment often driving the managers’ positioning. In addition to investing across the fixed income market, the fund can also invest up to 20% in equities (the segment of the portfolio managed by Ciaran).
This fund predominantly invests in corporate bonds, but also includes government bonds. Managers Stuart Steven, Kenny Watson and Aitken Ross form part of the Liontrust sustainable investment team and, while Monthly Income Bond is not strictly a sustainable fund, a sustainable process is applied which results in all companies with a certain level of revenues (5%) from areas deemed controversial (such as tobacco or nuclear arms), excluded from the portfolio.
This is a well-diversified, global multi-asset income fund, with an investment process that focuses on value investing and income generation. The fund can invest across all asset classes including UK and overseas equities, fixed income, property and specialist investments held through third-party funds. The team carry out in-house research looking for value investments, with each team member responsible for specific areas.
This fund aims to provide equity-like returns through a multi-asset structure. The Premier team are led by investment director, David Hambidge, who has more than 25 years of multi-manager and multi-asset investment experience. The team look to control risk through diversification, investing in equity, bond and property funds, as well as other alternative assets. As a ‘fund of funds’ David says “not only does it have lots of eggs, but lots of baskets too”.
This fund invests in both bonds and equities from around the world, in pursuit of an attractive monthly income, as well as capital growth. The ratio between these two asset classes will be varied to suit market conditions, but it is typically a natural split of 60% equities and 40% bonds. With two of our favourite stock picking fund managers in charge, the fund’s diverse portfolio and monthly payment mandate may make it an excellent ‘all weather’ option for income-focused investors.
** Figures taken from FE Analytics, 26 March 2019