Seven ISA ideas for income investors

2020 was not a great year for income investors. Not only did it become clear that interest rates would remain close to zero for a long time to come, but dividends were also slashed around the world, as companies fought to survive the global pandemic.

Income investors are no doubt wondering where to turn. But despite all the doom and gloom, there are pockets of yield in most asset classes. Here, we highlight six funds and investment trusts still yielding more than 4.5%, which could be considered for this year’s ISA.

Please bear in mind that these yields are not guaranteed and can fluctuate.

Man GLG High Yield Opportunities

This unconstrained and concentrated global high yield bond fund was launched in 2019. The manager is very experienced and has an excellent track record in navigating the extra risk in the sector whilst achieving above average returns. Mike’s experience and the fund’s flexibility to also short some positions allows him to find opportunities others may miss or avoid. The running yield on the fund is currently 6.85%*

City of London investment trust

Managed by Job Curtis for 30 years now, this trust invests predominantly in larger UK companies with international exposure. It has a yield of 5.42%* and has increased its dividend payment every year for the past 54 years. It has been able to do this through occasional use of its revenue reserve: investment trust managers can hold back up some of their income in good years and dip into the pot in bad years like 2020 to help maintain income pay-outs.

Invesco Monthly Income Plus

This fund is Invesco’s flagship fixed income product. It has a flexible mandate and is designed to offer investors broad exposure to the UK fixed income market and provide a high level of income (currently 5%*). Unlike many of its sector peers, it can also invest up to 20% in UK equities. At a time when inflation is a potential concern and bonds are expensive, this flexibility could prove very useful.

M&G Emerging Markets Bond

While bond yields are low across developed markets, that’s not the case in emerging economies. This fund has the flexibility to invest in both government and corporate bonds, denominated in local currencies or in the US dollar (‘hard’ currency) across the asset class. The manager uses her vast skill set to analyse the macroeconomic environment, and individual companies, to pick what she believes to be the best mix of bonds for this portfolio. The yield is currently 5%*.

Murray International Trust

As the name suggests, this investment trust offers an international portfolio of UK and global equities, as well as some bonds. The manager may invest anywhere in the world and in any sectors, with a focus on maintaining an above-average yield for investors. The current yield is 5%* and the portfolio has both its largest equity and bond weightings to Asia and emerging markets**.

VT Gravis UK Infrastructure Income

VT Gravis UK Infrastructure Income is a unique fund that invests in a combination of UK-listed investment trusts, direct equities and bonds. The underlying investments include renewable energy, GP surgeries, transport, water and student accommodation. A minimum of 75% of the portfolio must be supported by UK government or regulated cash flows. The current yield is 4.8%**

VT Seneca Diversified Income

The managers of this multi-asset income fund adopt a value-focused style and have the flexibility to invest across all asset classes. These include UK and overseas equities, fixed income, property and specialist investments held through third-party funds. Save for the regulatory requirements, this is a go-anywhere portfolio without any constraints. The fund has an historical net yield of 4.7%*.

*Source: fund fact sheet, 31 January 2021
**Source: Gravis website, 26 February 2021

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.