With Q2 a record quarter for income funds, UK equity income remains an attractive sector for investors looking to seek outperformance
Strong company fundamentals have helped income fund managers deliver exceptional returns against the market, research by TD Direct Investing shows.
The online investment platform released its annual ranking of the top 25 British fund managers, with income fund managers featuring strongly in the list. The prevalence of income funds in the top 25 table is because companies paying dividends are being rewarded by the market with the second quarter of the year delivering a record for the UK.
TD’s Best of British Fund Managers* list, reveals that UK active fund managers can beat the market – achieving an overall average return of 7.9% p.a. vs. the FTSE All-Share’s 5.8% p.a. over a 10-year period. The findings also highlight that talented equity income fund managers who focus on companies with sustainable dividends have performed well – due partly to the important role dividends play in overall total return.
Q2 was a record quarter for income funds, owing to a number of special dividends being paid out, and although we don’t expect special dividends to become a regular feature, we believe that UK equity income remains an attractive sector in which to seek outperformance.
Michelle McGrade, Chief Investment Officer at TD Direct Investing, said: “The second quarter of 2016 has been a great bonus for investors. However it’s worth remembering that, in the grand scheme of things, the impact of this one quarter [on the list] isn’t huge. It does highlight that UK equity income remains an attractive sector for investors over the long term – especially now with sustained low interest rates, which rightly drives people to consider alternative ways to grow their investments.
“We shouldn’t focus too much on when certain types of fund may come good, but instead should look at the long-term appeal of the different types of UK equity funds highlighted in the Best of British list. We expect turbulence in the markets over the months ahead as a result of the continued impact of Brexit, the US elections and weak inflation – therefore a list of funds with proven long-term returns is of real benefit.
“The Best of British list should help those feeling less confident about where to put their money. These managers are dedicated to delivering returns for their investors and are passionate about achieving long term outperformance – showing that disciplined active management continues to have an essential role to play.”
Best of British top 25 fund managers list