BLOG: Five income ideas for your ISA
Soaring inflation over the past year has put a financial strain on millions of people who could certainly benefit from extra revenue streams. And this is why an income-focused fund could be a wise idea for those still searching for inspiring ways to spend this year’s individual savings account (ISA) allocation.
Here, we take a whistle stop tour of the world to bring you five interesting income funds that could be worth considering over the coming weeks.
1) GAM UK Equity Income
Let’s start with our home market and the GAM UK Equity Income fund that is managed by the highly experienced Adrian Gosden and Chris Morrison. This fund invests in companies of all sizes – from the smallest names listed on the AIM market, through to the global giants of the FTSE 100. In fact, the flexibility enjoyed by Gosden at the helm is what makes this portfolio stand out from its rivals in an extremely competitive sector.
The fund’s largest holdings currently include many well-established names. These include HSBC bank, pharmaceutical giant GlaxoSmithKline and oil major BP. In a recent video update, Morrison noted that equities have always done well in an inflationary environment and acknowledge the team’s role was to pick good stocks.
“Those companies should be able to maintain or gain market share,” he said. “Revenue should be able to increase as they put prices up.”
2) BlackRock Continental European Income
Our next pick is the BlackRock Continental European Income fund, which searches for undervalued companies offering reliable, sustainable dividends. Its manager, Andreas Zoellinger, has managed the fund since launch and was joined by co-manager, Brian Hall, two years ago. They are both part of BlackRock’s highly regarded European equity team.
The investment process focuses on fundamental company analysis and awareness of macroeconomic trends. However, the mandate is flexible in terms of company size and country exposure, balancing stocks with large, secure dividends, and those able to grow dividends faster than average.
Financials has the most significant sector weighting currently at 27.91%, followed by 22.47% in industrials. As far as countries are concerned, France accounts for almost a third of the asset allocation, followed by Switzerland with 13.95%, Denmark on 11.46%, and Sweden on 11.30%.
3) JPM US Equity Income
Income investors who want exposure to the United States are next and we like the JPM US Equity Income fund, whose lead manager is Clare Hart. Although the US market is naturally lower yielding, it has a long history of dividend payments. In fact, an increasing number of companies are now making pay-outs to investors.
We see Hart’s fund as a core equity income holding that invests in the world’s largest stock market and has a diverse spread of investments to ensure a stable above-market yield. In a recent fund update, Hart emphasised she was continuing to “monitor incremental risks” as the economy teeters on the edge of recession.
“Through the volatility, we continue to focus on high-conviction stocks and take advantage of market dislocations for compelling stock selection opportunities,” she said.
4) Ninety One Global Income Opportunities
For those who want to take an even more international approach, there’s the Ninety One Global Income Opportunities fund. This portfolio, which is managed by John Stopford and Jason Borbora-Sheen, invests conservatively around the world in a diverse range of equities and bonds. This equates to investing at least two-thirds in the shares of companies and bonds – or similar debt-based assets – that are investment grade with a relatively high credit rating.
In the fund’s most recent quarterly update, the managers warned that the balance of risk remained to the downside, given the economic backdrop. “Our concern is that given the speed and magnitude of developed world [interest rate] hiking cycles, a recession over the next 6-12 months is likely,” they said.
They explained their approach was to remain cautiously positioned in terms of both equity risk and interest rate risk, as they were during 2022. However, they were also searching for opportunities. “We will look for attractively valued, resilient income-generating securities that have been impacted by the market sell-off, but which offer compelling cash flows and potential returns,” they added.
5) VT Gravis Clean Energy Income
Our final suggestion is the VT Gravis Clean Energy Income fund, which provides access to a fast-growing and increasingly important area. This portfolio offers exposure to companies engaged in the provision, storage, supply and consumption of clean energy. Its stated objective is to deliver a regular income and preserve an investor’s capital throughout market cycles, as well as offering the potential for capital growth.
Will Argent, the fund’s advisor, favours assets that derive energy from renewable, zero emissions sources, as well as companies saving energy through efficiency measures.
This list includes solar, wind and hydro-electric power, as well as energy storage, energy efficiency, bioenergy, geothermal, heat pumps and the smart grid. Although the fund appears concentrated, with 30-50 names, there is considerable diversification through the underlying holdings as each stock is involved in multiple projects.
Juliet Schooling Latter is research director at FundCalibre