BLOG: Six ISA ideas for income investors
With interest rates still close to zero, bond yields low, and dividends having been cut by more than a third in some countries over the past year, income investors are no doubt wondering where to turn.
But despite all the doom and gloom, there are pockets of opportunity in most asset classes.
Here are six funds and investment trusts still yielding more than 4%, which could be considered for this year’s ISA.
Please bear in mind that these yields are not guaranteed and can fluctuate.
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**.
Premier Miton Multi-Asset Monthly Income
This multi-asset fund of funds aims to pay a monthly income by investing across a broad range of asset classes via third party funds and investment trusts.
It has an historic yield of 4.9%* and has its largest exposure to UK equities (32.7%*) and specialist bonds (28.9%*). It also has positions in property and alternative assets. The total number of holdings is 52.
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%**
*Source: fund fact sheet, 31 January 2021
**Source: Gravis website, 26 February 2021
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
Juliet Schooling Latter is research director at FundCalibre