Fund Research & Insights
3 Gold Rated Income Funds

Inflation has hit a four year high today in the UK – up to 2.9%. The CPI measure of inflation rose from 2.7% the previous month, the Office for National Statistics has revealed. This is against a Bank of England target of 2%. RPI rose from 3.5% to 3.7%.

“The rise of inflation to 2.9% means no end is in sight for hard-pressed consumers who see prices rising but growth in their wages failing to keep pace,2 said Calum Bennie, savings expert at Scottish Friendly.

Fixed income fund manager Ben Lord of M&G added that the inflation forecast was heavily dependent on the fate of the pound, which has fallen significantly over the past year.

“The direction the pound takes from here will have significant implications for inflation in 2018. On the one hand, as the market started to anticipate a strong Conservative majority the pound appreciated rapidly,” he said. “And since the outcome of the hung parliament, the pound has fallen back to pre-general election levels. Ultimately caution is required at this juncture, as the moves have been somewhat counter intuitive.”

With interest rates so low, and inflation stubbornly higher, investors looking to generate an income from their portfolio are having to consider more adventurous options than cash. We highlight three funds rated Gold by Morningstar analysts which could provide investors with a real rate of return.

Fidelity MoneyBuilder Income

Morningstar analysts have a high opinion of lead manager Ian Spreadbury and co-manager Sajiv Vaid, given their backgrounds and long-term portfolio management experience, says Carlos Lucar. The long-established investment process is driven by the managers’ top-down views, while they rely heavily on Fidelity’s well-resourced multidisciplinary research platform for bottom-up idea-generation and execution.
The managers have retained a cautious stance during the past few years based on their expectation of slow global economic growth.

Veritas Global Equity Income

This fund remains among the strongest offerings in its sector says Morningstar analyst Muna Abu-Habsa. A major strength of this fund is its management. Charles Richardson and Andrew Headley, who previously worked together at Newton, have been at the helm since the fund’s launch in 2006 and have run the institutional version since 2003.

The fund’s standout characteristic is the extent to which the managers aim to deliver real returns to investors. They invest in companies with durable competitive advantages and strong, sustainable cash flows that can lead to steady, repeatable dividend payments. Yield is one of the considerations, but the managers are not prepared to invest in high-yielding companies that are unlikely to contribute to capital growth.

T Rowe Price Global High Yield Bond

Rigorous bottom-up credit selection has been successfully married with top-down macro analysis from T. Rowe Price’s veteran investment committee members, all at a reasonable price, says Morningstar analyst Niels Fassen.

The team backing Vaselkiv is an experienced one and has proven its worth over time. Credit selection typically accounts for most of the fund’s strong relative returns, including what they do not own.


Source: Morningstar. Emma Wall | 13/06/2017

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