Equity Income and Absolute Return Funds

With the bond funds now seem having low returns in the next 2 years, Equity Income Funds and Absolute Return Funds are better choices.

In the last 1 year, GBP Corporate Bond Funds returned 3.6% (top 10 4.2%) whereas UK Equity Income 24.9% (sources are in the links, from Trustnet), and the average of top 10 is 35.0%. Absolute Return Funds returned 5.6%, but the average of the top 10 is 18.2%.

After up 6% from Feb to May, GBP Corporate Bond sector was down 6% in May. In July it was up 2% then down 2% again in August. From Sep it is up 3%. Hence 3.6% in the last 1 year. I can’t invest in a yoyo sector like this. And the prospect is not looking good either, because of interest rate raise. I pulled out from Corporate Bond in Feb, and switched to equity. In the last 6 months, every fund in the top 10 return negative.

UK equity income looks good so far, and the future looks bright too. From October 2012 to May it was up 20%, down 10% in June, up 10% in July, flat in Aug & Sep, then up 5% in Oct. Hence 24.9% return in the last 1 year. My choice in this sector in Unicorn UK Income, which returned 41.1% in 1 year with volatility of 8.1%. That is better than Invesco Perpetual High Income, which returned 21.9% with 9.2% volatility.

The Absolute Return sector looks good too. It was up 5% since October 2012 until May, then down 2% in May-June, up 2% in July, flat in Aug-Sep and 1% in October. My choice is Cazenove UK Absolute Dynamic, which returned 16.3% in the last 1 year, with 4.5% volatility! This fund is consistently upwards since Oct 2012.

Date written 25/10/2013

Equity Income and Absolute Return Funds

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