A recent scour of our database has indicated that UK-based equities don't necessarily guarantee higher yields for income portfolios.

Yields have spiked this year as central banks continue slogging against inflation, and 13 of the 16 income funds that we monitor have seen their percentage yield increase over the period spanning April to November.

The average yield on offer from an income portfolio in our database now sits at 3.8 per cent. This is up from 3.27 per cent at the end of last year (which was itself up from 2.7 per cent in early 2022).

Zooming in on the current highest-yielding product, we note some interesting characteristics. 

Handelsbanken offers a handsome payout of 5.89 per cent, well above its peer group average

Despite this figure, it has the second-lowest exposure to equities of the 20 income portfolios we monitor. 

What’s more, Handelsbanken has the third-lowest allocation to UK equities, a market both defined and blighted by the dominance of stocks in higher yielding sectors such as mining and oil and gas. 

Those folks have chosen instead to take advantage of the spike in bond yields across 2023, with almost 50 per cent of its holdings in fixed income – 17 per cent of which are gilts. 

Forming a conclusion from our database is not so simple: even some of the lowest-yielding products on our database are shunning the UK, too. 

Brewin Dolphin and Investec – two of our lowest-yielding funds at present – both hold 11 per cent in UK equities, which is similarly low compared to the peer group average.

Around the middle of the pack is where UK equity entertains its biggest fans, with several allocators reaching above 20 per cent exposure.

But on average exposure to UK equities in income portfolios has gone down as yields have gone up. The average exposure to the home market is now 15.3 per cent - down from 18.7 per cent at the end of last year.

Of course sentiment may also be driven by the old market adage that if a stock has a very high yield, one of the two numbers, the share price or the yield, is wrong, with either the share price set to rise or the dividend to be cut. 

Given the deeply cyclical nature of the higher dividend payers in the UK market, such as miners and banks, it may be that the allocators we cover are wary of the cyclicality involved, particularly if they can access a comparable or indeed higher yield simply by buying government bonds.