Our recent rummage around the databases to review how allocators have been positioning their UK growth exposure has prompted us to have a glance at that old chestnut: the UK equity income fund. 

Having noticed a general decline in appetite for some of the biggest growth names, we thought we’d see how allocators’ preferences for UK equity income funds have changed over the course of 2023. 

As we have recently mentioned, Evenlode Income has seen a spate of attention which has seen it rise to become the most popular UK equity income fund (even though it doesn't sit in the UK equity income sector).

But an uptick in demand for a couple of long-established products has caught our attention. 

Man GLG Income has seen two new buyers this year, taking its total from six to eight – and is now tied with Evenlode Income. 

The Man GLG fund is £1.34bn in size and has returned a cool 52 per cent over three years. Though tied in popularity with Evenlode Income, the two funds have taken very different paths to income generation. 

Henry Dixon at Man GLG wears the label of value investors with pride, and makes considerable use of financials, energy and industrials in this strategy: Shell, BP, and Imperial brands comprise three of their top five holdings, which is probably worth keeping quiet if he ever wants to punt the fund to sustainable allocators. 

In contrast, Ben Peters and his Cotswolds colleagues are firmly in the growth investing camp, as reflected by substantial holdings in Unilever, Diageo and Relx. 

This difference is perhaps most on show when comparing the yield offered by the two funds. Evenlode offers just 2.8 per cent while Man GLG offers 5.4 per cent (the issue of yield is why the Evenlode fund doesn't sit in the UK equity income sector).

A few smaller offerings are also gaining ground against their larger peers. Redwheel UK Equity Income’s AUM stands at a comparatively modest £446mn, but has picked up two new buyers in 2023, taking its total to five. 

This means it is now tied in popularity with CT UK Equity Income which has seen a number of sales recently and has therefore lost its crown as the most popular UK equity income fund.

The product has returned 64 per cent over three years, which may explain the recent piquing of interest among DFMs.

James Burns, lead manager of the Evelyn Partners active proposition, is a longtime fan of this fund, having first bought it for his balanced portfolios in 2021 before adding to its three most defensive models in February 2023. 

He says: “We like this fund as, due to its value approach to investing, it offers something very different from most other funds in the equity income space which tend to have a quality/growth focus. The managers have a strong long-term track record dating back to 2001 utilising their ‘intrinsic value’ process. We like that they take a focused, stock-picking approach and do not have any benchmark considerations to worry about, meaning that their portfolio can look very different to everyone else’s.”

The Redwheel fund comes with a charge of 67 basis points, which contrasts well with the 0.9 per cent charges for the Man GLG fund and the 0.87 per cent for Evenlode. 

Another example of this phenomenon is Gresham House UK Multi-Cap Income which has attracted two allocators over the course of 2023 and is now owned by three in total.

This is a fund which is only £590mn in size but has returned top quartile performance in all but one of the past years.