Last week, Neil Woodford suspended trading in his Equity Income fund, meaning it’s not possible to invest money in the fund at the moment. As a result, there are likely to be plenty of UK investors now looking at other funds to invest in. With that in mind, here’s a look at three top UK-focused funds I believe offer strong long-term investment potential.
Man GLG UK Income The Man GLG UK Income Fund has been the top-performing UK equity income fund on the Hargreaves Lansdown (LON:HRGV) platform over the last three and five years. That’s an impressive achievement, so I think it warrants a closer look.
Over three years, it’s returned 36%, and over five years it has returned 53%, meaning it’s easily outperformed the FTSE All-Share index, which has returned approximately 31% and 32% over these time periods.
The objective of this fund is to generate an income higher than that of the FTSE All-Share Index, as well as capital appreciation. To do this, it employs a unique value approach to security selection that focuses on companies with strong fundamentals.
Portfolio manager Henry Dixon also has a strong focus on dividends, and a requirement of the fund is that stocks must have dividend yields that are equal or higher than the yield of the market. Top holdings currently include Rio Tinto (LON:RIO), Imperial Brands (LON:IMB), and Royal Dutch Shell (LON:RDSa) and the yield of the fund is around 4.6%.
Overall, I think this fund could be a good choice for those looking for a solid UK equity income fund. Fees are 0.9% p.a. through Hargreaves Lansdown.
Franklin Rising Dividends Another fund I believe is worth a closer look is the Franklin Rising Dividends Fund. This one aims to provide a growing level of income and outperform the FTSE All-Share index on a total return basis by investing in UK dividend-paying companies that have a habit of increasing their dividends. Over three years it has returned 28%, while over five years it has returned 44%. Its yield is 3.6%.
A look at the portfolio holdings here reveals the fund holds a number of high-quality companies. For example, the top holding is Unilever (LON:ULVR), while Diageo (LON:DGE) and Reckitt Benckiser are also in the top 10. Overall, the top 10 holdings are an impressive list of stocks. With fees of just 0.55% p.a. through Hargreaves, I think this fund is a top choice for dividend investors.
Lindsell Train UK Equity Finally, if you’re not so concerned about income/yield, you may want to consider the Lindsell Train UK Equity Fund. This has been absolutely smashing it in recent years, returning 57% over three years, and 84% over five, making it one of the best performers in the ‘UK All Companies’ fund classification.
This fund is run by portfolio manager Nick Train, who’s often referred to as ‘Britain’s Warren Buffett’. The reason for this is that Train has a very similar approach to Buffett, seeking out high-quality companies with strong competitive advantages and holding them for the long term. It’s an approach that seems to work very well for the fund manager. Top holdings currently include RELX, Unilever, and Diageo.
Available on Hargreaves Lansdown for a low fee of just 0.51% p.a., I believe this fund is a fantastic choice for those with more of a growth focus.
Edward Sheldon owns shares in Hargreaves Lansdown, Unilever, Diageo, Imperial Brands, Royal Dutch Shell, Reckitt Benckiser, and has positions in the Franklin Rising Dividends fund and the Lindsell Train UK Equity fund. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, Imperial Brands, and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019