A brace of top performing income funds for 2018’s ISA allowance


INVESTORS who are looking for alternatives to equity income funds for their £20,000 2018 ISA allowance may wish to explore Tideway Investment Partners’ main income-delivering bond funds.

Cash and traditional corporate bond funds are offering income well below current and expected inflation and investors are getting little solace from the huge UK equity income funds sector, which is looking somewhat volatile.

Tideway's GBP Hybrid Capital Fund (see Note 1 below) has delivered exceptional performance over the past 12 months and is currently ranked second out of 82 bond funds in the IA Strategic Bond and IA UK Equity Income sectors combined in the past year.

In 2017 the fund returned + 17.17%, leading the IA Sterling Strategic Bond sector and beating the average return of 5.31 % by 11.86%. The stated objective of the fund is to pay 5% p.a. net income and the fund has paid income at or near this level since inception (See: https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%253ASTERSRT%252CO%253AUKEQINC&tab=fundOverview&pageSize=125&sortby=P12m&sortorder=desc).

Hybrid Capital is a riskier type of debt than traditional corporate bonds and investors are getting a higher income for taking on this additional risk.

For income seeking investors with a lower risk appetite Tideway’s shorter-dated GBP Credit Fund is delivering around 4% p.a. in quarterly gross income, ahead of the stated fund objective of “UK Base Rates + 1-2 %”.

Between now and next April, UK investors have the opportunity to invest a maximum £20,000 into an ISA.  The returns will accumulate free of all tax – capital gains and income tax.

Children also have an ISA allowance this year of £4,260 which can be funded by contributions from parents or grandparents – although the plan must first be set up by a parent.

This means they could put away £24,260 between now and April 5 next year in a tax-free wrapper.

Individual Savings Accounts are more flexible than pensions – even after new freedom rules were introduced in 2015 to give retirees easier access to their pension plans, and many investors will feel that they provide a perfect complement to a pension.

Commenting on the two Tideway funds, the company’s Managing Partner and Chief Investment Officer Peter Doherty said:

“Our funds are likely to have a special appeal to investors wanting solid income returns with less volatility than UK equity income: to have topped the IA £ Strategic bond fund performance tables in 2017 is a great achievement and having two funds in the top 20 demonstrates how consistently well the funds are performing,” said Mr Doherty.

“Importantly, the two funds are very straightforward and competitively priced. There is no leverage, no derivatives, no structured products and no foreign currency bonds. We focus all of our energies on picking the right credits and the right bond within the capital structure for those companies that we like.”   

“There are no Single B or below rating bonds in the funds, which have a strict BB or higher credit rating restriction,” he added.

The funds will most likely appeal to investors with a low to medium appetite for risk but who would like to generate additional income from their investment portfolio.

Why Tideway funds for your 2018 ISA allowance? **

  1. The borrowers are household name companies – Legal and General, Centrica, Sainsbury’s
  2. Interest on most of the bonds in the portfolios is senior to dividend payments
  3. The interest payments represent a small part of the borrower’s overall cash flow out to investors (interest and dividends) and so not paying is highly unlikely
  4. Payments are gross – there is no WHT
  5. The bonds themselves are now very difficult for retail investors to buy directly
  6. Daily liquidity / Highly regulated UCITS Funds
  7. Income is net income – so not using capital to pay out

** Important Information

This press release is for information and discussion purposes only and should not be construed as personal advice to invest in the Tideway UCITS Funds ICAV nor any of the securities mentioned. Always read the prospectus, factsheets and KIIDs before investing in any fund.

Investing in Tideway UCITS Funds ICAV involves the risk of loss and there is no guarantee that all or any capital invested will be repaid.  Past performance is no guarantee of future returns and the value of investments and the income they produce can fall as well as rise.

Investors should make their own investment decisions based upon their own financial objectives and financial resources and, if in any doubt, should seek advice from an investment advisor.

Go back to the previous page

Tuesday 17 April 2018

Tideway Investment Group comprises the following entities: Tideway Investment Partners LLP; Tideway Wealth Management Limited and Tideway Asset Management Limited. Tideway Asset Management Limited and Tideway Wealth Management Limited are appointed representatives of Tideway Investment Partners LLP, which is authorised and regulated by the Financial Conduct Authority. FCA number: 496214.

Tideway Investment Partners LLP
107 Leadenhall Street
London EC3A 4AF

+44 (0)20 3143 6100

© Tideway Investment Group 2019