Top 10 funds and trusts in ISAs

Top 10 funds and trusts in ISAs

Once again Royal London Short Term Money Mkt Y Acc claims the top spot. The fund offers a “cash like” return through investing in very low-risk bonds that have short lifespans. Its dividend yield stands at 4.1%.

While the level of income money market funds are generating is attractive and ahead of inflation, bear in mind that yields will fall as and when UK interest rates are cut further. As our recent Bond Boss columnist pointed out, “cash is unbeatable for low volatility and minimal risk of drawdowns. But that safety comes at the cost of lower returns. Short-dated corporate bonds, by contrast, can offer a yield increase for only a slight increase in risk.”

Climbing six places to second place is Greencoat UK Wind  UKW

which has proven very popular among ii customers over the past couple of years. It has raised its dividend ahead of RPI inflation every year since launch in 2013. That income consistency, a dividend yield of 10.8%, and a discount of -31.5%, are all attracting investors. This is despite notable losses of -18.2% and -20.5% over one and three years, and a small gain of 3% over five years, with its investment strategy rocked by UK interest rates rising from rock-bottom levels to peak at 5.25%.

As our recent feature explained, Greencoat UK Wind’s investment approach was recently hit by a curveball of proposals to change the inflation indexation of legacy subsidies. The changes would align indexation with Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI), altering the terms of contracts that underpin billions of pounds of investment in wind, solar and other clean energy projects.

Unchanged in third place is the ever popular Vanguard LifeStrategy 80% Equity A Acc fund, which, as the name suggests, holds 80% in global shares and the remainder in bonds. It is joined in the top 10 by three other tracker funds, with the world’s biggest global companies on offer via Vanguard FTSE Global All Cp Idx £ Acc and HSBC FTSE All-World Index C Acc, while dedicated technology exposure is provided by L&G Global Technology Index I Acc.

In fourth place is one of two new entries this week – Scottish Mortgage Ord SMT Its shareholders will be watching with interest regarding recent reports of SpaceX, Elon Musk’s space exploration company, possibly listing on the stock market next year. The private company is SMT’s top holding, and 8.2% of its assets. The trust holds 29% in private companies, with the remainder in publicly listed companies. Its aims to identify, own and support the world’s most exceptional growth companies. 

The other new entry is SDCL Efficiency Income Trust plc.  SEIT

In common with other renewable-focused trusts, its performance has been hit by higher interest rates. It is up 2.5% over one year, with heavy losses of -30.8% and -28.5% over three and five years. It is trading on a high dividend yield of 12%, while its discount stands at -40.9%. The trust has a continuation vote next year, with the board recently saying that it may not recommend the trust continuing in its current form.

Also in the top 10 is the conservatively run City of London Ord  CTY

and Artemis Global Income I Acc. The former mainly focuses on FTSE 100 dividend-paying companies, while the latter has a value-investing approach and a low weighting to the US, which only accounts for 25% of the portfolio. 

Dropping out of the rankings are private equity trust 3i Group and global tracker Vanguard LifeStrategy 100% Equity.