High-yielding income options for your ISA

When it comes to earning an income from your investments, there are various options you can consider. Firstly, you can look at the different asset classes that yield an income. Then you can look at whether you want to your income to be at a high level or whether you prefer it to be growing. Different investors will have different priorities.

Here we look at funds investing in different types of assets, but which all have a yield greater than 4%. Investors should bear in mind that a higher yield often also means higher risk and that the income on the funds mentioned, is not guaranteed.

Aviva High Yield Bond (4.29%*)

This fund invests predominantly in UK and European bonds with a minimum of 80% invested in high yield bonds and the remaining 20% allocated between investment grade bonds and cash. While high yield bonds carry more risk of default than higher quality bonds, the fund has not experienced a single default over the past three years, which is a testament to the manager’s stock-picking skill and focus on management teams that are able and incentivised to strengthen their companies’ balance sheets, therefore reducing the risk of default.

F&C MM Navigator Distribution (4.56%*)

The yield of this multi-asset fund is derived from a greater number of sources than with a conventional vehicle, which is important when targeting balanced and consistent income distributions. The managers will invest up to in 60% equities and at least 30% in fixed income, non-equity and cash. It is run by one of the most experienced and best established multi-manager teams in the UK and the managers’ ability to find less well-known funds and then blend them together makes this a very interesting option for income seekers.

Fidelity Enhanced Income (6.52%*)

The is a core UK equity income fund aiming to achieve both capital growth and a high, regular yield. The income is generated via the core portfolio of dividend-oriented stocks, and enhanced by selling covered call options on a portion of the portfolio’s holdings. It has an interesting process with few direct competitors.

M&G Emerging Markets Bond (5.1%*)

This fund has the flexibility to invest across the whole emerging market bond spectrum. It can invest in both government and corporate bonds, denominated in local currencies or in the US dollar. The manager uses her vast skill set in this asset class to analyse the macroeconomic environment, and individual companies, to pick what she believes to be the best mix of bonds for this portfolio.

Man GLG UK Income (5.71*)

This UK equity fund has a value-driven approach and invests predominantly in UK companies of all sizes. It can also invest in continental European companies that derive a substantial part of their revenues from the UK and has the ability to invest up to 20% in corporate bonds - a flexibility that sets it apart from the majority of its peers.

Twenty Four Dynamic Bond (4.73%*)

This bond fund has a very flexible approach, taking advantage of changes in market conditions. It may invest across the whole range of fixed interest assets and its yield is usually one of the highest in the sector. It is managed with an emphasis on credit risk to ensure protection of investors' capital and income wherever possible and it differs from most strategic bond funds due to a consistent weighting to asset-backed securities, an area in which the team specialises.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The options mentioned in this article do not constitute financial advice.

*Source: Fund fact sheets January 2018.