Funds Income vs Accumulation - Is Income yield included in performance

RomfordNavy

Bit of advice required to understand the difference between Income and Accumulation funds: Is income yield included in performance charts?

For example looking at:
Maitland Institutional UK Equity Growth B (income) - GB00BP855954, yield: 1.13%, 5yr performance: 150%, 5yr annualised: 20.13%
vs
Maitland Institutional UK Equity Income B (income) - GB00B1FD6467, yield: 4.65%, 5yr performance: 50%, 5yr annualised: 8.85%
which of these would have returned overall greater returns?

Prism

Income is nearly always included for funds performance. In this case the first fund has done considerably better

Audaxer

RomfordNavy said:

Bit of advice required to understand the difference between Income and Accumulation funds: Is income yield included in performance charts?

For example looking at:
Maitland Institutional UK Equity Growth B (income) - GB00BP855954, yield: 1.13%, 5yr performance: 150%, 5yr annualised: 20.13%
vs
Maitland Institutional UK Equity Income B (income) - GB00B1FD6467, yield: 4.65%, 5yr performance: 50%, 5yr annualised: 8.85%
which of these would have returned overall greater returns?

I didn't recognise these names at first but now realise they are the funds better known as MI Chelverton UK Equity Growth and Income funds. The performance figures refer to Total Returns which assume that the dividend income is reinvested. Clearly the Growth fund has the greater returns. I am surprised by the difference in the amount of return over the 5 years.  I think the Equity Income fund is still a perfectly good fund if you are looking for income from natural yield.

aroominyork

Re whether income is included in performance charts this thread I started recently might help.

PS. I've just looked at these Maitland funds and they mostly invest in small companies. That's a curious place to fish for dividend yield so it's not surprising the Growth fund has performed better.

RomfordNavy

Audaxer said:

Clearly the Growth fund has the greater returns. I am surprised by the difference in the amount of return over the 5 years.  I think the Equity Income fund is still a perfectly good fund if you are looking for income from natural yield.

Seems to me even if income is required that it would be better to buy the Growth fund and just sell-off the equivalent amount when required to provide the same income as the Income fund would have provided.

Prism

RomfordNavy said:

Audaxer said:

Clearly the Growth fund has the greater returns. I am surprised by the difference in the amount of return over the 5 years.  I think the Equity Income fund is still a perfectly good fund if you are looking for income from natural yield.

Seems to me even if income is required that it would be better to buy the Growth fund and just sell-off the equivalent amount when required to provide the same income as the Income fund would have provided.

I agree. There is an argument however that during a downturn dividends hold up better that the share price. A little of both is good

Sheriff_Fatmen

RomfordNavy said

Seems to me even if income is required that it would be better to buy the Growth fund and just sell-off the equivalent amount when required to provide the same income as the Income fund would have provided.

What is the best approach if investing outside of the pension/ISA tax wrappers?
If growth/acc funds, how quick and easy is it to get income & capital gains info from either the platform or the fund managers, in order to deal with annual personal tax returns? 

Thrugelmir

Reinvesting the income back into the fund would incur a 5% front end charge. Better to take the accumulation option. 

bowlhead99

Sheriff_Fatmen said:

RomfordNavy said

Seems to me even if income is required that it would be better to buy the Growth fund and just sell-off the equivalent amount when required to provide the same income as the Income fund would have provided.

What is the best approach if investing outside of the pension/ISA tax wrappers?
If growth/acc funds, how quick and easy is it to get income & capital gains info from either the platform or the fund managers, in order to deal with annual personal tax returns? 

It varies from platform to platform. 

Some will confirm the equalisation and accumulation dividend figures round about the time they happen, as a line in your transaction summary, albeit a non cash item.

Generally you will get a consolidated tax certificate showing the income from your various types of holdings some time after the end of a tax year, e.g. usually between April and July for a 5 April year end. This would show the total income from each type of holding you have (e.g. dividends, interest, property income distributions, from onshore and offshore sources). It would include the accumulated/ reinvested income in each of your OEICs and UTs. So most people will just wait for that.

However, waiting for the end of the year is not especially practical if e.g.  you're selling a holding or part of it during a tax year and trying to figure out what your reinvested dividends earlier in the year had been, to work out what your cost of investment was, to work out what gain you would make on disposal, to plan to exactly use up your annual exemption before the year is up...

You could generally find out the income amount per share for a particular date for a particular fund from your platform or direct from the fund manager, once the notional distribution date has passed. But easiest from a tracking perspective if you get the dividends paid to your account so that you can see them and decide for yourself exactly how much you want to invest and then you'll have your own records of what you spent on acquiring the shares / units you hold. 

Obviously if there is a large cost of manual reinvestment (ie bid-offer spread, platform transaction fee or undiscounted initial charges on purchases), you might prefer to stick with acc and just deal with the tax admin as necessary.

Audaxer

RomfordNavy said:

Audaxer said:

Clearly the Growth fund has the greater returns. I am surprised by the difference in the amount of return over the 5 years.  I think the Equity Income fund is still a perfectly good fund if you are looking for income from natural yield.

Seems to me even if income is required that it would be better to buy the Growth fund and just sell-off the equivalent amount when required to provide the same income as the Income fund would have provided.

It would be better to buy the Growth fund if you knew for certain that it was going to do much better than the income funds for the following 5 years. But we don't know for certain what is going to happen in the next 5 years. The Growth fund grew by 40% last year, which is great if you invested at this time last year, but now may not be a great time to invest in it.

Thrugelmir

aroominyork said:

PS. I've just looked at these Maitland funds and they mostly invest in small companies. That's a curious place to fish for dividend yield so it's not surprising the Growth fund has performed better.

Why is it curious to fish in the smaller companies sector for dividends. Not every company is a stellar growth story. There's some well run, unleveraged, cash generative companies amongst the smaller caps.