The equity income funds that have ticked (just about) all the boxes in the past three years

Source: Trustnet

Equity income funds have outperformed many other sectors over the past three years, following a period when they were overlooked by investors seeking growth. But some have consistently been able to beat their peers over this period.

FE Analytics shows the average IA UK Equity Income fund made a 38.1% return in the three years to the end of 2025, ranking it eighth out of 56 peer groups in the Investment Association universe. IA Global Equity Income is in 10th place with a 36.8% average return.  

In this annual series, Trustnet uses 10 key metrics – cumulative three-year returns to the end of 2025 as well as the individual returns of 2023, 2024 and 2025 (to ensure performance is not down to one great year), three-year annualised volatility, alpha generation, Sharpe ratio, maximum drawdown and upside and downside capture, relative to the sector average – to score funds.

We then rank funds on their average decile for the 10 metrics to discover which were most consistently at the very top of their sector. As such, the lower a fund’s average decile score, the stronger it has been on multiple fronts over the past three years.

Source: FE Analytics. Total return in sterling between 1 Jan 2023 and 31 Dec 2025.

Starting with the IA Global Equity Income peer group, Thornburg Equity Income Builder took first place thanks to an average decile score of 1.7, including a top-decile three-year return of 64.7%. The fund is also in the peer group’s first decile for its returns in 2025 and 2024, alpha, Sharpe ratio, maximum drawdown and downside capture.

Managers Brian McMahon, Matt Burdett and Christian Hoffmann look for high-quality companies with strong cashflows and financial stability that have shown both the ability and willingness to pay and grow their dividends over time. Top holdings at present include Orange, AT&T, CME Group, Roche Holdings and BNP Paribas.

Commenting on the fund’s biggest holdings – many of which are in the telecommunications, financials and healthcare sectors – the managers said: “These are not trivial businesses. These firms occupy important positions in their respective markets. They tend to be well capitalised. Most have made reasonable progress growing their bases of paying customers and distributable cashflows to support multi-year dividend growth.”

Artemis Global Income takes second place in this research with an average decile score of 2.7. Its three-year return of 101.9% is the highest in the peer group by more than 30 percentage points.

For several years, managers Jacob de Tusch-Lec and James Davidson have been tilting the portfolio away from past winners and towards companies they think will do well under “regime change” in the global economy. Among these are holdings in defence, banks and gold miners, all of which have outperformed in recent years.

Giving an outlook at the start of 2026, de Tusch-Lec and Davidson argued that the short-term outlook is uncertain, with reasons to be both optimistic (strong global growth, potential US rate cuts, tariff relief) and cautious (government debt, geopolitical conflict and equity valuations that are far from cheap).

“With all of this in mind, we can continue to take comfort in a portfolio that is 40% cheaper than the index, with twice the dividend yield, which is well covered by free cashflow,” they argued.

“We also remain highly differentiated versus both the index and our peers: our active share is 95% and on average our portfolio has a 5% overlap with peer funds. With such pronounced ongoing shifts in the global economy and investment zeitgeist, we think the case for a fund with a flexible and pragmatic approach that looks so different to peers is as strong as ever.”

In third place in the IA Global Equity Income sector is Ian Clark, Andrew Headley and Mike Moore’s Veritas Global Equity Income fund. It also has an average decile score of 2.7 but its three-year return is about half that of Artemis Global Income.

The managers build a concentrated portfolio of quality mid- to large-cap companies worldwide, with a focus on high and sustainable equity yields. The fund is value-disciplined, investing only when attractive real returns are achievable. Top holdings include Unilever, Spirax Group, Medtronic, Vinci and Diageo.

Source: FE Analytics. Total return in sterling between 1 Jan 2023 and 31 Dec 2025.

Turning to the IA UK Equity Income sector, the best performer in this research was Artemis Income (Exclusions) with a 2.4 average decile ranking and three-year total return of 55.2%.

It is managed by Adrian Frost, Nick Shenton and Andy Marsh, who also run Artemis Income (which appears in sixth place in this research). Both funds invest in companies with robust cashflows and reliable dividend yields, leading to the ability to deliver consistent income and capital appreciation. This fund then excludes companies deriving more than 20% of revenue from tobacco, gambling, weapons and fossil fuels.

Both funds are in the second decile for three-year returns, having been in the first decile in 2024 but dropping into the fifth last year. Commenting on 2025, when the funds underperformed the FTSE All Share’s 24% return, the managers said: “It is unusual to be disappointed by a portfolio return of this magnitude – the fund’s best annual performance since 2019 – but as active managers our aspiration is of course to outperform the benchmark.

“It is inevitable however that a differentiated portfolio with positions sized by the risk/reward we believe to be on offer – with less attention paid to benchmark weightings – will on occasion underperform. Nevertheless, it is always frustrating when we do.”

However, there are several funds in the table above that have some of the IA UK Equity Income sector’s best average decile scores and made first-decile returns over the three years to the end of 2025. These are TM Redwheel UK Equity Income, Man Income, Schroder Income, Redwheel UK Value and BNY Mellon UK Income.

All of these funds have a value approach, which tends to be more common in the equity income peer groups as these are the companies attracting investors through dividends rather than high growth.