EdenTree Higher Income Fund Class B - Income (GBP)

The fund has done an excellent job for investors since it launched in 1994. Robin Hepworth steered the fund until November 2020 but he continues to support lead manager Chris Hiorns. We have also analysed a similar investment portfolio that Hiorns managed for institutional investors since 2008, demonstrating a good track record in his own right. The pair share a similar investing philosophy, and we expect continuity in the way the fund is managed. Over the long term EdenTree Higher Income has performed much better than the average fund in the sector, as shown in the chart on the right. Sometimes its approach will go out of favour and performance won't be as good. This is true of any fund manager and past performance isn't a guide to the future.

We normally expect this fund to offer some shelter when markets fall, but not perform quite as well when they rise strongly. Not losing as much in the tougher times means there's less to make up in the good times. This can lead to excellent long-term performance, but there are no guarantees.

Hiorns typically invests in companies he thinks are of sound quality, but out-of-favour or overlooked. This could be because something has gone wrong, or the company is in an unfashionable area. Whatever the reason, the setback must be temporary. The manager won't invest unless he sees the potential for business improvement and share price recovery. This often takes time, so he invests for the long-term.

He invests more in shares when the outlook for companies to grow profits and dividends is good. When it's less certain he'll invest more in bonds. Bonds can offer an attractive income and their prices haven't tended to rise and fall as much as share prices. They can reduce volatility, but also hamper gains.

Hiorns changes the amount invested in each area over time, depending on where he sees the most opportunity. In recent years the amount invested in shares has increased to around 75%. While many companies faced dividend cuts in 2020, over the longer term shares have generally offered an attractive and growing income, while income from bonds and cash has dwindled. He usually focuses on UK companies, but also invests in America, Europe, and higher-risk Asian and emerging markets.

Some corporate and higher-risk high-yield bonds are held as it's still possible to find some income here. They also help diversify the fund. We think the manager will increase bond investments again if yields become attractive, or the outlook for shares worsens. This is partly why we like the fund.

Please note the fund's charges can be taken from capital. This increases the yield, but reduces the potential for capital growth.