Wealth Shortlist Update: Jupiter UK Income

We believe the fund gives investors access to an experienced UK equity income team with a disciplined focus on dividends, cash flows and long-term income and capital growth. The fund’s managers focus on companies whose share prices are currently below their true value.

The fund is managed by experienced UK equity income investors Adrian Gosden and Chris Morrison, who took over the fund in 2024. They’re supported by Jupiter’s wider UK equities team.

While they took over the fund two years ago, Gosden has 30 years’ investment experience, including 13 years at Artemis where he co-managed the Income fund. He joined GAM in 2017, where he began working with Morrison and launched a UK equity income fund that they co-managed before moving to Jupiter.

The managers take a straightforward approach to income investing. They look for companies they believe are undervalued, but which can generate the cash needed to pay dividends, reinvest in the business and support future growth. We like the simplicity of the process. They’re not trying to do anything overly complicated, but instead focus on whether a company can generate sustainable cash flows and return some of that cash to shareholders over time.

The fund has a value bias, which means the managers invest in companies whose share prices they believe don’t fully reflect their long-term prospects. While some UK equity income funds are heavily focused on larger companies, Gosden and Morrison also have the flexibility to invest in medium-sized and smaller companies. This can give investors a broader range of income opportunities than funds focused mainly on the largest dividend-paying companies, although investing in smaller companies adds risk.

We view this flexibility as one of the fund’s strengths. It allows the managers to use their experience across the UK market and look beyond the traditional larger dividend payers that dominate many UK income funds. The fund typically invests around 70% in FTSE 100 companies and 30% in FTSE 250 companies and below.

Gosden and Morrison have built a strong track record together. They co-managed the GAM UK Equity Income fund from October 2017 until July 2024. Over this period, the fund grew 38.06%, compared with 37.97% for the FTSE All-Share and 29.47% for the average fund in the IA UK Equity Income sector. While Jupiter UK Income is a different fund, it follows the same investment philosophy and a similar process to the GAM fund. Differences in the way the fund’s invested and changing market conditions mean performance won’t be identical, but both funds take a value-focused approach and have exposure to medium and smaller-sized companies, so they can be influenced by similar market drivers. As always past performance isn’t a guide to future returns.

Since Gosden and Morrison took over Jupiter UK Income in April 2024, the fund’s grown 54.79%*, compared with 43.20% for the FTSE All-Share and 36.38% for the average fund in the IA UK Equity Income sector. Performance will vary at times depending on market conditions and investor sentiment towards different types of companies. In particular, periods when value investing or medium and smaller-sized companies are out of favour could affect returns.

The managers have also historically delivered a yield above the FTSE All-Share and have grown income payments over time. The fund currently yields 4.56% compared with 3.00% for the FTSE All Share. Income is not guaranteed though, and yields can rise and fall and are not a reliable indicator of future income.

The fund provides diversification alongside the existing UK income funds on the Wealth Shortlist, as it uses a more value-focused approach and invests more in smaller companies, while still keeping income at the heart of the process.

Overall, we’re impressed by Gosden and Morrison’s experience, track record, straightforward investment process and disciplined approach to income investing. We believe the fund offers a differentiated, value-oriented approach that has the potential to deliver attractive returns for patient investors over the long term.

Please note the fund takes charges from capital, which could boost the income, but reduces the potential for capital growth.