Alternative investment funds to boost your income

With yields on stocks falling, James Connington looks at ways of getting higher returns

The FTSE index of leading shares has a dividend yield of 3.7pc. The average yield of the 10 largest funds in the “UK Equity Income sector” – which collectively run £38bn of investor cash – is only marginally higher at 3.8pc.

Despite this, a number of apparently secure asset classes are offering yields nearer 5pc. trades at a premium of 12pc with a 12-month average of 11pc – but not at the extremes of the funds detailed above.

Kenneth MacKenzie, managing partner at Target, said: “We aim to offer income and a little bit of capital growth, based on sustainable rents.

“We’re not just landlords, we’re backing the homes – our health-care team is bigger than our investing team.”

A similar care-home REIT, Impact Healthcare, launched this month. It trades at a 5pc premium. Richard Curling, who runs Jupiter’s Fund of Investment Trusts, likes both Target and Impact.

He said the premiums were kept lower due to investors’ negative view of care homes – thanks to previous high-profile care-home management scandals.

He said: “There is a significant cushion of safety between what the tenant operators earn and the rent paid to these REITs. One attractive thing about both of them is rental uplift linked to inflation.

“I like Target as it invests in new or purposebuilt homes with low maintenance costs.

“Impact is smaller and invests in some older homes, but that offers the

‘Wait until they issue more shares and seize that opportunity’

possibility of gains from property improvements.”

Mr Curling believes the premium on Target is worth paying “if you’re looking for reasonably secure income that is inflation linked”.