Which UK income funds are likely to outperform?

Funds overweight cyclicals will see 'best returns'

As the UK economic cycle turns from deflation to inflation, yield-hungry investors face some challenging decisions to generate above-average income while protecting, let alone growing, their capital.

Their first big hurdle is global interest rates, led by the US, are on the rise again after a decade of declines. With the UK likely to be the next major economy to increase rates, all fixed income securities, and counter intuitive as it might sound in a rising inflation environment, index-linked gilts, are now at risk of incurring significant capital loss. In contrast, blue-chip equities, with stable and growing dividends, offer a better solution for income investors. How concerned should investors be about dividend concentration risk? Yet many UK income funds appear indistingu...