Which sector is tempting Isa investors this year?

For the third year in a row, the UK equity-income sector is proving most popular among Isa investors as we approach the end of the tax year.

Research by Chelsea Financial Services among its clients shows that in the past three months UK equity-income funds were the top choice, followed by UK all companies and strategic bond, then Asia Pacific ex Japan and global-equity funds.

When it comes to individual funds, Invesco Perpetual High Income and Invesco Perpetual Monthly Income Plus have dominated the popularity tables for each of the last three years.

But with legendary manager Neil Woodford leaving Invesco, other UK equity-income funds are moving up, according to Chelsea's Darius McDermott. "Artemis Income, Threadneedle UK Equity Alpha and Rathbone Income seem to be the main beneficiaries," he said.

Meanwhile, bond funds have fallen out of favour. "They have been replaced in the top 10 by more UK equity and equity-income funds as fears over an end to quantitative easing and rising interest rates have put people off buying more fixed income," Mr McDermott added.

Adrian Lowcock of Hargreaves Lansdown said Artemis Income is the fund of interest in the sector. "It's focused on large UK companies and is suitable as a core holding," he said.

He also mentioned the Marlborough Micro Cap Growth fund. "Investors benefit from diversification away from core UK holdings as well as access the rapid growth of equity income in the UK market," he said.

Finally, Mr Lowcock cited an overseas income fund, Newton Asian Income. The fund currently yields 4.99 per cent.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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