Funds can be a useful tool for investors seeking income while still looking for diversification. However, as with picking individual dividend stocks, investors should be wary of just choosing funds with the highest yield. Performance is a key element here.
As part of income week, we profile three UK funds highly rated by Morningstar that invest globally for income, while also outperforming peers in the shorter and longer term.
To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. All names that passed the screen were actively managed.
We have highlighted three accumulation, or “acc” share classes in this article, meaning they reinvest the income received from its holdings.
Income, or “inc” share classes are also available—as the name suggests, an income unit does pay out the dividend, either into the cash account of your ISA or trading platform, or directly into your bank account.
Investors are often encouraged to choose accumulation share classes while still working and saving for the future. Income share classes can suit those in retirement looking to rely on the income paid for living expenses. This income could also be exposed to income tax if held outside of an Isa or a Sipp.
What Are Global Equity Income Funds?
Global equity income portfolios invest in international equities that pay out above-market yields. Funds in this category can invest in companies of any size, though many exhibit a large-cap bias.
Global Equity Income Fund Performance
Over the last 12 months, global equity income funds have returned 5.26%. On an annualized basis, global equity income funds have returned 8.01% over the last three years and gained 10.25% over the last five years. That compares with the Morningstar UK Index, which has returned 7.78% over the last 12 months, gained 9.69% per year over the last three years, and gained 11.37% per year over the last five years.
Global Equity Income Funds vs. the Morningstar UK Index
Source: Morningstar Direct. Data as of May 19, 2025.
Screening for the Top-Performing Global Equity Income Funds
To find the best global equity income funds, we looked at returns data from the past one, three, and five years, using data available in Morningstar Direct. We screened for UK-domiciled open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with the highest Morningstar Medalist Ratings: Silver or Gold. We excluded funds with assets under £100 million. This left three funds.
Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.
M&G Global Dividend Fund
- Share Class: M&G Global Dividend GBP PP Acc
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★
Over the past 12 months, the £2.2 billion M&G Global Dividend Fund rose 7.77%, while the average fund in its category rose 10.80%. The M&G fund, which launched in April 2019, has climbed 9.19% over the past three years and gained 13.77% over the past five years. As of Apr. 30, 2025, the fund’s annual dividend yield is 4.05%, against the category average of 3.52%.
“Stuart Rhodes has been the strategy’s portfolio manager since its inception in July 2008. Rhodes has navigated the strategy well through different stages of the economic cycle and adhered to his investment philosophy and convictions when facing headwinds. He sometimes goes against the grain and has demonstrated his stock-picking talent over time.
“Rhodes applies a well-designed, repeatable, and diligently executed dividend-growth-focused strategy. He constructs a compact portfolio of 40—50 stocks through bottom-up fundamental analysis, where he has put more emphasis on financial leverage in recent years. The strategy’s hallmark bucket structure divides the portfolio into three sleeves: assets, quality, and rapid growth.
“Traditionally, the quality bucket dominated the portfolio, but rising valuations made it harder to find opportunities. The portfolio is top-heavy, with about half of its assets in its 10 largest holdings, and being a larger shareholder in some (smaller) companies reduces the portfolio’s liquidity. Its tilt toward mid- and small caps, typically around one third of the portfolio, is another risk factor that investors should consider.
“The track record built by Rhodes points to strong total returns, beating peers and the index by a comfortable margin. While investors have been compensated for the higher risk, they must be willing to accept periods of erratic and poor relative performance to reap the rewards over the long term.”
—Jeffrey Schumacher, director
Artemis Global Income Fund
- Share Class: Artemis Global Income I Acc
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★★
Over the past 12 months, the £2.3 billion Artemis Global Income Fund rose 22.60%, while the average fund in its category rose 10.80%. The Artemis fund, which launched in July 2010, has climbed 16.59% over the past three years and gained 18.48% over the past five years. As of Apr. 30, 2025, the fund’s annual dividend yield is 4%, against the category average of 3.52%.
“The portfolio is overweight in financial services and industrials relative to the category average by 19.8 and 13 percentage points, respectively. The sectors with low exposure compared with category peers are technology and healthcare, underweight the average by 13.5 and 8.7 percentage points of assets, respectively. The portfolio is composed of 81 holdings and is relatively concentrated. Specifically, 28.9% of the fund’s assets are housed within the top 10 holdings, as opposed to the typical peer’s 21.9%.
“Over a 10-year period, this share class outperformed the category’s average return by 2.1 percentage points annualized. And it also beat the category index by an annualized 82 basis points over the same period. Although the overall rating does not hinge on one-year performance, its impressive 17.8% return is worth mentioning, a 13.2-percentage-point lead over its average peer, placing it within the top 10% of its category.”
—Morningstar Manager Research
Vanguard Global Equity Income Fund
- Share Class: Vanguard Global Equity Income Acc
- Morningstar Medalist Rating: Gold
- Morningstar Rating: ★★★★★
Over the past 12 months, the £482.1 million Vanguard Global Equity Income Fund rose 6.80%, while the average fund in its category rose 10.80%. The Vanguard fund, which launched in May 2016, has climbed 9.49% over the past three years and gained 13.27% over the past five years. As of Apr. 30, 2025, the fund’s annual dividend yield is 3.80%, against the category average of 3.52%.
“This strategy, over time, has consistently held more undervalued companies, compared with peers in the global equity income Morningstar category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio.
“The managers have also tended to overweight yield during recent years, shown by the portfolio’s high exposure to dividends or buybacks. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month.
“The fund has been a top performer in its peer group category, Global Equity Income. Over the past three-year period, it was within the top 20% of funds. And managers generated alpha, over the same period, proving their effectiveness.”
—Morningstar Manager Research
Part of this article was generated using an automated tool and reviewed by Morningstar editors.
This article was generated with the help of automation and reviewed by Morningstar editors. Learn more about Morningstar’s use of automation.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
