TM Redwheel UK Equity Income L Acc
Why is this fund on our radar?
The Redwheel UK Equity Income fund could appeal to investors seeking long-term growth in both income and capital from UK equities, delivered through a disciplined, value-oriented approach. Managers Nicholas Purves and Ian Lance seek to deliver a yield in excess of the FTSE All-Share Index, alongside long-term capital growth, through buying companies they deem to be undervalued or overlooked by the market. Importantly, their focus is not just on valuation but on dividend sustainability and resilient earnings too, helping to avoid ‘value traps’ or companies which are cheap for good reason. They prioritise those with strong cash flows, resilient profits and a record of paying growing dividends, whilst also targeting businesses with improving fundamentals, whether through new management, better capital discipline or healthier balance sheets. They argue these contrarian opportunities can deliver significant value if the recovery takes hold.
Put simply, the managers have repeatedly added value through stock selection whilst limiting losses during tougher markets, with consistently strong risk-adjusted returns reflected, including in falling markets, key reasons this fund has earned a place on our list. For investors, the combination of contrarian opportunities, effective risk management and reliable income might make this fund a differentiated option that can work as a UK equity income holding.
Skip to Our VerdictPerformance
Since its 2018 launch, the fund has outperformed both the FTSE All-Share Index, represented below by an equivalent ETF, and a sector of similar funds across multiple time frames. This is notable given that much of the period has been seen funds which chase the highest earnings growth in typically more expensive companies, leaving contrarian, value-focussed strategies out of favour. By staying disciplined, the managers have been able to benefit when undervalued businesses re-rated, whether supported by improving fundamentals, growing international interest or more favourable market conditions.
Performance since inception
Past performance is not a reliable indicator of future results
Over the past 12 months, the fund has outperformed. To October 2025, the fund delivered a 29.8% total return, ahead of the ETF tracking the FTSE All-Shares returns of 22.2% gain and the average return from the IA peer group of 16.9%. Notable contributors included NatWest, Barclays and Standard Chartered where higher interest rates have supported income.
That said, the fund is not immune to periods of underperformance. Given its value-driven approach, the fund will likely struggle during periods when high-growth stocks are driving market returns, like we saw in 2020, or when economic conditions are unfavourable, like in 2022 when elevated inflation, market uncertainty and political tension weighted on the fund’s value-oriented companies.
Calender year returns
Past performance is not a reliable indicator of future results
Volatility has also been higher than the index, reflecting the fund’s contrarian tilt and willingness to back undervalued companies through recoveries. At times, this has led to deeper drawdowns than some peers. Yet, the fund has performed relatively well on the downside, whilst stock selection has added value in recoveries. Over time, this balance has produced attractive risk-adjusted returns, offering investors a strategy that balances potential upside with managed downside exposure, alongside a competitive yield and a dividend that has grown steadily since the pandemic.
Portfolio
Given the contrarian nature of the managers’ approach, valuations are central to the process, meaning they will back undervalued companies where they believe fundamentals are strong or improving, whether through new management, capital discipline or balance sheet repair. However, Nicholas and Ian also emphasise quality, meaning they target companies exposed to long-term growth themes that are capable of both generating stable earnings and reliable dividends. They actively avoid investing in businesses just because they look cheap, screening out value traps by monitoring risks across valuation, earnings and financial health.
An example this year is aberdeen. The managers purchased it on valuation grounds as they believe in the long-term potential of its diversified model which spans asset management as well as businesses serving advisers and the retail investment platform interactive investor. The managers see attractive cash flow potential and scope for value creation from restructuring its underperforming investments division, with the market, in their eyes, undervaluing this mix relative to its intrinsic worth.
Geographically, the portfolio is predominantly UK-focussed with around 82% of invested in UK companies. But the nature of the UK market is quite interesting. Many UK stocks themselves also earn significant revenues abroad, giving the fund exposure to global growth beyond just the UK. Moreover, the managers can take positions in overseas stocks. A case in point is International Consolidated Airlines, a major European airline with dominant positions on transatlantic and South American routes. They purchased it on valuation grounds, but also because they believe it adds unique industry exposure not easily replicated by UK-listed peers.
Regional allocation
Our Verdict
The UK equity market has been unloved for years, weighed down by economic and political uncertainty, lacklustre growth and the overshadowing presence of high-flying US tech. More recently, the appeal of 5% returns on cash, with no need to take stock market risk, has only added to the neglect. Yet this has left many fundamentally strong UK businesses trading on historically low valuations, both versus their own past and global peers, creating what we think could be a potentially compelling entry point as conditions shift.
With interest rates easing and volatility in the US prompting investors to rethink their allocations, the UK is beginning to attract fresh attention, and the Redwheel UK Equity Income offers a distinct way to access this overlooked potential. Managers Nicholas and Ian apply a disciplined value approach, focussing on companies with strong cash generation and the ability to sustain and grow dividends. That combination has delivered attractive, risk-adjusted returns since inception, alongside a competitive yield and a steadily rising income profile since the pandemic.
Key Risks
- Value-oriented investment approach is likely to lag a growth-driven market
- Concentrated, high-conviction portfolio can add risk
- Underlying company dividends are susceptible to cuts if wide-spread market pressures like we saw during COVID-19 resurface
