Five of the Best: Alternative sources of income

The search for income has become increasingly difficult in a world of slashed dividends and low interest rates. However, Gary Potter, co-manager of the Thames River multi-manager range, has been looking for alternative sources of income less correlated to market movements.

"In the current climate when the yields in equities and bonds are becoming increasingly correlated, we need to be prepared to look outside the box for inflation beating dividends," he said.

"We have found a number of income generating sources which diversify the £313m Thames River Distribution fund away from the stock market.

"The yield we are generating on this fund has been historically consistent and we are on track to yield at least the same as last year if not more. The estimated yield of the fund based on the underlying holdings is 5.5%."

Here are a number of alternative, less-correlated sources of income Potter and Robert Burdett use on the Distribution fund:

1. The Darwin Leisure Property fund

"This is a caravan park fund we have held for three years. It owns caravan parks throughout the country in areas of outstanding natural beauty. It is a beneficiary of a weakening economy, not a growing economy, as Britons avoid the costs of travelling abroad and instead opt for a ‘staycation'. It generates a good stable yield of around 6%."

2. MedicX fund

"A listed healthcare infrastructure fund which benefits from the government creating modern franchise centres for four to five doctors practising all under one roof. It also yields 6%."

3. John Laing Infrastructure fund

"This was set up by the infrastructure development company John Laing and is responsible for 26 projects predominantly in the UK across the health, roads and street lighting sectors. We consider this to be low volatility and it has a yield of 6%."

4. IFSL Harewood US Enhanced Income

"This is run by BNP Paribas and uses covered call writing on US equities in the S&P 500 to produce a yield of 8%. It is a little out of the ordinary but similar to the Schroders Income Maximiser range (which are all also included in the fund)."

5. Polar Capital Financials Income fund

"Managed by Nick Brind, this fund invests in the equities and debt of financials companies but more insurance-based businesses rather than the banks. It gives us exposure to a good team and yields 5%-6%."