Sanlam has released its half-yearly Income Study, which it described as “the definitive investor guide to UK equity income funds.”
The study monitors the performance of all UK equity income funds every six months.
The Income Study categorises the funds into White List, Grey List, and Black List:
The White List is the select group of funds that have established their ability over five years to produce superior total returns.
The Grey List can be a temporary home for a manager with an out-of-favour style or an early warning signal for a fund in decline.
The Black List is for consistent under-performers and may indicate the need for remedial action.
In order to determine the best and worst performing funds, Sanlam UK analysed the performance against the following metrics:
- Absolute income generated over the past five calendar years
- Capital growth for each of the past five 12-month periods
- Volatility over the past five years
The firm’s findings are outlined below.
The White List
The Slater Income Fund, run by Mark Slater, has placed first having performed strongly since first appearing in January 2017. Its high-ranking dividend yield, consistent performance and moderate volatility have helped to knock Miton UK Multi Cap Income Fund off the top spot, which now ranks third.
Adrian Frost’s Artemis Income Fund which had a large fall in 2017 and placed 30th a year ago. Since then, the fund has delivered on its mandate and, despite not paying the highest dividend income, it has managed to perform consistently over the last two studies. The fund is now in the fourth position, having moved up 15 places.
The Schroder Income Maximiser Fund has moved up 18 places last placing in the White List in January 2017. This was helped by the dividend income element which has been strong over the period past six months.
Other new entrants include the Schroder Income Fund. The fund, managed by Kevin Murphy and Nick Kirrage, has moved up 38 places in the review and ranks first in performance, helped by a respectable yield of 3.4%.
The Aviva Investors UK Equity Income Fund and the FP Miton Income Fund are also new additions, having been close to the top of the Grey List in the previous study. Finally, the Insight Equity Income Booster Fund has made its first appearance ranking 14th following its recent five-year anniversary. The fund, managed by Tim Rees, benefited from a high dividend income paid over the period and a lower standard deviation.
The Grey List
The Royal London UK Equity Income Fund, managed by Martin Cholwell, ranked 22nd. The fund has had a poor two-year period in terms of calendar performance. Thomas Moore who manages the SLI UK Equity Income Unconstrained Fund which also dropped, due to a higher volatility driving the fund lower.
The Premier Monthly Income Fund dropped into the Grey List for similar reasons. This pattern of under- and out-performance is consistent over previous years too and has resulted in some of these funds producing a high standard deviation figure.
The fund, run by Richard Colwell, dropped another eight places into the Grey List and, unlike some of its peers, this is predominantly due to disappointing performance over the last period, which has led to it ranking 42 out of the 61 funds.
The Black List
As with the top performers, there has not been a wide divergence among the bottom ranks. The Black List continues to have the same constituents, with the exception of three funds.
The first is the Unicorn UK Income Fund which has dropped to the Black List after being in the White List in July 2017. The fund, managed by Fraser Mackersie and Simon Moon, suffered from stock-specific issues which have affected the most recent numbers, leaving the fund at the bottom of the peer group.
The second new constituent is the Schroder UK Alpha Income Fund continuing its recent fall in the rankings. The performance was the key driver for the 12-position fall, as both 2016 and 2017 have been challenging.
The third added fund is the Fidelity Enhanced Income Fund which has delivered disappointing performance numbers.