Wealth manager Sanlam has released its definitive half-yearly list of UK equity income funds – and it contains results which some may find surprising.
The CF Miton UK Multi Cap Income fund, run by Gervais Williams and Martin Turner, topped the performance rankings, while the HSBC Income fund hit rock bottom.
The performance is based on metrics including absolute income generated over the past five calendar years, capital growth for each of the past five 12-month periods and volatility over the past five years. Sanlam then orders the funds into a superior "white list", the "grey list" which is defined as “a temporary home for a manager with an out-of-favour style or an early warning signal for a fund in decline” and the "black list" of consistent underperformers.
“The market has been open to speculative activity, but the fundamentals remain strong,” said Phil Smeaton, chief investment officer at Sanlam UK.
"While concerns raised about the future relationship between the UK and EU to come – not to mention the shape of the labour market – have some merit, the outlook for UK listed companies appears to have weathered any potential storm."
In a world where interest rates are low and investors are increasingly keen on funds which distribute cash, Sanlam's rating of income funds might be more important than ever. So who fell exactly where on the wealth manager's lists?
The white list
The CF Miton UK Multi Cap Income fund retained its top spot, due to what Sanlam termed “strong returns, low volatility and maintaining a high income pay-out”.
Slater Income slid up into second place, while MI Chelverton UK Equity Income rose from the bottom of the white list in the last study to third place.
The Bath-based fund, run by David Taylor and David Horner, performed strongly over the past year due to its “bias toward mid and small cap companies, along with their continued high income distribution levels”, according to Sanlam.
Marlborough Multi Cap Income and Majedie UK Income, which ranked fourth and fifth respectively, have both continued their upward trajectory. “These funds have two things in common: a high income pay-out and strong consistent performance versus peers,” said Sanlam.
One fund which did particularly well was the Unicorn UK Income, which recovered to re-enter the white list after being hit by the results of the UK's Brexit referendum last year.
|The full white list|
|CF Miton UK Multi Cap Income|
|MI Chelverton UK Equity Income|
|Marlborough Multi Cap Income|
|Majedie UK Income|
|Premier Monthly Income|
|Royal London UK Equity Income|
|SLI UK Equity Income Unconstrained|
|AXA Framlington Monthly Income|
|Threadneedle UK Equity Income|
|Unicorn UK Income|
|JOHCM UK Equity Income|
|River & Mercantile UK Equity Income|
The grey list
Threadneedle's three income funds have often performed well in Sanlam's rankings. Threadneedle UK Equity Income has retained its place in the white list, although it has fallen by five places, but both other funds have now dropped into the grey list.
Threadneedle UK Monthly Income was demoted in the previous study, while Threadneedle UK Equity Alpha Income has now fallen 15 places to suffer the same fate.
Schroder Income Maximiser is stuck back in the grey list after rising to the white list in the last study. Its gains “appear to have unwound”, but the fund has maintained its strong yield which still ranks first for dividend income provided in the past five years.
Man GLG UK Income grabbed the title of the largest mover in the half-yearly study, swooping up 32 places from the black list to almost the top of the grey list. But the Franklin UK Equity Income fund has dropped from the white list “as the income provided in the past five years has been lower than its peers, coupled with poorer performance than the sector average”, said Sanlam.
The Troy Trojan Income fund has also fallen 16 places, after dropping 18 in the last study. “Its quality style bias has continued to impact upon performance, and the amount of income the fund has provided over the past five years has continued to lag,” said Sanlam.
Schroder Income and Rathbone Income have both made a return to the study to drop directly into the grey list, benefitting from the Investment Association's decision to lower the yield requirements for funds in the equity income sector. Now funds must only cross a yield hurdle of 100 per cent of the FTSE All-Share index yield over a three-year rolling period, as opposed to 110 per cent.
|The full grey list|
|Smith & Williamson UK Equity Income|
|Man GLG UK Income Retail|
|Lazard Multicap UK Income|
|Threadneedle UK Equity Alpha Income|
|Schroder Income Maximiser|
|Ardevora UK Income|
|RBS Equity Income|
|F&C Responsible UK Income|
|Allianz UK Equity Income|
|Old Mutual UK Equity Income|
|Threadneedle UK Monthly Income|
|Aviva Investors UK Equity Income|
|Schroder UK Alpha Income|
|Franklin UK Equity Income|
|FP Miton Income|
|Santander Equity Income|
|Kames UK Equity Income|
|Troy Trojan Income|
|BlackRock UK Income|
|Fidelity MoneyBuilder Dividend|
|Liontrust Macro Equity Income|
|Jupiter Income Trust|
|SLI UK Equity High Income|
|Santander Enhanced Income|
|Rathbone Blue Chip Income and Growth|
|Fidelity Enhanced Income|
The black list
Invesco Perpetual Income & Growth is also a new entrant to Sanlam's study, benefitting from the lowering of the yield hurdle, but has pitched straight into the black list. Sanlam notes there has been very little change to the list of worst performers, although Scottish Widows UK Equity Income – which has been bottom for some time – has had its place assumed by HSBC Income.
The greatest faller in the entire study is Newton UK Income, which has sunk 24 places from the grey list to the black list after being knocked out of the white list last study. It has “struggled in terms of performance and its dividend pay-out level”, according to Sanlam.
|The full black list|
|Castlefield BEST Income General|
|AXA Framlington Blue Chip Equity Income|
|JPM UK Higher Income|
|Invesco Perpetual Income & Growth|
|NFU Mutual UK Equity Income|
|CF Canlife UK Equity Income|
|L&G UK Equity Income|
|F&C UK Equity Income|
|Newton UK Income|
|Scottish Widows UK Equity Income|
|Aberdeen UK Equity Income|
|HSBC Income Retail|