BlackRock’s £364m UK Income fund, run by Adam Avigdori, was one of the largest mandates to be added to the Black List after its latest yearly return and dividend failed to impress.

Sanlam’s list rates the best and worst of the income universe, using seven criteria to determine the funds to buy and the funds to avoid.

Paul Surguy (pictured), author of the White List and head of managed funds at Sanlam, said the fund had experienced a “very weak year” which saw its dividend yield come in well below the average payout.

Other new additions to the Black List were the JPM UK Higher Income, F&C UK Equity Income, Kames UK Equity Income, and Santander Enhanced Income funds.
Newton’s Higher Income fund also remained on the Black List for the fourth time in a row, despite a second change in management.

The fund featured on last year’s Black List when it was managed by Richard Wilmot, who had taken over from Tineke Frikkee in 2012.

Now in the hands of Christopher Metcalfe and Emma Mogford, the £2bn fund continues to struggle, returning just 11% over the year to end of June according to Sanlam, one of the lowest returns of all the Black List funds.

Over five years it has returned 59% versus the average Black List gain of 62%, and well below the average return from the UK Equity Income sector.

Surguy said: “Newton Higher Income has changed process once in the past 18 months and managers twice, but continues to struggle.”

Grey List

Meanwhile, the £538m Liontrust Macro Equity Income fund, managed by Jan Luthman and Stephen Bailey, has been downgraded to Sanlam’s Grey List.

The fund has returned 16% over the past year, versus a Grey List average return of 14%, but a combination of some weaker numbers in previous years, and a lower than average dividend yield, mean the fund has been downgraded.

There are a number of bright spots however, with the study highlighting those funds consistently outperforming.

Unicorn UK Income maintains its top spot following another strong year of returns, with the fund delivering 20% versus the White List average of 17%.

Long-term manager John McClure passed away in June, but Sanlam’s Surguy said in Simon Moon and Fraser Mackersie the group has two highly competent managers.

“Simon and Fraser have learnt their craft from John and we believe they will continue to produce solid risk-adjusted returns with their focus on smaller companies with strong cashflows,” he said

There is also good news for Threadneedle, which has three funds fin the White List.
These are the £2.8bn Threadneedle UK Equity Income, £746m Threadneedle UK Equity Alpha Income and new entrant £640m Threadneedle UK Monthly Income funds. The first two are managed by Leigh Harrison and Richard Colwell, while the UK Monthly Income fund is run by Jonathan Barber.

Other new entrants to the White List include the £908m Fidelity MoneyBuilder Dividend, £606m Invesco Perpetual Income & Growth, and RBS Equity Income funds.

Surguy said: “Threadneedle is consistently seen in the White List. Marrying economic analysis with company meetings and research is a skill not all can master; Leigh Harrison and Richard Colwell obviously can.”

All three funds have outperformed the IMA sector average.