The best and worst income funds revealed
Sanlam Private Wealth’s bi-annual income study has run for 30 years, ranking funds based on performance in terms of absolute income generated over the past five years, capital growth over the past five 12-month periods and volatility.
Funds that make it onto the white list have produced superior total returns while the grey list can be an early warning sign for investors that a fund’s in decline.
The black list houses consistent underperformers, and unless swift action is taken, it’s a sign for investors to look elsewhere.
The white list
The Troy Trojan Income fund, managed by Francis Brooke, has maintained its strong run to make top position, with Richard Colwell’s Threadneedle UK Equity Income fund rising to number two. Three Threadneedle funds feature in the top ten.
The highest climber, to number seven, is Colin Morton’s Franklin UK Equity Income fund. Martin Cholwill has succeeded in advancing the Royal London UK Equity Income fund back to fourth position.
The Marlborough Multi Cap Income fund, managed by Siddarth Chand Lall, who focuses on under-researched small and medium sized companies, has leapt into the white list at number three.
The grey list
The Unicorn UK Income fund, managed by Fraser Mackersie and Simon Moon, has struggled, having fallen from the top spot in the white list to the middle of the grey list. Although it has good long-term performance, this fund has been let down during the review period by its domestic mid-cap focus, according to Sanlam.
Similarly, Thomas Moore’s SLI UK Equity Income Unconstrained fund has suffered recent weakness and has therefore dropped into the grey list.
The Black List
The Santander Enhanced Income Portfolio has fallen back into the black list where it has joined the Scottish Widows UK Equity Income fund which is in last place, with the HSBC Income fund only one place above.
View the full list of UK equity funds here.
How to spread risk
Sanlam said the mid-year income study focused on market uncertainties stemming from fears about global growth and the fallout from the Brexit vote. However, it pointed out that over 40% of UK dividends are expected to come from the top 10 payers, though there are doubts about dividend sustainability.
Charles Brand, head of portfolio management at Sanlam, said one-way income investors can cushion themselves is by spreading the risk and a way to do that is with an equity fund.
“Investors selecting a diversified vehicle that includes a mix of different dividend paying stocks, across a broad array of industries and market capitalisation, will be better able to ride out the storm than those investing in a single dividend-paying stock or a fund focused in only one area.”
He concluded that in an environment in which companies of all sizes and sectors are susceptible to risk, it is the selection of individual companies within funds that is more than ever the key to their success.