The Miton UK Multi Cap Income fund has continued its dominance of Sanlam’s bi-annual review of the UK equity income space.
It has returned 106.3% over the past five years, compared with the sector average of 64%.
The study is a quantitative assessment monitoring the performance of all UK equity income funds over a six month period and then bracketing them into three categories: white list, grey list, and black list.
The white list is made up of the funds that have proved their ability over five years to produce superior total returns.
The grey list is for funds that have an out-of-favour style or it serves as an early warning signal for a fund in decline. The black list is for consistent underperformers.
Although the white list has remained relatively stable, there have been three big changes since Sanlam's June report.
They have been replaced by: the RBS Equity Income fund managed by Aviva’s Chris Murphy, Man GLG UK Income and Lazard Multi Cap UK Income fund managed by Alan Clifford and Citywire A-rated Alan Custis.
Coming in at the bottom of the black list is Aberdeen UK Equity Income fund, which fell three places since June.
The biggest single drop on list was Ardevora UK Income fund which fell 28 places into the black list after two years of relatively poor performance.
Also noteworthy is Thomas Moore’s SLI UK Equity Income Unconstrained fund, which in 2016 placed last in terms of performance. Since then it has delivered on its mandate and despite having the highest standard deviation (due to past volatility in 2016), it has subsequently strengthened its position in the middle of the white list, moving up two places.
‘Our income study illustrates the strength and breadth of a hugely popular investment option for British investors. Given the current low interest environment, there is a lot of reasons to be excited about UK equity income funds, with a number of them currently yielding between 4% and 6% a year,’ said Philip Smeaton, chief investment officer at Sanlam UK.
‘One element that makes the income market attractive is the UK’s exposure to overseas earnings. A large proportion of large cap companies in the UK generate their earnings from overseas, with some benefiting even further by paying dividends in dollars or euros.
‘While Brexit has presented a challenge to the UK economy, the sudden depreciation of sterling has meant those stocks have increased income payments.’