Trojan Income has re-taken top-spot in the latest rebalancing of Sanlam’s White List, jumping 37 places to take the crown off Slater Income.
FE Alpha Manager Francis Brooke’s fund was knocked off the top of the White List – a select group of funds that have established their ability to produce superior total returns over five years – at the start of 2017, and it struggled to keep up with its peers over the next 12 months as the market rallied. However, its defensive strategy worked in its favour last year as the market saw its worst period since 2008.
Source: Sanlam
The £2.7bn fund has made 42.48 per cent over the past five years, according to data from FE Analytics, compared with 35.81 per cent from its FTSE All Share benchmark and 29.14 per cent from the IA UK Equity Income sector.
It was yielding 4.4 per cent as at the end of last year and has ongoing charges of 1.02 per cent.
Another big gainer was Michael Clark’s £712m Fidelity MoneyBuilder Dividend fund, which moved from bottom of the Grey List – which Sanlam describes as “a temporary home for a manager with an out-of-favour style or an early warning signal for a fund in decline” – to eighth on the White List.
Sanlam said the fund has continued to deliver on its mandate since the last review, adding: “Despite not having the highest dividend income paid or the lowest volatility, the fund has managed to perform consistently in all other years reviewed.”
Fidelity MoneyBuilder Dividend has a yield of 5.3 per cent and ongoing charges of 0.67 per cent.
The AXA Framlington Monthly Income fund, run by George Luckraft, has maintained its second place position.
“The high-ranking dividend yield, consistent performance and moderate volatility have contributed to its performance,” said Sanlam.
AXA Framlington Monthly Income has made 39.1 per cent over the past five years. The £378m fund is yielding 4.9 per cent and has ongoing charges of 0.84 per cent.
Gervais Williams and FE Alpha Manager Martin Turner’s £1.3bn Miton UK Multi Cap Income fund also retained its position in third place, having remained in the top three funds for several years and spending half of this time at number one. The fund has made 39.11 per cent over the past five years. It is yielding 4.8 per cent and has ongoing charges of 0.81 per cent.
The £741m Man GLG UK Income fund, the best performer in the sector over the past five years with gains of 59.55 per cent, retained its position on the White List. It is yielding 4.6 per cent and has ongoing charges of 0.9 per cent.
Previous winner Slater Income dropped 19 places and onto the Grey List. This followed a more difficult 2018 for the fund, run by FE Alpha Manager Mark Slater, which experienced a pick-up in volatility.
Source: Sanlam
Kevin Murphy and Nick Kirrage’s Schroder Income fund dropped 24 positions, falling from the White List to the Grey List. Although it was the best performer in the IA UK Equity Income sector from a total return point of view last year, Sanlam said it was adversely affected by high volatility and a lower total dividend income. The managers’ Schroder Income Maximiser fund, the second-best performer in 2018, also dropped for similar reasons, specifically the high standard deviation generated over the last five years.
However, the biggest faller was Chelverton UK Equity Income, which dropped 39 places from the White List to the Black List – which Sanlam said is for consistent underperformers “and may indicate the need for remedial action”.
Source: Sanlam
The fund, managed by David Taylor and David Horner, suffered from stock-specific issues in the small- and mid-cap space, hurting the most recent performance and leading to the worst standard deviation over five years.
However, while it lost 14.9 per cent last year, its gains of 38.78 per cent over five years are still well ahead of the sector average.
Sanlam UK’s half-yearly Income Study, which has been running for more than 30 years, is a quantitative assessment that reviews and monitors the performance of all UK equity income funds over a six-month period.
The group ranks funds according to absolute income generated over the past five calendar years, as well as capital growth and volatility.
Philip Smeaton, chief investment officer at Sanlam UK, said: “As a result of sector concentration, traditional equity income funds that have tended to allocate disproportionately to sectors with the highest dividend yields may contain a hidden risk for investors.
“Most managers of those funds appearing at the top of our study have the ability to vary the size of their underlying positions according to where they see the best opportunities. Such a flexible approach enables managers to respond to prevailing market conditions over the short to medium term.”
Smeaton added: “Over the past year, dividend payments have helped the FTSE 100 outperform the other UK indices. The main index currently supports a dividend yield approaching 5 per cent, while the more broadly-based FTSE 250 yields around 3.9 per cent.
“The UK equity income sector offers funds that focus on the top 100, as well as those with a bias towards the wider market and can be an attractive option for investors looking for a stable income.”