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£5bn of assets in underperforming UK income funds

Almost £5bn of retail assets are invested in consistently underperforming UK income funds, according to Principal Investment Management.

A host of big names are among the 14 funds sitting in the Principal black list of funds which have struggled to perform based on consistent total returns and risk over five years.

The biggest fund in the list is the £2bn Jupiter Income trust, managed by Tony Nutt. The fund is fourth quartile in the Investment Management Association UK equity income sector over three years to July 30, 2012, having returned 34.7 per cent, compared to an average return of 44.1 per cent.

Other large funds in the list include £642m Standard Life UK Equity High Income fund, managed by Karen Robertson, and the £684m Scottish Widows UK High Income fund, managed by Chris Fontenla. Both funds are also fourth quartile in the IMA UK equity income sector over three years.

Neil Woodford’s £9bn Invesco Perpetual Income fund has been cut from Principal Investment Management’s white list for the first time since 2002.

The fund is one of two to be cut from the 14-strong list despite being the second best-performing fund in the IMA UK Equity Income sector over the 12 months to 30 July.

The white list, published this week, calculates the best 14 funds in the sector based on consistent total returns and risk over five years.

Woodford’s fund has been dropped into the grey list alongside the £253m CF Liontrust Macro Equity Income fund, which is managed by Jan Luthman and Stephen Bailey.

The two funds have been replaced by the £1.1bn JO Hambro UK Equity Income fund and the £142m Franklin UK Equity Income fund.

The £684m Troy Trojan Income fund tops the list, followed by the £1.3bn Threadneedle UK Equity Income and £60bn RBS Equity Income funds.

Chelsea Financial Services managing director Darius McDermott says: “Neil Woodford has a strong track record and I am sure he will be back in the white list sooner rather than later.”

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