Four funds have dropped off the “white list” in Sanlam’s half-yearly income study as the Newton UK Income fund was named the biggest faller and enters the black list.
The study monitors the performance of UK equity income funds with a market cap of more than £20m over a six-month period and puts them onto a white, grey or black list.
In April the Investment Association amended requirements for a fund to enter the UK equity income sector and reduced the sector’s yield hurdle from 110 per cent to 100 per cent.
The white list is the group of funds that has produced superior total returns over five years, the grey list is a warning signal for funds in decline or managers with an out-of-favour style, and the black list is for consistent under-performers and could also indicate a need for remedial action.
The funds are analysed according to absolute income generated over the past five calendar years, capital growth for each of the past five 12-month periods and volatility over the past five years.
The Unicorn UK Income fund has re-entered the white list after being eliminated last year. The CF Miton UK Multi Cap Income fund retained its position at the top of the list.
The Schroder Income Maximiser, Threadneedle UK Equity Alpha Income, Franklin UK Equity Income and RBS Equity funds all slid from the white list to the grey list.
The largest mover in the study is the Man GLG UK Income fun which moved 32 places from the black list to nearly the top of the grey list.
The HSBC Income fund is at the bottom of the black list, taking the spot from the Scottish Widows UK Equity Income fund.
The greatest faller in the study is the Newton UK Income fund, which dropped 24 places from the grey list to the black list. In the previous study it moved out of the white list.
Sanlam UK chief investment officer Phil Smeaton says: “Investors willing to look at historical and longer-term fundamentals of the market will reap the rewards of a high and diversified income stream. This provides an attractive option for investors who are prepared to expose their capital to stock market risk.”
He adds: “The IA’s decision to amend the requirements for a fund to enter the UK equity income sector is shaping the equity landscape, and has the potential to impact investors looking for income in the future. While funds have greater flexibility, there is a limited pool of stocks available, and investors therefore need to ensure they have the right blend of funds to make sure they are diversified.”