The £2.7bn Newton higher income and the £837m Standard Life UK equity higher income funds have both been demoted to the grey list with four new names being added to what is now a 14-strong white list of funds.
The Newton income fund is currently fourth quartile in the IMA UK equity income sector over the past 12 months having returned 14.9 per cent compared to the sector average of 24.3 per cent. The Standard Life UK equity high income fund is on the borderline of the second and third quartile having returned 22.8 per cent.
Principal Investment Management investment manager Joe Wiggins says: “The issue with the Newton fund was that it was too defensive in its attempts to focus on dividend and defend against market conditions. The fund has tended to yo-yo between the white and grey list as it performs when the likes of tobacco and utilities do well and struggles when the likes of mining stocks outperform.
“Standard Life UK equity higher income just went into the cyclicals rally a little late and consequently it just missed out.”
The White List calculatesthe best 14 funds in the sector based on consistent total returns and risk over five years, Principal has increased the list from 12 to reflect the developing universe and a number of “mirror funds” which in fact have the same manager and process.
The four new entrants to the list include the £1.3bn Schroder income fund, managed by Ian Lance and Nick Purves, as well as Royal London equity income managed by Martin Cholwill.
Wiggins says: “Schroder UK equity income is definitely one of the better funds in the sector and the managers’ decision to go aggressive earlier has paid off well.”
The list is completed by the Old Mutual equity income fund run by Stephen Message and the JOHCM UK equity income fund, managed by James Lowen and Clive Beagles, which has just qualified for the list.
“We were surprised at Old Mutual Asset Management’s decision to change Michael Gifford as the lead manager on the fund in November 2009 and it is currently a hold,” Wiggins adds.
There were five new additions in the black listed set of funds as Aberdeen, Lazard, F&C, Marlborough and Prudential all saw funds brought into the list.
Henderson New Star, Liontrust and F&C all currently have high profile funds in the black list.
Wiggins says: “The Henderson New Star funds are a disappointment, the group has three funds in the list and while performance has picked up in 2009 there are a number of better options in the sector.
“Liontrust’s has implemented a new process since Gary West and James Inglis-Jones replaced Jeremy Lang and William Pattisson and at present the fund is a hold as we wait to see the proof in the pudding.”