Hargreaves analysis reveals top ten income fund managers

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Francis Brooke has topped the list of the 10 best managers ranked by total returns having returned 127 per cent over the past decade, new analysis from Hargreaves Lansdown shows.

Brooke’s £3.1bn Trojan Income fund has turned £10,000 into £22,700 over the last 10 years helped by a combination of capital appreciation and income generation within his strategy.

Hargreaves’ UK Equity Income report, published today, has ranked 34 fund manager records looking at the past 10-year period and includes the top 10 funds in terms of total return, capital return and income. The sample tracks managers who have run UK equity income funds with a minimum 10-year track record.

Standard Life Investments’ Thomas Moore, who runs the SLI UK Equity Income Unconstrained fund, follows Brooke with a 122.8 per cent total return, while Invesco Perpetual’s Mark Barnett has taken over Neil Woodford in the ranking, boasting a 117.1 per cent return.

Hargreaves attributes Barnett’s better performance more to his mid-cap-focused Strategic Income fund rather than his Income and High Income funds.

Meanwhile, Woodford’s transition from Invesco Perpetual as well as the preparation to launch his new Equity Income fund saw him ranked sixth place with a 104.2 per cent total return.

Meanwhile, Nick Purves, the manager of the RWC Enhanced Income, Tim Rees of the Insight Equity Income Booster, and Michael Clark, manager of the Fidelity Enhanced Income were listed as top three income-producer managers, generating £5,649, £5,463 and £5,180 over 10 years from £10,000 invested.

Fund managers who have fallen out the IA UK Equity Income sector for failing to meet its high yield requirements have been included in the analysis.

A “badly constructed” sector

Hargreaves attacked the relevance of the sector saying it is “badly constructed” since 22 funds, or 20 per cent of the sector, have been excluded so far, citing the new Woodford Income Focus fund which will now be placed into the IA Specialist sector.

While a FTSE All-Share tracker performed better than the IA UK Equity Income sector average, which also includes new, merged or closed funds, and cash over the period, a number of active managers continued to deliver significantly higher total returns despite underperformance. 

Overall, the report found the UK Equity Income sector has returned four times more than cash over the past 10 years, generating £15,799 out of a £10,000 investment compared to £11,361 of an average instant access savings account.

 

 

 

Income produced

Top manager £5,649
Average manager £4,010
Bottom manager £2,925
FTSE All Share Tracker £2,903
Cash £1,292
Sources: Hargreaves Lansdown, Thomson Reuters Lipper IM 31.12.2006- 31.12.2016

Hargreaves Lansdown senior analyst Laith Khalaf says: “If on the eve of the financial crisis, you had put your money into an equity income fund, you still would have significantly outperformed cash over 10 years, despite the huge falls in the market witnessed in 2008 and 2009.

“This demonstrates that while cash is the best place for short-term savings, investors squirreling their money away for the long term should make sure they have a healthy amount invested in the stock market.

“Income funds come in different shapes and sizes and that is amply demonstrated by the range of returns which have been generated over the last decade.

“In particular some income booster funds have done a very good job of providing a high income over the last 10 years, but this has been at the expense of investors’ capital.

“This is all well and good if you are prioritising jam today over jam tomorrow, but a total return strategy is a more sustainable way of generating income over the long term.”