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 funds to be cut from the 14-strong list despite being the second best performing fund in the IMA UK Equity Income sector over the past 12 months to 30 July, 2012.
The Income fund has been dropped into the grey list alongside the £253m CF Walker Crips Equity Income – now called the CF Liontrust Macro Equity Income fund – managed by Jan Luthman and Stephen Bailey.
The two funds have been replaced in the list by the £1.1bn JO Hambro UK Equity Income fund, managed by James Lowen and Clive Beagles, and the £142m Franklin UK Equity Income fund, managed by Colin Morton.
Principal says Woodford’s £9bn fund still has a buy rating, despite falling from the white list. The group has placed a switch notice on Luthman and Bailey’s Liontrust Macro Equity Income fund.
Principal Investment Management investment manager Paul Surguy says: “Woodford has a great long term record but his numbers between June 2010 and June 2011 were weaker in comparison to the average in the whitelist and that is what has hurt his fund in our quants process. We would expect him to come back and he remains a stalwart in the list courtesy of his Invesco Perpetual High Income and St James’s Place UK High Income funds.”
The white list calculates the best 14 funds in the sector based on consistent total returns and risk over five years.
The £684m Troy Trojan Income fund, managed by Francis Brooke, tops the list, followed by the £1.3bn Threadneedle UK Equity Income fund and the £60bn RBS Equity Income fund.
Jupiter, Henderson, Ignis, Standard Life and Liontrust are among a host of big names with funds sitting in Principal’s black list of struggling funds.
New entrants in the black list include the £282m Liontrust Income fund, managed by Gary West and James Inglis-Jones, the £304m Henderson UK Equity Income fund, managed by James Henderson, and Thomas Moore’s £89m Standard Life UK Equity Income Unconstrained offering.
Liontrust chief executive John Ions says that while the study is a good identifier of funds’ consistency of performance, focusing on purely empirical data does not identify important changes that may have taken place.
He says: “In this instance, the managers of the Liontrust Income fund changed in 2009 and this is obviously critical to future outcomes. Since James Inglis-Jones and Gary West took over management of the Liontrust Income fund on 25 March, 2009 to 30 June, 2012, the Fund has returned 66.3 per cent against 64.4 per cent by the FTSE All-Share index and 59.1 per cent by the average IMA UK Equity Income fund. This puts the Liontrust Income Fund in the first quartile of the sector. The flaw with the Income Study is that the new fund managers are penalised for past performance.”
Bill Mott’s £452m Psigma Income fund makes its debut in the grey list alongside the likes of the £2.3bn Newton Higher Income fund, managed by Tinekke Frikkee and the £1bn Neptune Income fund managed by Robin Geffen.
Surguy says: “This is a competitive sector and funds must continue to perform to stand out for investors.”