Private client investment manager Sanlam Private Investments has added a second smaller companies fund, PFS Chelverton UK Equity Income (GB00B1FD6244), to its White List of preferred open-ended UK equity income funds (read our tip on this). It joins IC Top 100 Fund Unicorn UK Income (GB00B00Z1S94). The White List highlights funds that deliver a rising level of income alongside long-term capital growth, resulting in superior total returns over five years.
Traditionally, most investors have viewed small-caps as engines of growth rather than income. Yet, said Sanlam "data provided by Professors Elroy Dimson and Paul Marsh at Numis shows that not only has small-cap value outperformed large-cap value by more than double since 1955, but within small-cap itself, higher yielders have compounded at nearly 5 per cent more per year over the past 58 years." It continues: "Like Unicorn UK Income, PFS Chelverton UK Equity Income mines the smaller company universe, searching for a definitive high starting yield. This has not been at the expense of capital: a return of more than 40 per cent over the past year and the best income generation of the White List over the past five years leads us to initiate a Buy recommendation."
Sanlam also notes how, after moving into the White List in January, Unicorn UK Income Fund has moved to the top of the White List. "In challenging the status quo, its managers' difference in style from the majority of income investors has stood them in good stead," said Sanlam.
IC Top 100 Fund Troy Trojan Income (GB00B01BNW49) also makes the White List. "This fund's focus on capital protection has seen it slip down the list, despite a still pleasing return of 16 per cent over the past year," said Sanlam. "But we maintain our faith in the team at Troy and expect them to remain stalwarts."
IC Top 100 Fund Artemis Income (GB0006572464) also makes the grade. "The longest service award goes to Artemis Income," says Sanlam. "The focus on cash flow and dividends is rigorously applied and we applaud its longevity."
Sanlam's White List ranks funds using seven different criteria based on performance, volatility and income distributed, with the most recent period of performance receiving a greater weighting.
Sanlam Private Investments White List
Fund | Net dividend yield at 28/06/13 (%) | Net income 5 years to 28/06/13 based on £100 investment (£) |
---|---|---|
Unicorn UK Income A | 3.3 | 25.4 |
JO Hambro UK Equity Income Fund B GBP Inc | 4.4 | 28.8 |
RBS Equity Income 1 | 4.3 | 24 |
Royal London UK Equity Income A | 4.3 | 23.4 |
Cazenove UK Equity Income B Inc | 3.9 | 22.6 |
Aviva Investors UK Equity Income SCA | 4.6 | 23.4 |
Threadneedle UK Eq Alpha Inc RN GBP | 4.4 | 24.6 |
PFS Chelverton UK Eq Income Ret | 5.4 | 30.7 |
Threadneedle UK Eq Inc Ret Net GBP | 4.1 | 23.4 |
Troy Trojan Income O Inc | 4.5 | 25.2 |
Fidelity MoneyBuilder Dividend | 4.8 | 25.5 |
Invesco Perpetual UK Strategic Income Inc | 3.7 | 19.8 |
Artemis Income Inc | 4.5 | 23.7 |
Premier Monthly Income A | 5.5 | 26.3 |
White List Average | 4.4 | 24.8 |
Source: Sanlam Private Investments/Morningstar