Slater Income ranked best UK equity income fund

The company conducts a bi-annual analysis of UK equity income funds, judging them by the yield, income, portfolio returns over five years and volatility. The latest update saw the Slater Income Fund, run by Mark Slater within his eponymous firm, replace the LF Miton UK Multi-Cap Income Fund (GB00B4M24M14) as the best-performing fund.

Sanlam’s report, called the White List, said the Slater fund has risen up the rankings since first being recognised as a top-performing product in January 2017.

“Its high-ranking dividend yield versus peers, consistent performance and moderate volatility have brought the fund into the first position,” the report added.

The Miton fund, which is managed by Gervais Williams and Martin Turner, has now slipped into third place, with the Axa Framlington Monthly Income Fund (GB00B7MMK577) in second place.

Sanlam’s White List, which highlights the top third of UK equity income open-ended unit trusts, also saw relative upheaval further down the list. There were six new entrants in total, including a return for the Artemis Income Fund (GB00B2PLJJ36) run by Adrian Frost and Nick Shenton.

Sanlam said the fund – which had performance issues in 2017 and fell substantially down the rankings – has since delivered on its mandate.

“Despite not paying the highest dividend income, it has managed to perform consistently in all the other years reviewed, in particular over the last two reports. The fund is now in fourth position in the White List, having moved up 15 places,” the report said.

The Schroder Income Maximiser Fund (GB00BDD2F083) – which is a value income strategy that uses derivatives to boost the income payout – has also come back into the White List, having not been present over the past 12 months.

“[The fund has moved up] 18 places helped by the dividend income element, which has been stronger versus peers over the period reviewed,” Sanlam said.

The fund’s sister product, the Schroder Income Fund (GB00BDD2DX75), also returned to the top rankings. The latter fund uses the same stock composition as the Maximiser fund, but does not use derivatives to boost income. As a result, it will offer a lower yield but provide better capital returns over the long term.

The fund yields a respectable 3.4 per cent, helping it move into the White List, but is also the best-performing fund in the White List over the 12 months to the end of June 2018, returning 13.5 per cent. Value-style investing has been gaining ground this year and began outperforming the growth style in recent months.

In terms of fallers, the Royal London UK Equity Income Fund (GB00B3M9JJ78), the Standard Life UK Equity Income Unconstrained Fund (GB00B1LBSS23) and the Premier Monthly Income Fund (GB0003886875) were all removed from the White List in the latest report.

Sanlam said the Royal London fund, run by Martin Cholwell, has had a poor performance record over the past two years, while the Standard Life and Premier funds had exhibited too much volatility.

On the latter two funds, Sanlam said: “This pattern of under- and outperformance is consistent over previous years too, and has resulted in some of these funds producing a high standard deviation figure versus peers. It is this volatility that is to blame for them falling 17 and 18 places respectively.”

Sanlam's White List:

Source: Sanlam, Morningstar