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Top UK equity income all-rounders revealed

Wealth manager Sanlam has released its latest report on the top-scoring UK equity income funds
February 13, 2020

Aviva Investors UK Listed Equity Income (GB0004460803) has topped a list of the best “all-rounder” UK equity income funds as ranked by performance, volatility and income paid over five years to the end of 2019. The fund came out top in the latest half-yearly Sanlam Income Study after rising four places since the last study six months ago.

Sanlam said the fund had “continued to deliver strong and consistent performance”, and found that if you had invested £100 in it over the five years to the end of 2019, it would have paid an income of £21. The fund made a total return of 23.5 per cent in the 2019 calendar year, with a volatility of 9.8, compared with average volatility of 10.2 for the best all-round funds in the study.

“While not ranking number one under any of our metrics, it is securely placed in the first and second quartile across our volatility, income and performance criteria, resulting in its first place position,” added Sanlam.

Aviva Investors UK Listed Equity Income, which has assets worth about £1bn, is run by Chris Murphy and James Balfour.

But, unusually, Sanlam’s White List of best funds by overall merit has otherwise changed relatively little over the past six months. The top four funds, which also include Santander Enhanced Income Portfolio (GB00B3RJG579), Man GLG UK Income (GB00B0117D35) and NFU Mutual UK Equity Income (GB00B82F8821), were already on the white list.

But some funds have seen an improvement in their fortunes. Premier Monthly Income (GB0003886875) and Premier Income (GB0003884722) have risen 39 and 35 places, respectively. Sanlam praised their improved performance and “excellent income distribution”. And Allianz UK Equity Income (GB00B82ZGC20) has risen to fifth place, having made a total return of 28.3 per cent in 2019.

Investors grew more confident about the course of Brexit last year, which helped some funds with a focus on smaller companies perform strongly. Sanlam said that Unicorn UK Income (GB00B00Z1R87), which spent some time on its Black List of funds that score poorly in areas such as performance, volatility and income made an “astounding move”.

“[Unicorn UK Income] has struggled versus peers in our rankings for several studies,” explained Sanlam. “However, in the current review, it improved by 27 places. While the fund's volatility is poor over the period assessed, performance has been excellent and it now ranks first, with a return of 31.7 per cent in 2019. The fund’s small-cap exposure worked exceptionally well in 2019 when its style suited market conditions.”

The FTSE All-Share index returned 19.2 per cent and the FTSE 100 index of the largest companies returned 17.3 per cent in 2019. However, the FTSE 250, which is comprised of mid-cap companies, did even better with a return of 28.9 per cent.

A few popular funds fell down the rankings in Sanlam's latest study. Liontrust Income (GB00B8L7B355) fell from the top spot to 19th place, leaving it in the study’s Grey list of funds that falls between the White and Black Lists. This fund made a total return of 15.5 per cent in 2019. “One of the most disappointing moves is Liontrust Income fund, formerly known as Neptune Income fund,” said Sanlam. “Near-term performance is the main reason for this decline and it will be interesting to see how the fund evolves following [its management] team’s acquisition by Liontrust Asset Management.”

LF Miton UK Multi Cap Income (GB00B4M24M14) also moved into the Grey list after falling 17 places. The fund returned 13.1 per cent in 2019.