LF Miton UK Multi Cap Income retains top spot in Sanlam Income Study

The fund, which is run by Gervais Williams and Martin Turner, has a dividend yield of 4 per cent and a small- to mid-cap bias. About 35 per cent of its assets are invested in Alternative Investment Market (Aim) shares, with 14 per cent in each of the FTSE 250 and FTSE small-cap indices.

The fund can be bought from platforms for an ongoing charge of 0.81 per cent.

Sanlam produces its Income Study twice a year and ranks Investment Association (IA) UK equity income funds according to quantitative criteria including:

absolute income generated over the past five calendar years,

capital growth for each of the past five 12-month periods, and

volatility over the past five years.

The most recent 12-month performance period receives a greater weighting and funds with a value of less than £20m are excluded.

Since Sanlam’s last Income Study in July 2017 there are three new entrants in the White List. These include Man GLG UK Income (GB00B0117D35) which was initially covered by the Income Study in July 2016 but ranked in the Black List, which includes funds which are consistent underperformers and may need for remedial action. However, Man GLG UK Income's performance has improved considerably since Henry Dixon took over its management in November 2013. It yields 5.3 per cent and has an ongoing charge of 0.9 per cent.

RBS Equity Income (GB0033517276), managed by Chris Murphy, has returned to the White List after falling into the Grey List last year. It yields 4.1 per cent and has an ongoing charge of 1.29 per cent.

Lazard Multicap UK Income (GB0008470253), managed by Alan Clifford, has moved into the White List due to having lower volatility than many other UK equity income funds over the period assessed. It yields 4.1 per cent and has an ongoing charge of 0.8 per cent.

Sanlam also puts together a Grey List that can include funds whose managers invest via an out of favour style, are experiencing temporary poor performance or are showing early warning signs of decline.

The latest Grey List includes Unicorn UK Income (GB00B00Z1R87) which has once again fallen out of the White List, despite having performed strongly over the 12 months to 31 December 2017 with a total return of 20.5 per cent. The fund, which focuses on small- and mid-cap companies, was dragged down by poor performance in 2016 when its investments were affected by the vote to leave the European Union.

"This pattern of under and out performance is consistent over previous years too, and has resulted in the fund producing a high standard deviation figure versus peers," explained Sanlam. "It is this volatility that is to blame for it falling seven places in the January 2018 study into the Grey List."

Despite bouts of volatility Unicorn UK Income makes very good long-term cumulative returns, placing it among the top performers in the IA UK Equity Income sector. But its volatility means that it is probably better suited to investors who have a long-term investment horizon and can stomach periods of volatility.

One of two new entrants to the Black List, meanwhile, was Ardevora UK Income (IE00B4MKXW82), managed by Jeremy Laing and William Pattisson. It previously had a solid position in the middle of the Grey List. Performance was the key driver for its 28 place fall as both 2016 and 2017 were challenging for this fund versus peers.