Richard Colwell’s £3.2bn Threadneedle UK Equity Income fund is the most popular UK equity income fund with multi-asset managers in the Investment Association universe, according to the latest FE Trustnet study, overtaking Artemis Income which sat at the top of the list last year. 
According to FE data, the Columbia Threadneedle fund sits at the top of the popularity tables with funds of funds managers as some 29 multi-asset portfolios count the three crown-rated vehicle as a top 10 holding – three more than Majedie UK Income, which sits in second place.
Despite a soaring AUM and an increasing number of followers, the now £8.3bn CF Woodford Equity Income fund is still only in third place as it features in 23 top 10s. However, that is an increase from last year when 18 funds held it in their list of biggest holdings.
The last two years’ favourite, Artemis Income, has fallen to fourth spot as while 57 and 36 funds held it their top 10 in 2014 and 2015, respectively, that figure has fallen to just 22 this time around.
What is also noticeable is the absence of FE Alpha Manager Mark Barnett’s three UK equity income funds. In fact, just eight multi-asset funds hold Invesco Perpetual Income in their top 10, only five have Invesco Perpetual UK Strategic Income and Ingenious Global Growth is the only portfolio to have Invesco Perpetual High Income as a top 10 position, despite its £12.6bn size.
Source: FE Analytics
Turning back to the top of the list, though, and Colwell (pictured) – who assumed sole responsibility of the portfolio from Leigh Harrison in October last year – has some notable backers.
Though six of those 29 funds that hold it in their top 10 are managed by Columbia Threadneedle, the likes of Bambos Hambi have sizable stakes in Threadneedle UK Equity Income within his Standard Life Investments MyFolio range and Tilney Bestinvest uses the fund in six of its OEICs.
Interestingly, however, 33 funds held Threadneedle UK Equity Income in their top 10 this time last year.
The Threadneedle fund has one of the best long-term track records in the IA UK Equity Income sector and since Colwell was named a manager on the portfolio in September 2010, it sits comfortably in the top quartile with gains of 77.73 per cent.
According to FE data, that means it has beaten its FTSE All Share benchmark by some 35 percentage points over that time.
Performance of fund versus sector and index under Colwell
Source: FE Analytics
The fund has also made money and beaten the index in every year under Colwell’s stewardship. That means the Threadneedle fund has now outperformed in nine out of the last 10 calendar years.
The fund is biased towards the larger end of the UK market, but Colwell aims to run a more contrarian portfolio than many of his peers in order to deliver an attractive starting yield. For example, he holds the likes of GlaxoSmithKline, Marks & Spencer Group, Morrisons and Centrica in his top 10 and, as a result, Threadneedle UK Equity Income yields more than 4 per cent.
Also, though our data isn’t yet complete, Colwell looks set to have increased his fund’s dividend in each of the last four years.
It may come as a surprise that Majedie UK Income is second on the list, given it was only launched in December 2011.
However, Yuri Khodjamirian and FE Alpha Manager Chris Reid’s five crown-rated fund’s popularity has sky-rocketed over the course of the past 12 months. Currently, 25 funds hold the now £1.1bn fund in their top 10 whereas last year it didn’t even feature on the list.
While it lagged the sector last year (but still comfortably outperformed the wider UK equity market), it was a top quartile performer in 2012, 2013, and 2014. As a result, it has beaten its peer group average and benchmark by 32 and 48 percentage points, respectively, since inception.
Majedie UK Income, which has a heavy mid and small-cap bias, yields 4.58 per cent thanks to its high weightings to mining companies – with Rio Tinto and BHP Billiton among its top 10 holdings.
Schroder MM Diversity Growth, Henderson Multi Manager Diversified, HL Multi Manager Income & Growth and four funds from the F&C Lifestyle range are among the 26 which count it as a top 10 holding.
The fact that CF Woodford Equity Income is only the third favourite UK equity income fund with fund of funds managers may also be a surprise to most.
While the 23 funds which count it in their top 10 is an increase from last year, given Neil Woodford’s track record, the hype surrounding the fund’s launch in June 2014 and its stellar track record over that time, you could be forgiven for thinking it was at the top of the popularity tables – especially as its AUM has risen dramatically over a relatively short space of time.
Performance of fund versus sector and index since launch
Source: FE Analytics
Nevertheless, some of the biggest names in the multi-asset space support the fund. FE data shows, for example, three Jupiter Merlin funds, five Hargreaves Lansdown funds and five Architas MA Active funds are among the 23 that hold CF Woodford Equity Income in their top 10.
The major theme we found when writing this study last year was how many professional fund pickers had sold Invesco Perpetual Income and High Income following Woodford’s departure from the group.
In January 2013, for instance, they were the third (with 20) and fifth (19) most popularly held UK income funds with fund of funds managers. In 2014, however, just eight held Income and only one held High Income in their top 10.
Interestingly, those figures have stayed exactly the same this year despite the fact that Barnett has so far proved he can run the two multi-billion pound portfolios as well as his existing open and closed-ended trusts, as High Income and Income are well ahead of their peers and the FTSE All Share since he took over the reins.
The main reason why the Invesco Perpetual funds saw such as huge dip in popularity last year was because many investors simply followed Woodford to his new venture. However, many used the star manager’s departure to look for new options in the space.
Another portfolio which has seen a huge dip in popularity among multi-managers is FE Alpha Managers Adrian Frost and Adrian Gosden’s £6.9bn Artemis Income fund.
Having been the standout favourite in 2013 with 52 top 10s (which put it 30 ahead of JOHCM UK Equity Income in second place), the number of multi-asset funds which held a significant stake in it fell to 36 last year – though it still kept its spot as the most popular in the space.
This time round, however, it is fourth on the list as just 22 hold it in their top 10. The size of the fund has shrunk from £7.4bn to £6.9bn over the past six months or so and it has been the most sold portfolio in the sector over the last year, according to FE Analytics.
In truth, while it has beaten the index in each of the last five calendar years, its performance relative to its peers has been rather unspectacular. Apart from it is top quartile gains in 2011 when the market fell, it has frequented the second and third quartile in each calendar year since.
Source: FE Analytics
Of course, fund of funds managers may well have sold down their exposure to buy Woodford. However, the selling of Artemis Income is also likely to have funded the huge rise in popularity of Majedie UK Income and Thomas Moore’s Standard Life Investments UK Equity Income Unconstrained fund, which is a new entrant on the list.
It is now the eighth most popular UK income fund with multi-managers as it features in 16 top 10s.
The likes of JOHCM UK Equity Income, Trojan Income, Ardevora UK Income, Royal London UK Equity Income and Liontrust Macro UK Equity Income have all kept their place on the most popular list this year.
However, apart from Martin Cholwill’s RLAM offering, all have seen the amount of funds which hold them decrease over the course of the year.
