Francis Brooke’s £2.7bn Trojan Income fund has jumped to the top of the Sanlam’s White List of UK equity income funds following a difficult start to the year that saw many members of the peer group struggle.
The bi-annual Income Study ranks members of the IA UK Equity Income sector into three groups: the White List, which is home to the peer group’s best members; the Grey List, for those in the middle; and the Black List, where those with the lowest scores are banished.
Funds are rated on a number of metrics based around total returns over recent years, income paid, net dividend yield and five-year volatility. The most recent period of performance is given a greater weighting in the study’s methodology while funds with assets of less than £20m are excluded.
The previous edition of the study saw the £678.4m Unicorn UK Income fund, which is headed up by Fraser Mackersie and Simon Moon, take the top spot on the White List followed by MI Chelverton UK Equity Income, after portfolios biased towards small-caps had a good run.
However, the latest rebalancing has seen FE Alpha Manager Brooke jump into pole position, up from fifth place in January’s study. As the chart below shows, the five FE Crown-rated fund has outperformed its average peer and the FTSE All Share by a wide margin over the five years covered by the latest Income Study.
Performance of fund vs sector and index over 5yrs to the end of Jun 2016
Source: FE Analytics
Charles Brand, Sanlam's head of portfolio management, said: “The Troy Trojan Income fund, run by Francis Brooke, continues to perform strongly and, having previously re-entered the top half of the White List, it has now knocked Unicorn UK Income off the top position.”
“Performance continues to be strong for Brooke’s fund which finds itself ranked second in the eligible universe over a one-year period; it is only one of 10 funds in the study that produced a positive return for the month of June, which saw concerns about Brexit prove detrimental to UK equity markets.”
Other big changes in the study include Colin Morton’s Franklin UK Equity Income fund re-entering the White List. This £183.5m fund had drifted onto the Grey List in the past few editions of the study but has gone through a period of strong performance over the most recent period and has achieved low volatility over the past five years.
A recent FE Trustnet study found that the fund was the only member of the IA UK Equity Income sector to have beaten the FTSE All Share in each of the past five years as well as 2016 so far.
Meanwhile, Columbia Threadneedle Investments now has three funds in the White List. Brand said: “After producing strong returns so far in 2016, the Threadneedle UK Equity Income fund, run by Richard Colwell, has now re-entered the list after a six-month exile period, ranking second in the White List.”
Performance of fund vs sector and index over 5yrs to the end of Jun 2016
Source: FE Analytics
Some funds have disappeared from the White List after moving from the IA UK Equity Income sector for failing to meet its yield requirements. Hugh Yarrow’s Evenlode Income and Carl Stick’s Rathbone Income funds were two products to move peer groups in the opening half of 2016.
When it comes to the Grey List, there have been some big moves also.
As mentioned earlier, Unicorn UK Income has gone from the top of the White List to halfway down the table of more average performance.
Brand said: “The Unicorn UK Income fund has had a tough half year ranking fourth quartile on a one-year and year-to-date basis versus peers and, consequently, has fallen 26 places from the top of the White List to the middle of the Grey List.”
“Its disappointingly large decline can be explained by its domestically focused small to mid-cap bias which has underperformed the larger-cap company-focused funds in the first half of this year. In spite of this, it is worth noting that the fund has had good long-term performance which has been evident by its prolonged position near the top of the White List for the last two years.”
Another “dramatic” fall in the ranking was Thomas Moore’s £1.2bn Standard Life Investments UK Equity Income Unconstrained fund, which has gone from 10th on the White List to the bottom half of the Grey List.
The fund has made first quartile returns over the past five years but has fallen onto the bottom decile over the past year and is the worst performer of the peer group over the year to date.
“The fund has consistently experienced the highest volatility in the study, given its unconstrained nature, with performance having been very strong in the last few years but particularly weak recently (specifically in June after the UK referendum),” Brand said.
In contrast the Black List, which is where the 14 worst performers in the Sanlam Income Study are put, has seen little change. 
Ben Whitmore’s Jupiter Income Trust has been promoted from the Black List to the top quarter of the Grey List after its investments in out-of-favour companies led to strong performance in the last 12 months.
Scottish Widows UK Equity Income is once again at the bottom of the list, followed by HSBC Income and Man GLG UK Income – which is a new entrant to the study.
The only other fund to join the Black List was Santander Enhanced Income Portfolio, which was previously on the Grey List.
