Artemis Income, Trojan Income and JOHCM UK Equity Income are some of the IA UK Equity Income funds that stand out when the sector is reviewed by the second-most commonly used performance metric of financial advisers.
Average five-year rolling returns are the second most used metric by UK financial advisers, a survey by investment research and advisory business Platforum recently found, coming after performance relative to the sector and ahead of the most recent three-year return.
How advisers independently review fund performance
Source: Platforum, January 2017
With this in mind, FE Trustnet is looking at the best performers from the major Investment Association sectors using this measure. To do this we took the rolling five-year total returns over the 49 quarterly periods spanning 1 January 2000 to 31 December 2016 and worked out the average.
In the following gallery we highlight the five IA UK Equity Income funds with highest average rolling five-year gains (of the funds that have been around for at least 25 of the 49 periods) as well as revealing the top 30 according to this metric.
Artemis Income
5yr rolling return vs sector and index
Source: FE Analytics
First up is the £6.4bn Artemis Income fund, which is managed by Adrian Frost and Nick Shenton; longstanding co-manager Adrian Gosden left the fund in July 2016. Over its 47 periods of track record, the three FE Crown-rated fund has posted an average five-year rolling return of 58.96 per cent. Its biggest five-year return was 129.28 per cent while the smallest stands at 9.27 per cent. The fund focuses on companies that can return a sizeable level of income to shareholders, meaning that close attention is paid to finding businesses with plenty of cash remaining after all expenses have been covered. This often leads the managers to large businesses in defensive sectors such as telecoms, pharmaceuticals and oil. Top holdings include BP, Reed Elsevier, Imperial Tobacco Group, 3i and Informa.
Cumulative return to 31 Dec 2016 vs sector and index
Source: FE Analytics
Trojan Income
5yr rolling return vs sector and index
Source: FE Analytics
The £3.2bn Trojan Income fund has established a strong long-term track record thanks to the cautious positioning of FE Alpha Manager Francis Brooke. The five crown-rated fund boasts an average five-year rolling return of 58.97 per cent over 30 quarterly periods. The highest was 110.06 per cent while the lowest was 26.89 per cent. Brooke invests in companies with the potential to increase dividend payouts. Given his emphasis on capital preservation, the manager prefers predictable firms with strong cash flows and tends to dislike cyclical stocks, although some can be found in his portfolio. Unilever, Royal Dutch Shell, GlaxoSmithKline, Lloyds and Compass are among the fund’s biggest holdings.
Cumulative return to 31 Dec 2016 vs sector and index
Source: FE Analytics
Schroder UK Alpha Income
5yr rolling return vs sector and index
Source: FE Analytics
Matt Hudson has managed the £529.3m Schroder UK Alpha Income fund since its launch in May 2005. Over the 27 quarterly rolling five-year periods since, the fund has made an average total return of 66.53 per cent with the highest being 165.53 per cent and the lowest 12.32 per cent. Hudson uses the business cycle approach developed by Cazenove Capital (which was acquired by Schroders) and invests in stocks deemed to be most appropriate for the current phases of the boom and bust cycle. The portfolio is currently overweight financials, industrial cyclicals and some value areas, with its biggest positions being in Royal Dutch Shell, BP, British American Tobacco, GlaxoSmithKline and Rio Tinto.
Cumulative return to 31 Dec 2016 vs sector and index
Source: FE Analytics
JOHCM UK Equity Income
5yr rolling return vs sector and index
Source: FE Analytics
In second place we have the £2.9bn JOHCM UK Equity Income fund, which has been around for 29 of the periods and posted an average five-year rolling return of 68.45 per cent. Its highest five-year gain was 183.04 per cent and the lowest was 9.87 per cent. Managers Clive Beagles and James Lowen concentrate on dividends as they believe they are the best indicators of a company’s financial health and potential. The fund will only hold stocks that pay out a level of income higher than the market average and will sell out if they expect it to not make this threshold. Current holdings include Royal Dutch Shell, BP, HSBC, Lloyds Banking Group and Vodafone.
Cumulative return to 31 Dec 2016 vs sector and index
Source: FE Analytics
Unicorn UK Income
5yr rolling return vs sector and index
Source: FE Analytics
Topping the list is the £625m Unicorn UK Income fund, which is managed by FE Alpha Manager Fraser Mackersie and Simon Moon. Its average five-year rolling return is 101.11 per cent for its 31 periods of history. The large five-year return was a huge 325.05 per cent, with the smallest being 13.08 per cent. The fund focuses on the small- and mid-cap parts of the market, which helps to explain the level of its outperformance. Mackersie and Moon combine elements of the growth and value styles in their investment process as they seek undervalued but profitable and well-managed growth businesses. Top holdings include BBA Aviation, Primary Health Properties, Secure Trust Bank, Cineworld Group and Marshalls.
Cumulative return to 31 Dec 2016 vs sector and index
Source: FE Analytics
Source: FE Analytics