Robin Geffen’s £320m Liontrust Income fund has held onto its place at the top of Sanlam UK’s Income Study, which aims to identify the best and worst UK equity income funds. 
The IA UK Equity Income sector has fallen out of favour with investors in recent years and in 2020 has been hit by coronavirus’ significant impact on the UK market and dividend cuts from some of the country’s biggest payers.
That said, UK equity income funds remain an important element of many investors’ portfolios and Sanlam UK’s Income Study, which has been running for more than 30 years, is a quantitative assessment that ranks the sector’s members on seven criteria, including performance, volatility and the income paid out.
At the top of the study’s White List – which is home to the funds that achieved superior results over the past five years – is Liontrust Income. This fund was also topping the White List when the previous edition of the biennial study was published in early 2020.
Source: Sanlam UK
The fund, which was formerly called Neptune Income, splits its holdings between three kinds of stock: core, which provides the income; recovery, which are unloved by the market and higher-yielding; and hidden fruit, or more tactical holdings that could have a more sudden turnaround. Geffen (pictured) says he is pursuing ‘idiosyncratic alpha’.
Sanlam UK said: “This fund has delivered solid performance over several years and has fared well during the recent volatile period. Key to its success has been its overall consistency across the Study’s criteria, which are volatility, income and performance.”
Santander Enhanced Income, NFU Mutual UK Equity Income, Aviva Investors UK Listed Equity Income, Artemis Income, Franklin UK Equity Income, Trojan Income, Santander Equity Income and Man GLG Income are the other funds that have retained a place on the White List, although some repositioning has been seen.
BlackRock UK Income and the ES R&M UK Equity Income are two first-time entrants to the list, however.
“First-quartile volatility outcomes over five years versus peers and good performance during the volatility of 2020 have helped to secure White List placings for these two funds,” Sanlam UK added.
Among the others being promoted from the study’s Grey List – which Sanlam said could be a temporary home for a manager with an out-of-favour style or, on the other hand, an early warning signal for a fund in decline – to the White List are Fidelity Enhanced Income (because of its defensive profile and the high dividend paid through the option overlay) and Fidelity MoneyBuilder Dividend (thanks to good recent performance and lower volatility).
Source: Sanlam UK
That Grey List can be seen above. Some of its members have fallen off the White List and into this one in the rebalance, including Lazard MultiCap UK Income, Royal London UK Equity Income and Allianz UK Equity Income.
ASI UK Income Equity and Threadneedle UK Equity Income were highlighted for jumping up the list to move near its top. Sanlam UK said: “Near-term performance and managed volatility over the period under review are the main reasons for these improvements.”
UBS UK Equity Income moved into the Grey List this time around. Before, it resided in the Black List, which is where the study places UK equity income funds that have displayed consistent underperformance.
“Despite relatively poor volatility, and less than average performance, a good income payment and some decent historic performance has edged it into the Grey List, after a long gap,” Sanlam UK said.
In less positive news, small-cap funds Unicorn UK Income and MI Chelverton UK Equity Income were flagged for relatively big falls down the list.
Premier Monthly Income also narrowly avoided dropping onto the Black List: “Volatility has been high, at just over 17 per cent, and some periods of lacklustre and disappointing performance, outweigh the high dividend income that the fund generates.”
Source: Sanlam UK
Like the White and Grey Lists, there has been relatively few changes in Sanlam UK’s Black List with just a handful of entrances and exits.
Familiar names that continue to sit in the Black List include M&G Dividend, ASI UK Income Unconstrained, Janus Henderson UK Equity Income & Growth, HSBC Income and L&G UK Equity Income.
While Premier Monthly Income avoided a place on this list, Premier Income and Premier Optimum Income can be found on it. Sanlam UK noted that Premier Asset Management (now renamed Premier Miton Investors) has been unable to match its success in previous editions of the study, as these two funds were on the White List in mid-2018 but have been sliding down the rankings since.
Sanlam UK also drew attention to Slater Income for its entry to the Black List.
“The Slater Income fund is a surprising entry, having fallen 25 places, mainly attributable to poor performance in the last couple of years and its fourth-quartile measure of volatility, versus peers,” it said.
“Over the last few studies, the fund has slowly sunk from the White List into the Grey List, and now the Black List, as its style and small- to mid-cap bias have hampered any recovery in the recently challenging market.”