The top 14 income funds revealed in the Sanlam White List

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There are two main types of investors: those who prioritise growth at all costs and those who want an income return.

Income funds might not seem as exciting as the growth alternatives, but dividends can generate significant returns in the long run and investors who receive payouts year after year get a serious boost to their wealth.


With this in mind, investment firm Sanlam has released the latest instalment of its half-yearly report revealing the best and worst UK-centric income funds. 

The Sanlam Income Study, which has been running for more than 30 years, reveals the best all-rounders within the UK equity income sector

The Sanlam Income Study, which has been running for more than 30 years, reveals the best all-rounders within the UK equity income sector

In the past, bond investments have generated a higher level of income than dividend paying shares, but the pendulum has swung the other way in recent history.

According to FE Analytics data, funds in the Investment Association’s global and UK equity income sectors have paid out considerably more on average than those in any of its bond-focused sectors since 2009. 

Fittingly for those who want to look to active fund managers investing in shares for their income, the Sanlam study is focussed solely on UK equity income funds.

About the Sanlam report

The study, which has been running for over three decades, reviews and tracks the performance of all funds in the the Investment Association UK Equity Income sector over a six-month period to the end of June and splits them into three categories: the White List, the Grey List and the Black List. 

The White List comprises of an exclusive group of 14 funds deemed, by the investment firm, to have established superior performance over a five-year period.

The Grey List is home to propositions that invest in a style that is currently unpopular, or have shown an early warning signal for a fund in decline.

The Black List is for consistent underperformers and could indicate that investors should dump these propositions for a better prospect. If you have a fund on this list it is time to review it. 

The best income funds

It is important to flag that the list should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.

The majority of the highest-ranking funds in its The White List have remained stable – with only three of the lower funds moving out in January 2018. 

There has been a slight shuffle in the top half of the list but the top nine funds have remained unchanged since the previous study.

LF Miton UK Multi Cap Income fund, has retained first place for the third consecutive study, while AXA Framlington Monthly Income has climbed seven places to occupy the second spot and Marlborough Multi Cap Income has jumped one spot into third.

The Unicorn Income fund as once again dropped out of the White List of funds with superior performance into the Grey List of funds that have an out of favour style or could be in decline, despite recording a very strong year in terms of performance – ranking third out of peers within the study. 

However, the fund, which has a distinct small/mid cap bias, was weighed down by its underperformance in 2016 as a result of the UK referendum, according to Sanlam. 

Meanwhile, the Threadneedle UK Equity Income fund has been relegated from the top tier into the Grey List having dropped 18 places.

The Black List of underperformers continues to be populated by the same repeat offenders, with the exception of the Ardevora UK Income fund and UBS UK Equity Income.

The former has plunged 28 places into the bottom tier from a solid position in the middle of the Grey List, while the latter’s maiden appearance in the study is tarred by its lowly ranking. 

The largest mover is the Santander Enhanced Income fund, which has climbed 21 places from the bottom of the Grey List to the top of it.

On the other end of the scale, the Schroder Income fund has suffered the biggest fall from grace – tumbling 24 places from fourth to the foot of the Grey List.

The fund produced a respectable amount of income in the previous study period but has since become one of the poorest income payers, according to the report.  

The best performing funds 

Funds on the top band White List have demonstrated they can deliver strong total returns over the last five years

Funds on the top band White List have demonstrated they can deliver strong total returns over the last five years

Funds on the top band White List have demonstrated they can deliver strong total returns over the last five years

1. LF Miton UK Multi Cap Income 

Ongoing charges: 0.81 per cent

Transaction costs: 0.01 per cent

Yield: 4 per cent

Volatility: 7.8 per cent

The LF Miton UK Multi Cap Income fund has held onto the number one spot since qualifying for entry in the study three years ago.

Run by Gervais Williams and Martin Turner, the fund invests mainly in UK shares – although the fund has little exposure to other assets including European shares and UK bond.

Sanlam commends the managers for its high-ranking dividend yield against its peers, along with excellent and consistent performance.

On a £1,000 investment, the fund would have earned you £295 over the past five years (to 31 December 2017) 

HOW THE RANKINGS WORK 

To determine the best and worst performing funds, the study looked at the capital growth of each fund, absolute income – or income after the fund’s costs are taken into account – and volatility on a five-year basis. 

It calculates volatility by looking at how much a fund’s return each month for five years differs from its overall average return.

This is known as five-year standard deviation and the figure is provided to Sanlam by investment research firm Morningstar. The figure is not annualised and is based upon monthly total return figures over five years.

2. AXA Framlington Monthly Income

Ongoing charges: 0.84 per cent

Transaction costs: 0.08 per cent 

Yield: 4.3 per cent

Volatility: 7.7 per cent

The AXA Framlington Monthly Income fund has climbed nine positions since the last iteration of the study (July 2017).

George Luckraft heads up the fund that aims to pay out a monthly income with potential for long-term growth of capital.

Among its top holdings are staple dividend stocks including Royal Dutch Shell, BP and British American Tobacco.

The fund would have generated £276 on a £1,000 investment over five years.

3. Marlborough Multi Cap Income

Ongoing charges: 0.80 per cent

Transaction costs: 0.45 per cent

Yield: 4.3 per cent

Volatility: 10.1 per cent

Siddarth Chand Lall holds the reins to the Marlborough Multi Cap Income, which seeks to generate an attractive and growing level of dividend income in addition to long-term capital growth by investing in a diversified portfolio of equities predominantly listed in the UK.

The fund has moved up a position since the last study despite recording a 0.1 percentage point reduction in dividend yield to 4.3 per cent.

The fund is a fairly diversified portfolio with 141 holdings, including WH Smith – which is its second biggest holding.

You would have received £302 income on a £1,000 investment over five years. 

4. Slater Income

Ongoing charges: 0.80 per cent

Transaction costs: none (although this could change next year) 

Yield: 4.5 per cent

Volatility: 9.4 per cent

The Slater Income fund has dropped two positions from second in the last study.

The fund is run by no fewer than four managers: Barrie Newton, Mark Slater, Ralph Baber and Nigel Milton. It targets increasing levels of income in addition to seeking long-term capital growth. 

Its top 10 holdings include familiar dividend-paying stocks including Rio Tinto, Legal & General and Imperial Brands. A £1,000 investment over five years would have generated an income of £290. 

5. Royal London UK Equity Income

Ongoing charges: 0.81 per cent

Transaction costs: 0.14 per cent

Yield: 3.9 per cent

Volatility: 9.4 per cent

The Royal London UK Equity Income fund has held onto fifth spot for the second consecutive study.

It invests solely in high yielding UK stocks, with a particular skew to companies that generate a lot of cash after covering operation costs to fund sustainable dividend payments. 

Its top ten holdings comprise of popular income stocks including Astrazeneca, GlaxoSmithKline and HSBC.

Managed by Martin Cholwill, the fund would have generated an income of £261 from a £1,000 investment over five years.

6. SLI UK Equity Income Unconstrained

Transaction charges 

Fund managers are being forced to disclose these hidden costs on top of the OCF under new rules introduced on the start of 2018 under a European Union directive, Mifid II, short-form for the second Markets in Financial Instruments.

These charges aren’t new, but they must now be declared by fund managers.

Read are comprehensive article on the topic here

Ongoing charges: 1.15 per cent

Transaction costs: 0.21 per cent

Yield: 3.8 per cent 

Volatility: 11.6 per cent 

The Standard Life Investments UK Equity Income Unconstrained fund has moved two places into sixth position since the last income study, despite experiencing the highest volatility of the funds in the White List.  

It typically invests in a portfolio of shares but has the remit to hold a proportion in bonds to supplement the income of the fund. A £1,000 investment over five years would have generated an income of £258. 

7. MI Chelverton UK Equity Income

Ongoing charges: 0.88 per cent

Transaction charges: 0.19 per cent 

Yield: 3.8 per cent

Volatility: 11.4 per cent

The MI Chelverton UK Equity Income fund has dropped from third in the last study to rank seventh. The fund seeks to unearth stocks in the UK AIM sector with the potential to pay out a growing level of income. 

Its top ten holdings are notably different from the other funds in the White List. Games Workshop is the largest holding, ahead of McColl’s Retail Group and electronics supplier Discoverie Group in second and third.  

An investment of £1,000 over five years would have generated £314 in income.

8. Majedie UK Income

Ongoing charges: 0.77 per cent

Transaction costs: 0.33 per cent

Yield: 4.7 per cent

Volatility: 10.2 per cent

Managed by Chris Reid and Yuri Khodjamirian, the Majedie UK Income fund has dropped three positions since its last outing.

The fund seeks to root out undervalued companies with a focus on those that are able to provide a growing level of income.

The fund’s top three holdings are comprised of the usual suspects for income: Royal Dutch Shell, BP and Legal & General. On a £1,000 investment, the fund would have given you £297 over five years.

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9. Premier Monthly Income

Ongoing charges: 0.88 per cent

Transaction costs: 0.39 per cent

Yield: 4.5 per cent

Volatility: 9.7 per cent

The Premier Monthly Income ranks in the top tier for the second study in a row, having been promoted from the Grey List.

It aims to give investors a rising level of dividends paid monthly. The bulk of the fund is comprised of FTSE 100 conglomerates that are renowned for delivering increasing levels of income. These include Royal Dutch Shell, HSBC and BP.

You would have received  £279 income on a £1,000 investment over five years.  

10. RBS Equity Income Fund

Ongoing charges: 0.81 per cent

Transaction costs:  N/A

Yield: 4.1 per cent

Volatility: 8.9 per cent

The RBS Equity Income Fund was inaugurated into the study as recently as January 2017.  The fund dropped 14 places before moving back up by 13 places from the Grey list into the top band this time.

The fund aims achieve a yield higher than the FTSE Actuaries All Share Index, with the prospect of rising income and growth in the value of shares.

It would have generated income of £252 over the past five years on a £1,000 investment.

11. JOHCM UK Equity Income 

Ongoing charges: 0.79 per cent

Transaction costs: -0.04 per cent

Yield: 4.2 per cent 

Volatility: 10 per cent

The JOHCM UK Equity Income fund, long-term capital and income growth by investing in UK shares, has jumped two places since the last study. 

Its top ten holdings comprise of the usual suspects for dividends including Royal Dutch and Shell as well as ITV.

A £1,000 investment over five years would have earned an income of £270. 

12. Premier Income

Ongoing charges: 0.84 per cent

Transaction costs: 0.37 per cent 

Yield: 4.6 per cent

Volatility: 9.9 per cent

Its more of the same for the Premier Income fund, which has clung onto 12th position for the second consecutive year. 

The fund aims to provide income that increases over time while growing investors’ original investment over the long term. 

It has produced an income of £283 on £1,000 invested over five years. 

13. Man GLG UK Income

Ongoing charges: 0.90 per cent

Transaction costs: 1.05 per cent

Yield: 5.3 per cent

Volatility: 10.6 per cent

The Man GLG UK Income fund is a new entrant to the top tier, after moving up 32 places from the Black List to the Grey in the last study.

Sanlam said: ‘This is quite remarkable given that the fund entered our universe in July 2016 and was initially placed at the bottom of the Black List; Henry Dixon [who manages the fund] appears to have turned the fund around considerably since becoming lead manager in November 2013.’

The fund seeks to achieve a level of income above the FTSE All Share Index, together with some capital growth through investing, directly or indirectly, primarily in UK shares or in stocks that derive a substantial part of their revenues from activities in the UK.

It would have produced income of £275 on a £1,000 investment over five years.

14. Lazard Multicap UK Income 

Ongoing charges: 0.80 per cent

Transaction costs: 0.15 per cent

Yield: 4.1 per cent

Volatility: 8.8 per cent 

The Lazard Multicap UK Income fund has crept into the White List, having moved from its position towards the top of the Grey List, due to a lower volatility than many of its peers.

Its top holdings include Vodaphone, Prudential and Unilever. A £1,000 investment over five years would have generated an income of £243.

Funds on the Grey List may invest in a style that is currently unpopular. They may have fallen out of the White List or may be even be future contenders for the black list of poor performers

Funds on the Grey List may invest in a style that is currently unpopular. They may have fallen out of the White List or may be even be future contenders for the black list of poor performers

Funds on the Grey List may invest in a style that is currently unpopular. They may have fallen out of the White List or may be even be future contenders for the black list of poor performers

The Black List is home to funds that have consistently underperformed on an income basis, and inclusion could prompt investors to look elsewhere

The Black List is home to funds that have consistently underperformed on an income basis, and inclusion could prompt investors to look elsewhere

The Black List is home to funds that have consistently underperformed on an income basis, and inclusion could prompt investors to look elsewhere

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