The Sanlam Income Study has relegated Neil Woodford’s heir Mark Barnett, and the Artemis team of Adrian Frost and Adrian Gosden from its White List.
Sanlam, which slapped a sell rating on Woodford’s funds at the start of 2013, has demoted Barnett’s Invesco Perpetual UK Strategic Income fund to its Grey List on the view that his hands will be full when he takes sole control of the firm’s flagship income later this year on Woodford’s departure.
‘Mark Barnett (pictured) will see his workload increase significantly from April this year,’ the study’s author and former Wealth Manager cover star Paul Surguy said.
‘This vehicle, which he has managed for many years, has outperformed Neil Woodford’s current offering over the past five years, albeit for a small increase in the level of risk.’
Meanwhile Frost and Gosden’s Artemis Income fund, has paid for a period of poor performance. ‘It is with heavy hearts that we initiate a sell on Artemis Income,’ Surguy said. ‘We have long been supporters of Adrian Frost and Gosden and they have regularly featured in client portfolios.
‘However, our job on the Income Study is to remain unemotional and allow the process to speak for itself. Due to unexceptional returns over the last five years, the fund is falling down the Grey List and investors should therefore consider alternatives.’
The two funds are among six to lose their places on the White List in the biggest shake-up in years.
The study ranks income, total return and volatility of funds in the equity income sector over the last five years. With the Lehmans crisis of 2008 now erased from the review period, returns have been dominated by those funds which have tended to exploit outperformance by smaller and medium-sized companies.
Other funds chopped from the White List include Michael Clarke's Fidelity Moneybuilder Dividend fund, the RBS Equity Income fund along with Chris Murphy’s Aviva Investors UK Equity Income fund and Francis Brooke’s Trojan Income fund.
However, Surguy does not see the Aviva and Trojan funds as outright sells and maintains hold ratings on both. Surguy said: ‘Chris Murphy on Aviva Investors UK Equity Income has been heralded a safe pair of hands by us over many years. As we look at the numbers he has produced, these have been consistently solid, as has income generation. We will overlook this short-term drop into the Grey List for the time being.’
He added: ‘The team at Troy have set out their CF Trojan Income fund’s proposition as one that will perform better in volatile/weaker markets – certainly not the case over the past five years or 2013. Considering the long-term track record, and the balance this portfolio can bring to investors, we suggest hold, although we are monitoring this holding closely.’
White List promotions
‘Thomas Moore took a lead role on Standard Life UK Equity Income Unconstrained in January 2009, so his entry into the White List is entirely his own work,’ Surguy said.
‘Whilst the concentrated number of holdings can make this vehicle more volatile than many of its peers, its wide remit and focus on dividend growth, rather than simply a high starting dividend, has led to not only strong performance but one of the highest levels of income within the Study.’
‘[Meanwhile] ‘Carl Stick makes a welcome return to the White List with solid returns, a constantly growing income over the past five years and low volatility.’
Stephen Message’s Old Mutual UK Equity Income fund makes up the six new entrants. ‘[The fund] has seen many changes over the years. However, since Stephen Message’s appointment in the latter part of 2009, returns have stabilised,’ Surguy said. ‘The addition of Richard Buxton to the already strong team at Old Mutual should further enhance this and we expect big things.’
The Black List
At the bottom of the spectrum Swip UK Income once again finds itself rooted to the bottom of the list.
Meanwhile two of the biggest funds in the sector, Jupiter Income and Newton Higher Income have also been blacklisted, the latter being a new addition to the list. ‘Both [funds] were due a change of manager and in the case of Newton, a significant change in process,’ Surguy said.
‘Whilst we have seen an improvement in performance from Jupiter, Newton has slipped from the Grey to Black List and we reiterate our sell recommendation.
Other additions to the Black List include the St James’s Place UK High Income and Equity Income funds, which are both outsourced to Invesco Perpetual’s Woodford, and the M&G Dividend fund, which Surguy notes had a change of manager last year and it is ‘a little too early to see a pick-up in performance’.