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The best and worst of UK equity income funds since Brexit

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The best and worst of UK equity income funds since Brexit

One year on from the UK’s historic decision to leave the European Union, we take a look at which UK funds managers beat their benchmarks and shook off the Brexit blues.

Over the past 12 months just eight out of 109 funds in the UK Equity Income sector beat the FTSE All Share, versus 66 which beat the index in the same period the year before.

The average fund performance over the past 12 months was 17% versus an index return of 22%, this compares with -3.4% and -4.2% respectively in the previous 12 months.

This is thanks to record breaking highs seen in UK equity markets, set during the past 12 months and a turn in sentiment in value stocks.

The best performing fund since the EU referendum is the UBS UK Equity Income fund, managed by the Steven Magill and Guy Walker.

 

 

The fund managers netted investors a whopping 38.2% return, more than double the sector average. The fund also showed remarkable improvement over the 12 month prior, when it was ranked 71 out of 109 on overall returns, and underperformed the FTSE All Share.

‘We are high conviction value investors and the outperformance in 2016 was down to overweight position in banks, mining and oil stocks, which we felt were undervalued by the market,’ said Magill. ‘2016 was the year the market changed and our performance was reflected by positions we had taken up in the year-to-18-months prior.’

The £17 million fund, which celebrates its 10th birthday this year, charges a 1.5% annual management fee.

The worst performing sector mandate since the Brexit vote was the Smith & Williamson UK Equity Income fund, managed by Tineke Frikkee and Mark Swain, with a return of 9.3%. 

Frikkee, who previously managed one of the largest UK equity income funds at Newton, has run the £58 million fund since 2013.

The most consistent outperformer since the Brexit referendum is the Evenlode Income fund, managed by Hugh Yarrow (pictured) and Ben Peters, both AAA-rated.

The £1.4 billion fund was launched in 2009 and has since returned 114.4% to anyone who invested on day one, versus 84% from the average manager over the same period. Investors recognising its success have flocked to the fund recently, pouring in £1 billion of new cash over the past year.

The biggest improvement year-on year came from the JOHCM UK Equity Income fund, managed by Clive Beagles and James Lowen, which came second only to the UBS Equity Income fund.

The fund, which made a 9.3% loss in the 12-months prior to the EU referendum, managed to climb from 103 out of 109 to second place in terms of performance over the past 12 months, netting investors 27.3%.

Also notable for its underperformance was big name investor Neil Woodford’s CF Woodford UK Income fund. The fund, launched in 2014, was ranked 89 out 109 following a disappointing year.

Earlier this year, Woodford explained that part of his relative underperformance was due to missing the rally in oil company shares.

In contrast, the UBS Equity Income fund counts BP and Royal Dutch Shell as its two largest holdings, accounting for 6.3% and 6.2% of its portfolio respectively. 

Another major fund to underperform over the past 12 months was the Standard Life Investments UK Equity Income Unconstrained.

The £1.1 billion fund, run by rising star Thomas Moore, has underperformed the market since the Brexit vote last year, and currently ranks 101 out of 109.  

Next up, we have the Brexit negotiations, which began in earnest this week, and it will be interesting to see how fund managers position for this challenge and how it will change the investment horizon. 

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Related Fund Managers

Neil Woodford
Neil Woodford
88/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: -4.35%
Thomas Moore
Thomas Moore
67/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 9.76%
Ben Peters
Ben Peters
5/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 30.20%
Hugh Yarrow
Hugh Yarrow
6/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 30.14%
Mark Swain
Mark Swain
84/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 2.24%
Tineke Frikkee
Tineke Frikkee
83/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 2.24%
Steven Magill
Steven Magill
8/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 28.63%
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