Sanlam UK’s latest Income Study reveals best and worst of UK Equity Income funds

11 February 2020
  • Aviva Investors UK Listed Equity Income Fund comes out on top in the 2020 study

  • The Liontrust Income Fund, formerly known as the Neptune Income Fund, drops out of the White List to nineteenth place - having been ranked first in the previous study

  • Consistent laggards in the Black List of the worst performers include the HSBC Income Fund, the UBS UK Equity Income Fund and the Janus Henderson UK Equity Income and Growth Fund

Sanlam UK has published its half-yearly Income Study, the definitive investor guide to the best and worst funds in the UK equity income sector.

The study, which has been running for more than 30 years, is a quantitative assessment that reviews and monitors the performance of 62 eligible funds in the Investment Association (IA) UK equity income sector over a six-month period. The study then categorises these funds into a White List, Grey List and Black List*.

The White List

The funds in the latest White List are relatively unchanged since last July, although some appear with new names.

The Aviva Investors UK Listed Equity Income Fund, previously known as the Aviva Investors UK Equity Income Fund, is placed at the top of the January 2020 study. While not ranking number one under any of the metrics, it is securely placed in the first and second quartile across the study’s volatility, income and performance criteria, resulting in its first-place position.

Taking the second spot is the Santander Enhanced Income Fund, after a tough period in 2016, the managers, Graham Ashby and Duncan Green have recently proved their worth again. In 2019, the fund returned 26%, ranking seventh out of the funds in the study.

The Man GLG UK Income Fund is another frequently appearing fund; it has achieved third place this time. This fund has dropped just one place, having distributed slightly less income than the Santander fund over the review period.

The fund house Premier Asset Management has performed more strongly than in recent Studies. Both the Premier Monthly Income Fund and Premier Income Fund have jumped substantially, with performance driving the resurgence and pushing the funds up 39 and 35 places respectively in the ranking.

Another notably successful fund is the Allianz UK Equity Income Fund. It has improved by 30 places, having returned 28.3% in 2019, ranking third for performance out of the 62 funds assessed.

The Grey List

Funds including the BMO Responsible UK Income Fund, the AXA Framlington Monthly Income Fund, and the Schroder Income Maximiser Fund are all in lower positions.

One of the most startling moves is the Liontrust Income Fund, formally known as the Neptune Income Fund, which now ranks nineteenth after achieving first place in the last Study. Near-term performance is the main reason for this decline and it will be interesting to see how the fund evolves following the team’s acquisition by Liontrust Asset Management.

Several funds have fallen quite dramatically within the Grey List. BNY Mellon Equity Income and Rathbone Income have fallen by 20 and 27 places respectively. Performance has predominantly caused these shifts; however, the Rathbone Income Fund has also ranked quite poorly on the amount of income distributed over the period analysed.

The Unicorn UK Income Fund has made quite an astounding move considering it has been languishing in the Black List for quite some time, and improved by 27 places. While the fund volatility is poor over the period assessed, performance has been excellent and it now ranks first, with a return of 31.7% in 2019.

The Black List

The Black List largely contains the usual suspects, although there are some new additions. A particularly severe drop has been suffered by the Liontrust Macro Equity Income Fund. It has joined from the Grey List, falling 21 places mainly due to only average performance over the evaluated timeframe and poor third quartile volatility.

The second and third additions to the Black List are the Schroder Income Fund and the M&G Dividend Fund, ranking 58 and 59 respectively. Each of the funds has fallen more than 15 places since the July 2019 study. Both funds have provided a dearth of distributed income compared with their peers and the inconsistency in long-term performance has had a large impact on their rankings.

Laggards that consistently appear in the Black List include the HSBC Income Fund, the UBS UK Equity Income Fund, and the Janus Henderson UK Equity Income and Growth. The final funds worth mentioning in the Black List are the two Standard Life funds, now known as Aberdeen Standard (ASI) funds, the ASI UK Equity Income Unconstrained Fund and ASI UK High Income Equity Fund. Neither fund has evaded their Black List status after tumbling down the rankings in the previous study.

Philip Smeaton, Chief Investment Officer at Sanlam Private Wealth, commented: “In the hunt for yield in the current low-interest rate environment, equity income funds have become core holdings for many who are prepared to accept the risk associated with the stock market.

“However, yields are never guaranteed, and investors should be wary of ‘dividend traps’ – companies offering high dividend payments that they are unlikely to be able to maintain. Opting for more modest payments can result in better overall value over time.

“After a year in which the performance of some equity income funds came under intense scrutiny, investors have grown increasingly cautious of unquoted companies that are both illiquid and generally do not have surplus cash to cover dividend payments, marking them out as particularly vulnerable in times of market stress. A further note of caution arises from the concentration of the UK equity market, coupled with the increase in the number companies that are unable to cover the cost of total dividend payments from profits, instead diving into capital reserves.

“We believe that investors in the White List selection of funds who have held their investments over the long term have been well rewarded. However, cautious investors should seek to retain some cash deposits, and perhaps fixed income holdings, to reduce the overall risk of their portfolios and to use as a source of funds that may be needed at short notice.”

Investors can use the Income Study to inform their own choices and decisions about individual funds. Sanlam UK also offers two ways to invest in them, through its execution-only service or through a portfolio of funds selected from its White List Portfolio ISA.


The study looks at funds in the UK Equity Income sector with a market cap of more than £20million. They are assessed based on seven criteria, including performance, volatility, and the income paid out, with the most recent period of performance receiving a greater weighting.

The White List is the select group of funds that have established their ability over five years to produce superior total returns.

The Grey List can be a temporary home for a manager with an out-of-favour style or an early warning signal for a fund in decline.

The Black List is for consistent underperformers and may indicate the need for remedial action.


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