The biannual review of funds in the IA UK Equity Income sector consigned three new funds to its blacklist.
The River and Mercantile UK Equity Income, the NFU Mutual UK Equity Income and the Aberdeen UK Equity Income funds have all fallen from the grey list of average funds in the sector.
Mr Hanbury’s £235.2m fund has slipped due to underperformance against its peer group in 2014 and a low level of net income in the past five years compared with its peers.
The fund was in the bottom quartile of the IA UK Equity Income sector in 2014, which pushed it down Sanlam’s list in spite of its top-quartile performance in 2013 and 2012.
Mark Thomas, managing director for wholesale distribution at River and Mercantile, said the fund had delivered top-quartile performance since its launch in February 2009 and he questioned the short-term emphasis of the Income Study.
The fund has delivered a return of 137.1 per cent since launch, compared with the FTSE All-Share total return of 118 per cent.
Mr Thomas said the multi-cap approach taken by Mr Hanbury meant that there “will be periods when the fund will underperform the peer group, particularly in risk-off periods”, such as in 2014. But he backed Mr Hanbury’s approach to outperform in the long term.
The Income Study ranks funds in the IA UK Equity Income sector that have a five-year track record on various metrics.
The funds are ranked based on net dividend yield, net income, volatility and its discrete annual performance across the past five years, with the more recent performance given a higher weighting.
Of the other funds that slipped, the Aberdeen fund – managed by its pan-European equity team – and Adam Carroll’s NFU Mutual UK Equity Income both also suffered from performance slumps last year.
The fall by the Aberdeen UK Equity Income comes during a tough time across the group’s equity range, highlighted by nine of its funds being included in Bestinvest’s ‘dog list’ of underperforming equity funds across the major sectors.
Meanwhile, two high-profile funds that had spent time in the blacklist – the Newton Higher Income and the Jupiter Income Trust – have escaped into the grey list after an upturn in performance.
Income Study author Charles Brand said the Newton fund had moved from 40th up to 30th on the list, in spite of “a number of changes in manager and process in the past few years”.
Most of the outperformance came during the past six months when Christopher Metcalfe had been running the fund. “Perhaps this is a sign of better things to come,” Mr Brand said.
He also warned that while Ben Whitmore’s Jupiter Income Trust had escaped from the blacklist, it still “remains not far from it”.
At the other end of the performance table, the Evenlode Income fund moved straight into the white list at number three after reaching its five-year anniversary.
Mr Brand said Evenlode managers Hugh Yarrow and Ben Peters had done “an excellent job of generating an attractive reward from such relatively low-risk businesses”.
And topping the list this year was Martin Cholwill’s Royal London UK Equity Income fund.
Aberdeen declined to comment.
NFU did not respond to requests for comment.
Evenlode Income claims third place in Sanlam’s fund rankings
Going straight into the Sanlam Income Study at number three has capped a remarkable 12 months for the Evenlode Income fund and its managers, Hugh Yarrow and Ben Peters.
The fund was only £44.2m in size this time last year, but its latest factsheet from the end of December shows the fund size has soared to £235m.
Mr Yarrow and Mr Peters were catapulted on to many investors’ radars for the first time last summer when Jupiter’s Merlin multi-manager team revealed it had invested heavily in the fund.
The portfolio’s high-conviction approach, which steered it clear of banks, oil majors and miners, has seen the fund generate significant outperformance since its launch in October 2009.
