The Slater Income fund beat several larger rivals to be the best performer in the IA UK Equity Income sector in the first half of the year, according to data from Sanlam.
The wealth manager’s half year report on the UK equity income sector measures funds by gross yield to the end of June, yield on a five year basis, total return and volatility.
The £148m Slater Income fund was the top performer when those measures were considered, displacing the Miton Multi-Cap Income fund from the top spot.
The fund is run by Mark Slater, who manages several funds through his Slater Investments business.
Slater Income fund has returned 49 per cent over the past five years, compared with 41 per cent for the average fund in the IA UK Equity Income sector in the same time period, and the fund has a yield of 4.2 per cent.
Ben Yearsley, a director at Shore Financial Planning, said: "I always think Mark Slater is one of those managers that slips under the radar slightly, despite excellent long term performance.
"Since the income fund launched he has had one excellent period of performance from launch in 2011 until late 2015, then had twelve months of under-performance before outperforming again. That’s a pretty decent record in my view.
"His natural hunting ground is probably outside large cap companies.This fund should be a good diversifier against more mainstream equity income funds and probably deserves a larger following."
The Miton Multi Cap Income fund, which has dropped to third in the rankings, is managed by Gervais Williams.
In second place was the Axa Framlington Monthly Income fund, a £379m mandate run by George Luckraft.
The fund has returned 66 per cent over the past five years, compared with 41 per cent for the average fund in the IA UK Equity Income sector in the same time period. It has a yield of 4.3 per cent.
The £2.3bn Schroder Income fund made the most progress on the list, rising 38 places.
Managed by Nick Kirrage and Kevin Murphy, it has returned 57 per cent over the past five years, compared with 41 per cent for the average fund in the sector. It has a yield of 3.32 per cent.
Philip Smeaton, chief investment officer at Sanlam UK, said: "Dividend payments from FTSE100 companies in 2018 are expected to total £87.5bn which equates to a yield of 4.4 per cent – a far higher return than is available from cash savings and bonds.
"But are these high yields sustainable? The recent rise in the dividend yield of several companies is attributable to a sharp fall in their share prices, leading investors to question whether the high payments can be maintained.
"One way for investors in funds to mitigate the risk from FTSE100 dividend concentration is to consider funds that contain the shares of a high proportion of small and medium sized companies.
"Although smaller companies lack the scale and breadth of operations that characterise many of the largest enterprises, they offer investors an opportunity to avoid over-exposure to the risk of dividend cuts by a small number of top-payers."
david.thorpe@ft.com
