The private client investment management group has issued a mid-year report focused on income portfolios.
Funds relegated to the Black List are those the group features to alert investors of those that have consistently provided sub-par returns. In examining performance data to assign funds to either the White, Grey or Black lists, Principal ranks portfolios in the IMA Equity Income sector using seven different criteria based on performance, volatility and the income distributed over five years. The most recent period of performance receiving a greater weighting.
In total there are 14 funds on Principal’s Black list. Among those mentioned is the forthcoming merger of Gartmore UK Equity Income into its Henderson counterpart, Higher Income, managed by Graham Kitchen and Andrew Jones. According to Principal: “There are many other superior managers in this sector and investors should look elsewhere before being funnelled into a consistently underperforming fund.”
On the White list, funds which the group rate as a ‘buy,’ Principal names managers such as Adrian Frost and Adrian Gosden on Artemis Income as well as Matt Hudson of Cazenove UK Equity Income. “Hudson has shown himself to be a nimble manager by successfully navigating this fund through many different market conditions and has very much earned its position in the White list.”
Neil Woodford’s Invesco Perpetual Income and High Income funds both appear as a recommended buy from Principal.
Among the funds on the White list are: Neptune Quarterly Income (Robin Geffen), JOHCM UK Equity Income (Clive Beagles and James Lowen), Royal London Equity Income (Martin Cholwell), Troy Trojan Income (Francis Brooke), Aviva UK Equity Income (Chris Murphy) and Threadneedle UK Equity Income Alpha.
As to the Threadneedle vehicle, Principal notes it joins two other Threadneedle income vehicles rated as buys. “The team, led by Leigh Harrison, continues to produce outstanding results and has proven, over time, that its adaptable investment process has the ability to succeed in changing economic conditions and is deserving of its appearance in the White list.”
Principal’s Grey list is comprised of funds, which it feels worthy of noting, either for positive or negative reasons. Within the 30 names on this list, Schroder Income is one Principal recommends investors watch.
According to the group managers Nick Kirrage and Kevin Murphy have had a difficult time in their first year on the portfolio, having taken over after Nick Purves left Schroders. Principal says investors should be rewarded for their patience with this funds, over time, but note currently there are better opportunities out there for investors.
