Robin Geffen’s UK equity income fund has seen a “startling” reversal of fortunes, mere months after his firm Neptune was acquired by Liontrust, sliding from the top of Sanlam’s income rankings to the middle of the pack.
Formerly known as Neptune Income, Geffen’s (pictured) fund fell 18 spots in the Sanlam Income, which examines UK equity income funds, after topping the list just six months prior. This sent it tumbling from the so-called White List, the select crop of 14 funds that have delivered superior returns over five years, to the Grey List, described by Sanlam as “a temporary home for a manager with an out-of-favour style or an early warning signal for a fund in decline”.
Over the five years to 31 December 2019, the £356.1m fund has distributed £21.30 based on an initial investment of £100, which was below the average income generated by the White and Grey List funds of £22.70.
It returned 15.5% in 2019, which was also below the White List average of 23.6% and the Grey List average of 19.8%.
Liontrust Macro Equity Income also suffered a severe drop in Sanlam’s rankings. The fund, co-managed by Stephen Bailey and Jamie Clark, dropped 21 places in the latest report, landing in Sanlam’s dreaded Black List of consistent underperformers, after delivering average performance over the timeframe and poor third quarter volatility.
Liontrust Income’s ‘startling’ fall
Sanlam described Liontrust Income’s swift descent from the top of the list to the middle of the pack as “startling”.
“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,” the report said.
Liontrust declined to comment.
Chelsea Financial Services managing director Darius McDermott was also surprised Liontrust Income had fallen so much in the study. The fund’s volatility is just above the average and the long-term performance is still very good, he noted.
Though Geffen’s fund is in the top tier of funds in the IA UK Equity Income sector on a three- and five-year view, on a six-month view it has become one of the weakest performers, delivering 5% against the sector’s 9%.
“We think the long tern returns and sustainable dividends are more important than six months of under performance,” McDermott said.
| 3m | 6m | 1y | 3y | 5y | |
| Liontrust Income | 3.5 | 5.0 | 13.5 | 24.2 | 45.8 |
| IA UK Equity Income | 3.8 | 9.0 | 12.0 | 15.5 | 31.2 |
Source: Trustnet
AJ Bell head of active portfolios Ryan Hughes said the portfolio’s big weightings to financials would have held back returns last year, as would positions in value stocks like miners Rio Tinto and Anglo American.
Hughes said he would expect the fund to behave differently to the benchmark good or bad given it invests in deep value stocks as well as high growth stocks like Apple which is unusual for an equity income fund. The fund has a 15.7% allocation to US equities, according to Trustnet.
“We complain our managers don’t invest with high enough active share and then when they do and they underperform we give them a bit of a kicking,” Hughes said. “They’re a little bit damned if they do damned if they don’t.”
Schroders and M&G fall into ‘Black List’
The Schroder Income and M&G Dividend funds were also among the biggest downward movers in the latest report. Both funds wound up in Sanlam’s Black List, having fallen more than 15 places since the July 2019 study.
Schroder Income, which is run by value managers Kevin Murphy and Nick Kirrage, is now 58th in Sanlam’s list, returning just 7.5% last year.
The Michael Stiasny and James Taylor-led M&G Dividend fund finished 59 out of 62 funds over the reporting period. Though it delivered better returns than Schroder Income in 2019 (19.5%) it had a tougher time in 2018 when it was down 14.9% compared with Kirrage’s and Murphy’s fund which was down 1.7%.
“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,” Sanlam noted in the report.
Premier funds rocket up the chart
On the other end of the spectrum, Premier’s funds were among the most improved in Sanlam’s rankings.
Premier Monthly Income and Premier Income catapulted into the White List over the period, jumping 39 and 35 places respectively.
The Allianz UK Equity Income fund also redeemed itself in the latest report, boosting its ranking by 30 places after delivering strong performance in 2019. The fund returned 28.3% last year, ranking third for performance out of the 62 funds assessed.
The White List remained relatively unchanged since July with regulars Santander Enhanced Income Fund and Man GLG UK Income Fund continuing to top the charts.
The strongest performer in the January 2020 study was the Aviva Investors UK Listed Equity Income Fund. Though the fund was not the best performer it was more consistent than others, ranking in the first and second quartile across the study’s volatility, income and performance criteria.
