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7/31/2015 Money Home The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money Markets Saving & banking Investing Bills Cars Holidays Cards & loans Pensions Mortgages & home Experts Buytolet Login Visit us at investmentfocus.co.uk Think big. @Alliance_Trust Smart insight from Alliance Trust The 14 best income funds revealed: New White List picks the top choices for dividend investors SHARE SELECTION Funds on the coveted 'White List' offer an average dividend of 4.1 per cent Top performing fund netted £36.50 for every £100 invested over five years Environment for income funds could be more volatile for the rest of 2015 By ELEANOR LAWRIE FOR THISISMONEY PUBLISHED: 10:35, 30 July 2015 | UPDATED: 10:37, 30 July 2015 9 View comments Income is increasingly hard to find in today's low growth world, with many asset classes offering much lower payout rates than a decade ago. This means investors can struggle to find an equity income fund offering healthy dividends that grow over time, especially when there are so many to choose from. In an attempt to sort the wheat from the chaff, twiceayear investment firm Sanlam selects its14 best performing UK Equity Income funds based on performance, volatility and income over the last five years. http://www.thisismoney.co.uk/money/investing/article3178405/The14bestincomefundsrevealedWhiteListpickschoicesdividendinvestors.html?IT… 1/8 7/31/2015 The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money +4 Watch the pennies: Income investing could experience more ups and downs in the second half of 2015, as big events take place in the UK economy, including a possible rise in interest rates from their historic lows How the Sanlam study works The Sanlam Private Wealth Income Study is its pick of the best 14 income funds from the IMA Equity Income sector The Sanlam Income Study's calculations are based on performance, volatility and the income over five years to the end of June. It calculates volatility by looking at how far a fund's return each month for five years differ from its overall average return. This is known as fiveyear standard deviation and the figure is provided to Sanlam by Morningstar. The figure is not annualised and is based upon monthly total return figures over five years. The funds are then divided into three sections. The White List reveals the funds that have consistently offered the best real returns over five years, while the Grey List features funds with an outof favour investing style or with declining income distributions. Finally, the Black List highlights persistent underperformers and could be a prompt for investors to switch their money into a higher yielding fund. Looking ahead, Sanlam is focusing on the prospects for equity income investors, as global interest rates rise from their historic lows. After a positive start to the year for global equity markets, the summer has been much more challenging, Sanlam said, as investors get nervous around the potential for interest rates to rise later on in 2015. These rate rises can prevent companies from bolstering their balance sheets with cheaper funding and may inhibit the ability to pay a healthy dividend. Other factors, such as fear that Greece could leave the eurozone and a rollercoaster six months for the Chinese stockmarket, could also mean that investors see their returns become more uneven in the upcoming months. WHY DIVIDENDS MATTER Dividends are not just important for taking income from on an investment, they can also be a good way to grow wealth over time. Compounded reinvested dividends have been shown to be a powerful driver of longterm investment gains and companies that pay solid and growing dividends are often judged to be of a higher quality. Regular dividend payments can indicate to investors that a company is being disciplined in the way it deploys its cash and is not being reckless in its spending habits. Returning cash to shareholders can also be a sign that a company is secure and wellfunded, and helps reassure the market of its share price. SHARE THIS ARTICLE RELATED ARTICLES Five funds to invest in the best that Europe has to offer ... INVESTMENT EXTRA: Why experts are taking advantage of Grexit... The fund manager who has bought just ONE new stock in the... http://www.thisismoney.co.uk/money/investing/article3178405/The14bestincomefundsrevealedWhiteListpickschoicesdividendinvestors.html?IT… 2/8 7/31/2015 The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money The White List There has been a bit of a reshuffle at the top of the White List since the last Income Study. The number one fund for income is now the PFS Chelverton UK Equity Income Fund, boasting an impressive £36.50 income payout for every £100 invested over five years. Chelverton's performance knocked Royal London’s UK Equity Income Fund off premier position and into third place. Another climber is Standard Life Investments UK Equity Income Unconstrained Fund, following a solid performance from manager Thomas Moore. +4 White List funds have demonstrated they can deliver strong total returns over the last five years PFS Chelverton UK Equity Income Ongoing charges: 1 per cent Yield: 4.4 per cent Volatility: 3.1 per cent The PFS Chelverton UK Equity Income fund invests mainly in the Alternative Investment Market. This is the junior stock exchange for smaller start up companies, so there is more risk than with a bigger firm. The fund emphasises smaller companies with high starting dividends. A £100 investment over five years would have yielded an income of £36.50 Unicorn UK Income Ongoing charges: 1.56 per cent Yield: 4.1 per cent Volatility: 2.9 per cent The Unicorn UK Income fund is a regular in the top of Sanlam’s White List. It aims for a yield of at least 10 per cent greater than the FTSE All Share Index. The fund's holdings include cinema group Cineworld and Brewin Dolphin. A year on from fund manager John McClure's death, Sanlam still backs its two managers Simon Moon and Fraser MacKersie who also concentrate on mid and small sized stocks. A £100 investment over five years would have earned an income of £30.30 Royal London UK Equity Income Ongoing charges: 1.3 per cent Yield: 3.9 per cent Volatility: 3.3 per cent The Royal London UK Equity Income fund focuses on companies in the UK that pay a consistent dividend. Its top holdings are well known dividend payers such as Shell, HSBC and Astrazeneca. You would have got £30 income on a £100 investment over five years, up from £26.60 when the last Income study was carried out six months before. Sanlam says fund manager Martin Cholwill has benefited from the strong performance of mid and smaller sized companies during the first half of 2015. SLI UK Equity Income Unconstrained Ongoing charges: 1.9 per cent Yield: 3.5 per cent Volatility: 4.2 per cent The Standard Life Investments UK Equity Income fund mainly holds shares in UK companies and is not worried about the size of company. Although it is one of the best performing funds on the White List, it has the lowest yield. Its top holdings include Legal & General and Vodafone and a £100 investment over five years would have generated an income of £28.40. http://www.thisismoney.co.uk/money/investing/article3178405/The14bestincomefundsrevealedWhiteListpickschoicesdividendinvestors.html?IT… 3/8 7/31/2015 The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money Threadneedle UK Equity Alpha Income Ongoing charges: 1.62 per cent Yield: 4.3 per cent Volatility: 3.3 per cent One of three Threadneedle funds on the White List, the Threadneedle UK Equity Alpha Income fund is comanaged by Leigh Harrison and Richard Colwell. It aims to generate income by investing in fewer holdings but concentrating on specific types of companies and sectors. It would have produced income of £30.40 on a £100 investment over five years. Old Mutual UK Equity Income Ongoing charges: 1.65 per cent Yield: 4.1 per cent Volatility: 4 per cent The Old Mutual UK Equity Income fund invests in a diverse range of companies mainly listed in the UK, and is aiming for an above average yield. Top holdings include Barclays, Aviva and ITV. A £100 investment over five years would have provided an income of £29. Rathbone Income Ongoing charges: 1.56 per cent Yield: 3.6 per cent Volatility: 2.7 per cent Managed by Carl Stick, the Rathbone Income fund invests mainly in UK companies in any sector with the aim of producing above average income. A £100 investment over five years has provided an income of £26.30. Premier Monthly Income Ongoing charges: 1.66 per cent Yield: 4.5 per cent Volatility: 3.1 per cent The Premier Monthly Income fund aims to give investors rising dividends paid monthly. Its top holdings are big companies such as Shell and Imperial Tobacco. A £100 investment over five years generated an income of £31.40. Threadneedle UK Monthly Income Ongoing charges: 1.62 per cent Yield: 4 per cent Volatility: 3 per cent The Threadneedle UK Monthly Income fund invests in the shares of 5070 UK companies of all sizes. Top holdings include AstraZeneca and Shell. It has produced an income of £27.70 on £100 invested over five years. JOHCM UK Equity Income Ongoing charges: 0.79 per cent Yield: 4.3 per cent Volatility: 3.6 per cent Managed by Clive Beagles and James Lowen, the JOHCM UK Equity Income fund is a reentrant to the list after missing out last year. Sanlam says the fund suffered towards the end of 2014 as the slump in old price hurt is commodity exposure. A recovery in the price since then has largely removed this problem, helping the fund take its place on the White List again. A £100 investment over five years would have resulted in an income of £29.50. Schroder UK Alpha Income Ongoing charges: 1.66 per cent Yield: 4 per cent Volatility: 3.4 per cent Run by Matt Hudson, the Schroder UK Alpha Income fund invests at least 80 per cent of its assets into the shares of UK companies. Top holdings include Imperial Tobacco Group and BP. A £100 investment over five years has provided an income of £27.60 Troy Trojan Income Ongoing charges: 1.02 per cent Yield: 3.8 per cent Volatility: 2.6 per cent The Troy Trojan Income fund invests in a mix of UK and overseas bonds and shares. Managed by Francis Brooke with assistant manager Hugo Ure, its holdings include Unilever, Centrica and Sky. A £100 investment would have returned £26.90 over five years. Threadneedle UK Equity Income Ongoing charges: 1.62 per cent Yield: 4.2 per cent Volatility: 3.2 per cent The Threadneedle UK Equity Income fund puts at least twothirds of its money in shares of small, medium and large companies in the UK. Its top holdings include Marks & Spencers and Unilever. It would have generated an income of £28.80 from a £100 investment over five years. http://www.thisismoney.co.uk/money/investing/article3178405/The14bestincomefundsrevealedWhiteListpickschoicesdividendinvestors.html?IT… 4/8 7/31/2015 The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money RBS Equity Income Ongoing charges: 1.29 per cent Yield: 4.3 per cent Volatility: 3.1 per cent The RBS Equity Income fund has moved very slightly from near the top of the Grey List to make it in to this edition's White List. Managed by Chris Murphy, its top holdings include Rio Tinto and BT. A £100 investment would have returned £27.70 over five years, up from £24.30 in the last study released in January. +4 Funds on the Grey List may invest in a style that is currently unpopular. They may have fallen out of the wWhite List or may be even be future contenders for the black list of perennial poor performers http://www.thisismoney.co.uk/money/investing/article3178405/The14bestincomefundsrevealedWhiteListpickschoicesdividendinvestors.html?IT… 5/8 7/31/2015 The 14 best income funds revealed: White List picks top choices for dividend investors | This is Money +4 The Black List is home to funds that have consistently underperformed on an income basis, and inclusion could prompt investors to look elsewhere Read more: PFS Chelverton UK Equity Income fund Unicorn UK Equity Income fund Royal London UK Equity Income fund Standard Life Investments UK Equity Income fund Threadneedle UK Equity Alpha Income fund webfund6.financi... 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