Rathbones' Stick drops into Principal Black List

Principal Investment Management’s latest income study has suggested investors should switch out of Carl Stick’s £481m Rathbone Income fund and Nick Kirrage and Kevin Murphy’s £1.3bn Schroder Income fund as performance deteriorates.

The July 2011 Principal White List, released today, said the market's eagerness to reward certainty over potential does not bode well for Kirrage and Murphy's style of focusing on deeply out of favour companies.

"Kirrage and Murphy have found the first year of their tenure difficult following the departure of their predecessors, Nick Purves and Ian Lance, to pastures new," Principal said.

"They should be rewarded for their patience over time, but there are better opportunities out there for investors".

The Schroder Income fund remains on the Grey List, which can act as an early warning sign for a struggling fund as well as chart rising newcomers, despite the call to switch, but Stick's Rathbone Income fund, once a stalwart of the White List, has been blacklisted for the first time.

"Stick's focus on value is not flawed but we feel the market is concentrating on dependable earnings so the fund will remain out of favour," said the study.

Principal also continues to recommend investors switch out of George Luckraft's Axa Framlington Equity Income and Monthly Income funds and Tony Nutt's £2.3bn Jupiter Income trust.

"After a number of years sticking to his guns with Jupiter Income, and ignoring the market's infatuation with growth companies, it appears Nutt finally yielded to the pressure and added more economically sensitive names to the fund just as markets were swinging back his way," said Principal.

It also recommends investors switch out of the Gartmore UK Equity Income fund before it is merged into Graham Kitchen and Andrew Jones' Henderson Higher Income fund on 12 August.

"There are many other superior managers in this sector and investors should look elsewhere before being funnelled into a consistently underperforming fund," Principal suggested.

A largely unchanged White List was notable for the addition of a third Threadneedle offering, UK Equity Income Alpha Income. Robin Geffen's £41m Neptune Quarterly Income fund makes the list for the first time, even as his £1.1bn Neptune Income fund falls into the Grey List.