Economic uncertainty throughout 2016 has prompted a shake-up of Sanlam Private Wealth's prestigious White List, with eight funds falling from the list since June, while Miton's UK Multi Cap Income has knocked the previous leader out of the top spot.
On the other hand, the £502m Fidelity Enhanced Income fund and the £191m FP Miton Income fund were amongst the largest downward movers in the study, with the performance of both funds struggling in recent months. However, Sanlam noted that Fidelity's product maintains a very high yield and has the lowest volatility over five years versus peers.
Similarly, Ben Whitmore's £2.3bn Jupiter Income Trust continued to descend within the Grey List as a result of its low yield versus peers, despite stronger performance in 2016 than previous years.
Meanwhile, the £267m River & Mercantile UK Equity Income fund has moved up to qualify as a Grey List constituent, following strong performance in the second half of 2016.
The Black List (see below) saw very little change from June's report, with the £613m Scottish Widows UK Equity Income fund continuing to rank bottom, despite an improvement in performance over 2016, while the £204m HSBC Income fund remained second to last.
Meanwhile, the £153m Santander Equity Income Portfolio has continued to fall in Sanlam's rankings, moving from the White List, to the Grey List, and now to the Black List in the last three studies as a result of poor returns, high volatility, and a low yield.
Phil Smeaton, chief investment officer at Sanlam, said: "Our Income Study highlights the funds which have been the most successful at producing income for investors over the long term, and which have generated strong returns regardless of market conditions.
"In these uncertain political and economic times, it is encouraging to see that UK income funds have been only mildly affected.
"The most obvious benefit to UK income fund investors is on the income side: many UK dividend paying companies are multinationals with significant dollar denominated earnings and revenue.
"It is also important to note that equities do continue to have an important role to play in income generation, but as evidenced by the change in fund rankings, this has become a trickier and more volatile asset class to navigate than in the past.
"There are potential opportunities that investors can exploit, including reaping larger dividends from the translation effect and investing in stocks at a discount. However, it is also undeniable the UK is entering an environment which has not been experienced before.
"The risk of uncertainty is high and there are many questions unanswered about the UK's exit from the EU which could potentially have a positive or negative effect on the markets."
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