The £6.4bn Artemis Income fund has been downgraded to a 'sell' in the latest Sanlam Private Investments (SPI) Income study, the widely followed guide to income funds.
The bi-annual report moved Adrian Frost's (pictured) and Adrian Gosden's Artemis Income to its Grey List of struggling funds and advised investors to sell out of the portfolio following its recent run of poor performance.
The Grey List highlights those funds which have performed poorly over five years and, as the Artemis fund returned 83.8% over the period (to 10 January, according to Morningstar) compared to a sector average of 94.6%, SPI’s team decided to take action.
Paul Surguy, author of the report and head of managed fund solutions at Sanlam UK, said: “We have long been supporters of Adrians Frost and Gosden, and they have been regularly featured in client portfolios.
“However, our job on the Income Study is to remain unemotional and allow the process to speak for itself. Due to unexceptional returns over the last five years, the fund is falling down the Grey List and investors should therefore consider alternatives.”
It is something of a fall from grace for the fund following a glowing report from SPI last July in which it praised the portfolio’s longevity and successful focus on dividends and cashflow.
Elsewhere, Invesco Perpetual manager Mark Barnett - set to take over Neil Woodford's Income funds when the latter leaves the group in April - has seen his UK Strategic Income fund downgraded from the White List to the Black List.
Woodford's own Income and High Income portfolios remain on the Grey List, but his £1.1bn St James' Place UK High Income fund has been moved to the Black List of the 14 worst funds.
Other funds Sanlam recommend investors should sell are the £67.5m SWIP UK Income fund, which remained bottom of the table, and the £2.1bn Newton Higher Income fund, previously run by Tineke Frikkee before her departure to Smith & Williamson.
Surguy said the Newton fund – run by Richard Wilmot since the end of 2012 – has not seen performance improve despite the change of manager and investment process. Its five-year numbers show a return of just 58.5%, making it the worst fund in the entire IMA UK Equity Income sector.
As well as funds to avoid, SPI has highlighted a number of top performing names on its White List.
Unicorn UK Income remained the White List’s top fund as its small-cap focus helped it outperform competitors for another year.
The fund has delivered a total return of 283.6% over the last five years.
Chelverton UK Equity Income also enjoyed a positive 2013, moving up from eighth place on the White List to second place.
Another fund which focuses more on small and mid caps than many competitors, David Horner and David Taylor’s fund has returned 218% over five years, more than double the sector average.
Both Premier and Threadneedle have two funds each listed on the White List; the Premier Monthly Income and Premier Income, which are both managed by Chris White, and the Threadneedle UK Equity Alpha and UK Equity Income funds, both run by Leigh Harrison.
There was also a new entry to the list for Thomas Moore’s £312m Standard Life UK Equity Income fund.
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