The latest Sanlam UK Income Study reveals its half-yearly take on the performance of income fund, flagging up long-running over-performers, and those that may require remedial action.

Running for more than 30 years, the study categorises performance into the ‘white list’, ‘grey list’, and ‘black list’.

The first is a ‘select group’ of funds that have shown superior total returns for more than five years. The grey list may indicate a manager with an ‘out of favour style’ or a warning signal for a fund in decline. The black list shows ‘under performers’, which may require remedial action.

Sanlam measures their absolute income generated over the past five calendar years; capital growth for each of the past five 12-month periods; and volatility over the past five years.

The Slater Income Fund has placed first, knocking Miton UK Multi Cap Income Fund off the top spot. It has shown high-ranking dividend yield, consistent performance and ‘moderate’ volatility.

Another fund on the up is the Artemis Income Fund, which placed back at 30 a year ago. “The fund has delivered on its mandate”, states the report.

Others on the white list include: Schroder Income Maximiser Fund; Schroder Income Fund; Aviva Investors UK Equity Income Fund; and the FP Miton Income Fund.

The Royal London UK Equity Income Fund is on the grey list. It has had a “poor” two-year period in terms of calendar performance, states the report. Higher volatility has driven down SLI UK Equity Income Unconstrained Fund. Volatility – a pattern of under- or out-performance – has also been seen at Premier Monthly Income Fund; Premier Monthly Income Fund; and SLI UK Equity Income Unconstrained Fund.

The black list includes previous white list constituent Unicorn UK Income Fund, which has suffered from “stock-specific issues”. Other entrants include: Schroder UK Alpha Income Fund; Fidelity Enhanced Income Fund; and Invesco Perpetual Income & Growth Fund.

“One way for investors in funds to mitigate the risk from FTSE 100 dividend concentration is to consider funds that contain the shares of a high proportion of small and medium sized companies,” said Sanlam UK chief investment officer Philip Smeaton.

“Looking ahead, markets will accommodate both the Brexit outcome and, in the longer term, the expected interest rate rises in the coming years. In the meantime, UK equity income funds are likely to remain a favoured source of income at a level unavailable elsewhere.”

Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance

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