UK Equity Income failing to deliver consistent performance


UK Equity Income funds are failing to achieve consistent performance, according to an analysis over the 12 most popular sectors over the last three years.

Only 1.3 per cent of UK Equity Income funds managed to achieve above median returns in each of the last three 12-month periods, BMO Global Asset Management’s latest quarterly research shows.

In contrast, the UK Smaller Companies sector was the most consistent sector with 21.7 per cent of funds achieving above-median returns over the consecutive periods.

With UK equities, Smaller Companies was also the best performer over the last quarter, rising 5.2 per cent over Q3 compared to 1.2 per cent in Equity Income, which was at the back of the pack.

BMO Global Asset Management investment manager Kelly Prior says the number of funds generating consistent above-median returns has deteriorated.

Over nine in 10 funds failed to consistently generate above average returns over a three year period, with vicious sector rotations and gyrating yield curves creating a lack of consistency from funds.

“Our survey shows that the last three years have rewarded the brave, although the investment backdrop is not an easy one to navigate as we live in curious times with volatility eerily absent.”

Only nine funds were able to generate first quartile returns over three consecutive years.

This represents 0.8 per cent of the total universe, while in previous quarters the figure normally sits between 2 per cent to 5 per cent of funds.

The Global Bond sector had the best results with 2.5 per cent of its funds achieving consistently top quartile returns, but there were seven sectors with no funds achieving this.

In March, the Investment Association changed yield requirements for the UK Equity Income sector, reducing the threshold over a three-year rolling period from 110 per cent to 100 per cent of the FTSE All Share.

The nine funds delivering top quartile returns over three consecutive years

  • Fidelity Asia
  • Marlborough European Multi-Cap
  • GAM Star Credit Opportunities
  • Aviva Investors Global High Yield Bond
  • Artemis US Extended Alpha
  • Baillie Gifford American
  • Marlborough UK Multi-Cap Growth
  • MFM Bowland
  • CFP SDL UK Buffettology