Principal Investment Management

• The White List identifies those funds that have offered a superior combination of income, capital growth and risk management - over the long-term.
• The Black List is the home for funds that regularly disappoint investors.
• The Grey List can display a fund on the wane, or simply a high quality manager with an out-of-favour style.

Sector Comment:

"Whilst Equity Income funds struggled to keep pace with the euphoric return to form of equities that marked 2009, they still produced strong total returns. Typically, Equity Income investors do not expect to participate fully in the market's short-term moves , but rather make a long term investment with the aim of receiving a rising income alongside capital growth. The best funds in the sector continue to excel in meeting this need."
Joe Wiggins, Investment Manager, Principal Investment Management Ltd

The White List:

Evidence that we live in a world increasingly obsessed with the short-term can be found in murmurings of displeasure over Neil Woodford's performance in 2009. There is no need to take such a myopic view, simply look at the total returns he has provided for investors in Invesco Perpetual Income & High Income over the long-term. Buy.

JOHCM UK Equity Income makes an immediate entry in The White List. Management duo James Lowen and Clive Beagles have proven the effectiveness of their yield driven approach refined from Beagles' time at Newton. Buy.

Nick Purves and Ian Lance have reaped the rewards from a move into depressed, cyclical stocks in the early stages of 2009. This is no flash in the pan, Schroder Income has been one of the strongest in its sector for some time. Buy.

The Grey List:

Equity Income stalwart Anthony Nutt continues to be held back by a portfolio of defensive growth companies positioned for a slow and measured recovery. Given the uncertainties that remain investors would be wise to keep Jupiter Income in their portfolio. Buy.

The Black List:

GLG UK Income (formerly SG) has become a familiar face in The Black List with a steady record of underperformance. However, GLG's takeover has seen the fund handed to highly regarded hedge fund duo John White and Jason Mackay. We will be watching intently to see how they handle this income mandate. For investors who are still in the fund, we hope that better performance could be around the corner. Hold.

In such a strong sector it continues to amaze that funds like Prudential Equity Income and JPM Premier Equity Income still struggle on. Switch.