The now £6.2bn fund was also the most popular in the sector in last year’s study, and the number of fund managers that hold it has increased by five this time around.
Other funds to feature high up on the list include JOHCM UK Equity Income (which is the second most popular UK equity income fund with managers), Threadneedle UK Equity Income and Invesco Perpetual Income.
Source: FE Analytics
Two of the most notable funds that hold Artemis Income in their top 10 are the £4.7bn Jupiter Merlin Income Portfolio – which is headed up by the FE Alpha Manager trio of John Chatfeild-Roberts, Algy Smith-Maxwell and Peter Lawery – and FE Alpha Manager Toby Ricketts’ Margetts Providence Strategy fund.
It is the Jupiter Merlin Income Portfolio’s eighth-largest holding, making up 5.45 per cent of its assets, meaning that it owns around 4 per cent of Artemis Income.
It is not difficult to understand why Artemis Income is so popular with fund of funds managers.
According to FE Analytics, it is the third-best performing portfolio in the IMA UK Equity Income sector since its launch in June 2000, with returns of 251.84 per cent, beating the FTSE All Share by close to 170 percentage points.
Performance of fund vs sector and index since June 2000
Source: FE Analytics
The fund also sits comfortably in the top quartile over 10 years.
However, due to its high weighting to large, often defensive stocks, Artemis Income has failed to rally as hard as the market and its competitors since the period after the financial crash and as a result has underperformed against the sector and index over one and five years.
Artemis Income, has however, grown by £1.8bn over the past 12 months.
While the fund’s long-term track record, the popularity of equity income as an asset class and the fact that markets have performed well have all played their part in the fund’s enlarged AUM, the news that FE Alpha Manager Neil Woodford will leave Invesco Perpetual in May has also contributed.
Money has been steadily seeping out of Woodford’s Invesco Perpetual High Income and Income funds since the news of his departure was announced last year.
His five crown-rated Invesco Perpetual High Income fund has shrunk by 5 per cent to £13.7bn over the past six months. In addition, while 19 funds counted it as a top-10 holding in last year’s count, that figure has shrunk to just 9 funds in the most recent study.
One of those that is sticking by it is the Jupiter Merlin Conservative Portfolio, which has a 6 per cent weighting to the fund.
Woodford’s five crown-rated Invesco Perpetual Income fund has remained just as popular with fund of funds managers as it was 12 months ago.
Although 20 funds still count it as a top-10 holding (the same amount as last year) Invesco Perpetual Income has shrunk by 13 per cent to £9.3bn over the past six months.
Following the news that FE Alpha Manager Mark Barnett would replace Woodford as manager of Invesco Perpetual's largest funds, industry experts highlighted a number of alternative portfolios for investors.
One of these was Richard Colwell and FE Alpha Manager Leigh Harrison’s five crown-rated Threadneedle UK Equity Income fund.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Twenty-two multi-manager funds hold the £2.4bn portfolio in their top-10. The fund is a top-quartile performer over one, three, five and 10 years.
Vanguard FTSE Equity Income has also become popular with fund of funds managers.
All in all, 20 portfolios count the tracker as a top-10 holding although five of those are members of Vanguard’s own fund of funds range.
It is not difficult to see why it is popular. Our data shows that the passive fund has a yield of 3.99 per cent, an ongoing charges figure (OCF) of just 0.25 per cent and a tracking error of 0.12 per cent over three years.
The UK equity market has performed well over the period since the financial crash and the IMA UK Equity Income sector’s best performers over recent years have all been those that dip into the lower end of the FTSE All Share.
Over the last 12 months for example, the four funds with the highest returns in the sector have been Marlborough Multi Cap Income, CF Miton UK Multi Cap Income, PFS Chelverton UK Equity Income and Unicorn UK Income.
Performance of funds vs sector over 1yr
Source: FE Analytics
Given their investment remit and the capacity issues inherent with the types of stocks they hold, it is not surprising that they don’t feature on the list of managers' favourite funds.
However, interest in these four portfolios has picked up over the last year.
For example, Gervais Williams and Martin Turner’s now soft-closed CF Miton UK Multi Cap Income did not feature as a top-10 holding in any IMA fund last year while this time around nine funds count it in their 10 top.
One of those is FE Alpha Manager David Coombs’ Rathbone Multi Asset Strategic Growth Portfolio.
It is a similar story with PFS Chelverton UK Equity Income, Unicorn UK Income and Marlborough Multi Cap Income, which are all held by more funds of funds than they were at this time last year.