Global Equity Income
Global Equity Income is a guest post by award-winning freelance financial journalist Philip Scott
With interest rates stuck at an all time low of 0.5% for more than six years and counting savers in their thousands have been piling into the stockmarket in a bid to get their cash working harder for them.
A big beneficiary of this rush has been equity income funds. These investment vehicles typically aim to deliver not only a rising level of income but capital growth too by investing in dividend paying firms, in other words companies that share out their profits with investors.
And dividends are big business – in 2014 for example, investors cheered when Vodafone shared out a world record £15.9bn special pay out, after selling off its US business.
Last year UK Equity Income funds were the top selling fund type, and their popularity has spilled over into 2015. Collectively retail investors now have almost £60bn invested in these portfolios according to trade body, the Investment Association.
However while UK Equity Income vehicles have a strong pull, it is worth sparing a thought for Global Equity Income funds, and while they only account for just over £14bn in assets under management – far less then their UK cousins enjoy, their appeal is on the up.
As with their UK counterparts, they aim to provide a high and growing income stream as well as capital growth, except as their name points out, invest in corporations from all across the globe, including the UK.
As a result, investors therefore not only enjoy the benefit of further diversification but the potential benefit of investing in a fund that can fish in a much bigger dividend pool.
To put it another way, while Capita Asset Services forecasts that UK dividends will reach £86.5bn in 2015, fund management firm Henderson Global Investors, presently expects that international pay outs will surpass a massive $1.1 trillion this year.
Like any investment type, Global Equity Income portfolios will have their ups and downs but in aggregate, performance has been well within the bounds of respectability, with the average fund delivering a total return of 66% over the past five years and 112 per cent over the past decade – just ahead of the 109% mean achieved by the UK Equity Income sector for the period.
Of course, there is no shortage of Global Equity Income funds to choose from so investing with the right manager is key. A popular choice in the sector, and one backed by Investment Quorum is Artemis Global Income. The fund, which has investments in Latin America, Asia and the US, among other regions and nations has delivered a stellar 111% return to its investors since its July 2010 launch.
Other preferred picks include the Schroders Global Equity Income fund. The portfolio, which has stakes in Legal & General and Microsoft has delivered a 72% return over the past five years, while another often tipped portfolio, Sarasin Global Higher Dividend, has returned 62% over the same period.
Ultimately by adopting an international approach to equity income investing, prospective investors can enjoy the benefits of global equity income fund managers being able to select their stocks from everywhere and anywhere worldwide, including some of the world’s fastest growing economies.
A key USP for Global Equity Income funds is that, if one market goes awry, fund managers can switch out and look for better opportunities elsewhere, allowing them to play differential growth cycles, which should hopefully lead to a more consistent and indeed profitable investment.
Philip Scott is an award-winning freelance financial journalist* and author.
He writes regularly for a number of trade and consumer titles. He began his career in 2002 in local press. He has written for among others Money Marketing, Investment Week, Citywire, Investment Adviser, Moneywise, The Sunday Times and The Daily Mail’s thisismoney.co.uk.
*Investment Association Freelance Investment Journalist of the year (2014)
(All fund performance – FE Analytics to 4 June 2015, total return, sterling terms)
Global Equity Income is a guest post and the views here do not necessarily concur with those of Investment Quorum. In fact, it is very often the case that we may largely be in disagreement but we respect the opinions and views of others and value their contribution to the wealth management debate. Guest posts may appeal more to some than others and may often hav an industry or sector knowledge expectation.
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