"World class companies are less likely to be defined by a single country or region than in the past," said Doug McGraw, co-manager of the £171m Invesco Perpetual Global Equity Income fund. "National economies are becoming more integrated and many industries are now global in nature. A globally diversified portfolio will also result in lower risk than more regionally concentrated portfolios."
McGraw and co-manager Paul Boyne highlighted the importance of dividends in a global growth strategy, pointing to research showing this form of remuneration accounts for more than 40 per cent of the MSCI World Index's total returns over the long-term.
"Compounding or reinvesting dividends is a powerful way of increasing returns. Most investors know that," added McGraw. "What is certain is that over the next three-to-five years we will see slow and choppy growth as economies and households deleverage."
"If GDP growth is slow then equity growth is going to be slow. Profit margins are at record levels and we don’t think they are going to rise. We think you should strongly consider getting a good chunk of your equity returns via global dividends. We have companies that can weather choppy environments because of strong balance sheets and earnings power."
According to data from FE Analytics, the Invesco Perpetual Global Equity Income fund has been one of the strongest performers in the Global sector over the last 12 months, with returns of nearly 9 per cent. By comparison, the benchmark MSCI World Index has returned 0.41 per cent over the same period.
Performance of fund vs index over 1-yr
Source: FE Analytics
The global strategy might interest investors who believe that the UK Equity Income space is dominated by funds that are over-exposed to just a handful of the FTSE 100’s largest companies. McGraw says that the corporate sector is in good shape across the board and the country in which a business is domiciled is not necessarily a good guide to where it derives its earnings.
"The tone we are getting from companies is that the real economy is much better than we are reading in the FT or Washington Post," he said. "We don’t pay too much attention to the regional benchmark because with companies like Vodafone you are getting exposure to a huge multi-national which is focused on more than just the UK economy."
Adrian Lowcock, senior investment adviser at Bestinvest, says that investors are starting to realise that other economies could be more attractive than the one they have at home over the coming months and years.
"What you’ve got is a growing income yield in Asia," he said. "Cash is offering people very little in a high-inflation and low interest rate environment so people have to put more money into equity income products."
"Combine that with the low growth outlook for the West then professional investors and advisers have been re-visiting the value of reinvesting dividends as a viable strategy. There is more emphasis on this now than I think there has been in the last 10 or 20 years. Investors are being forced up the risk scale and one way of managing that risk is by investing in the very best dividend payers from around the world."
Investors who want to get access to this story might want to take a look at the popular M&G Global Dividend fund, which has four crowns under the FE Crown Rating system or, for a more specific play, the Newton Asia Income fund.