While high income funds have come under fire for putting too much emphasis on generating dividends and thus sacrificing capital growth, Global funds with more than a 4 per cent one-year historic yield beat their sector over one-, three- and five-year periods.
Of the 14 funds that are yielding more than 4 per cent, only two – Schroder Global Equity Income and Henderson Global Dividend Income – have failed to return more than the 52.58 per cent total return of the average fund in the Global sector over a three-year period.
Henderson Global Dividend Income is the only fund that has failed to outperform its sector over five years, while Aviva Investments Global Return and Sarasin Global Equity Income are the only vehicles that fall short over one year.
Performance of average fund vs sector over 5-yrs
| Name |
6-m returns (%) |
1-yr returns (%) |
3-yr returns (%) |
5-yr returns (%) |
| Average high income Global fund |
-2.6 |
4.8 |
60.9 |
24.1 |
| IMA Global |
-7.7 | -0.06 |
52.6 |
11.7 |
Source: FE Analytics
According to FE Analytics, the average Global fund yielding more than 4 per cent has returned 24.1 per cent in the last five years – more than twice as much its sector average.
The best of these is the £2.15bn Veritas Global Equity Income fund, which has returned 54.75 per cent. Charles Richardson and Andy Headley’s vehicle is currently yielding 4.97 per cent.
Performance of average fund vs sector over 5-yrs
Source: FE Analytics
Aberdeen World Growth & Income and Newton Global High Income, which are yielding 4.5 and 4.96 per cent respectively, have also substantially beaten their sector.
High income global funds have also coped much better with the recent market volatility. In the last 12 months, the average Global fund has lost investors 0.06 per cent, while funds yielding more than 4 per cent have returned 4.76 per cent.
The difference in total return over a three-year period is just over 8 per cent.
The results are in stark contrast with the performance of high income funds in the UK Equity Income sector. An FE Trustnet study earlier this year found that the highest yielding UK funds have consistently underperformed their sector and benchmark over every possible time period.
FE Alpha Manager Francis Brooke said that higher yielding UK funds tend to have much lower capital returns to compensate for the fact they have to pay a higher dividend.
However Mark Dampier, head of research at Hargreaves Lansdown, says Global funds don’t tend to have this problem.
"There is a far greater choice of companies on offer [to Global funds], which means they aren’t as dependant on certain companies to bulk up their yield," he explained.
"The huge diversity of dividend-paying stocks contrasts with the market in the UK, which is much more squeezed."
The popularity of global equity income funds has grown substantially in the past year or so. Stuart Rhodes’ M&G Global Dividend fund has more than quadrupled in size to £1.3bn in the last 12 months.