Diversifying income streams away from the UK market has been one of the biggest investment themes of recent years, and one that is likely to endure for some while yet.
Global Equity Income was given its own IMA sector at the beginning of this year, and demand for its constituents has been strong. Independent research from Schroders found that advisers expect funds in the sector to be their biggest sellers of 2013.
With only 26 members, it is still relatively small, but there are a handful of funds that excel across a number of different ratings-measures.
Newton Global Higher Income
- FE Crown Fund Rating: 5
- FE Alpha Manager rating
- Constituent: AFI Cautious, Balanced and Aggressive Indices
Performance of fund vs sector and index
| Name | 1yr | 3yr | 5yr |
|---|---|---|---|
| Newton Global Higher Income | 12.96 | 31.47 | 26.96 |
| FTSE World | 10.3 | 24.16 | 18.15 |
| IMA Global Equity Income | 10.09 | 24.98 | 16.16 |
Source: FE Analytics
The £3bn fund is the largest in the sector and, according to FE inflows data, has been the best seller over one year by a huge distance.
Looking at the manager’s record, it is easy to see why; according to FE data, it is a top-quartile performer over one, three and five years, as well as since its launch in November 2005. The fund has also beaten its FTSE World benchmark over these time frames.
Performance of fund vs sector and index since launch
Source: FE Analytics
Harries has done this with less volatility than the index, but he has been a touch more volatile than his peer group. His portfolio is currently yielding 4.26 per cent, which is well above average for the sector.
The manager runs a diversified portfolio of around 60 stocks, with no single company accounting for more than 5 per cent of assets.
It is predominantly large cap focused, across both developed and emerging markets. North America is currently Harries’ largest regional position, with a 40 per cent weighting, followed by Europe ex UK [28.7 per cent], Asia Pacific ex Japan [12.9 per cent] and the UK [11.9 per cent].
The portfolio has a significant defensive bias, with big overweight positions in telecoms and healthcare. Tech, financials and basic materials are Harries’ biggest underweights.
Newton Global Higher Income has a total expense ratio (TER) of 1.62 per cent and requires a minimum investment of £1,000. It is listed on all the major platforms.
Veritas Global Equity Income
- FE Crown Fund Rating: 5
- Constituent: AFI Cautious, Balanced and Aggressive
This £2.2bn fund is not as well known in the retail world as Newton Global Higher Income, but it is a favourite with multi-managers, including Thames River’s Gary Potter.
Veritas Global Equity Income has returned 97.28 per cent since its launch in February 2005, beating its sector and benchmark by around 40 percentage points.
It has done this with less volatility than both, and has a better record in falling markets.
Performance of fund vs index and sector since launch
Source: FE Analytics
With returns of 45.07 per cent, Veritas Global Equity Income is number-one in IMA Global Equity Income over five years, returning significantly more than Newton Global Higher Income; however, over one and three years it falls slightly short of its rival. It has a yield of 4.5 per cent.
The five crown-rated fund, which also makes it into all three AFI portfolios, is headed up by Andy Headley and Charles Richardson. They have more of an emerging market focus than Harries, reflected by their 30 per cent position in Asia Pacific ex Japan, and 5.7 per cent position in Africa & the Middle East.
Energy is the managers’ biggest sector position, followed by financials and telecoms. Healthcare has a far lower weighting compared with Newton Global Higher Income.
The minimum investment of £30,000 is waived by a number of platforms; it is only £1,000 through Hargreaves Lansdown, for example.
Veritas Global Equity Income has a total expense ratio of 1.18 per cent – well below average for a global equity fund, or any equity portfolio for that matter.
Invesco Perpetual Global Equity Income
- FE Crown Fund Rating: 5
- Constituent: AFI Cautious, Balanced and Aggressive
Paul Boyne’s £301m Invesco Perpetual Global Equity Income fund has the shortest track record, but it has made quite an impression since its launch almost four years ago.
The five crown-rated fund has returned 75.66 per cent since March 2009, which puts it in the top decile of the sector.
It has done this with significantly less volatility as well. However, with a yield of 3.11 per cent, it is below average in the income-stakes.
Boyne runs a diversified portfolio of around 60 stocks, with no single company accounting for more than 4 per cent. Like the Newton fund, it is currently defensively positioned; however it has more of a focus on consumer products, which is his biggest sector overweight, at 32 per cent of AUM.
It is the most developed market-focused of the three, with just 7 per cent in emerging markets.
Invesco Perpetual Global Equity Income requires a minimum investment of £500 and has a TER of 1.7 per cent. It made it into the AFI Cautious, Balanced and Aggressive portfolios.