IMA Global Equity Income was second only to IMA Sterling Strategic Bond in the sales charts, and a number of equity income funds outside of the staple UK sectors sold very well.
The platform’s March sales figures revealed that the five-crown rated Newton Global Higher Income saw the largest inflows of any fund in the IMA universe.
Other top-selling non-UK equity income funds included Standard Life European Equity Income and JPM US Equity Income, which FE Trustnet highlighted as strong contenders in a recent article.
Top selling funds in March 2013
Source: Cofunds
M&G Global Dividend was also a favourite. Though it doesn’t sit in the IMA Global Equity Income sector, it’s still a good dividend-paying option. It is currently yielding 3 per cent.
Newton Global Higher Income is one of the standout performers in the IMA Global Equity Income sector and with just under £3.7bn worth of assets under management (AUM) – it is also the largest.
James Harries’ fund has been the third best performing fund in the sector over both three and five years. Newton Global Higher Income has also consistently beaten its benchmark – the FTSE World index – since its launch in November 2005.
The fund has a yield of 3.98 per cent and has returned 99.1 per cent since its launch, beating the index by 35.27 percentage points.
Newton Global Higher Income has an ongoing charges figure (OCF) of 1.62 per cent and requires a minimum investment of £1,000.
Newton has proven to be the favourite hunting ground for income hungry investors, with their Asian Income fund also making the bestsellers list.
Like the Global Higher Income fund, Jason Pidcock’s Newton Asian Income has a five crown rating.
However, at £3.7bn it is slightly larger and with a yield of 4.14 per cent it currently provides investors with a higher level of income.
Pidcock’s largest regional weighting is to Australia – which makes up 29.5 per cent of the portfolio. The fund also has high exposure to areas such as Singapore, Hong Kong and Thailand.
Since the fund’s launch in November 2005 it has returned 188.21 per cent, while the FTSE World Asia Pacific ex Japan index and the IMA Asia Pacific ex Japan sector have returned 127.37 per cent and 124.67 per cent, respectively.
Performance of fund versus sector and index since November 2005
Source: FE Analytics
Newton Asian Income has tended to be less volatile than both the sector and index over that time. It has an OCF of 1.65 per cent and requires a minimum investment of £1,000.
Mark Shields, investment manager at Brookes MacDonald, says he isn’t surprised that investors are looking overseas for their income.
“From a UK funds perspective, you do tend to find that there are only a small amount of companies that a lot of the income funds find there yield from,” he said.
“UK equity income funds have tendency to look at a limited number of names – we like UK funds that look at things a little bit differently.”
Charles Stanley’ Rob Morgan is a big proponent of investors looking abroad for income.
“It is absolutely essential that investors look to diversify their income,” he said.
“In the UK there are just a few companies that give UK equity income funds dividends. Looking overseas for yield is a great way to diversify, because if you own a popular stock you can get company specific risk like with BP’s issues in the Gulf of Mexico.”
“That showed that you don’t want to be overly reliant on one company’s dividend,” he added.
JPM US Equity Income is another fund that has proven popular with investors recently.
North American companies do not have the same history of paying dividends as their British counterparts, which is why JPM US Equity Income is one of very few in the IMA North America sector that offers investors a yield.
However at 2.31 per cent, it is substantially lower than the average fund in the IMA UK Equity Income sector.
The £1.2bn fund has been a consistent performer in the sector since its launch in December 2008. Over three years it is the third highest ranking portfolio with returns of 47.95 per cent.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
Its benchmark – the S&P 500 – has returned 39.44 per cent while its peer group has returned 31.95 per cent.
JPM US Equity Income is managed by Clare Hart and FE Alpha Manager Jonathan Simon and has an OCF of 1.62 per cent. It has a minimum investment of £1,000.
This weekend, FE Trustnet will be looking in more detail at how investors can diversify away from the UK through global funds.