Global Equity Income funds offer a one-stop shop for anyone who wants to diversify without having to make geographical decisions themselves.
FE’s Adviser Fund Indices are derived from the recommendations of a panel of the country’s leading IFAs and are aimed at investors with three main risk profiles: aggressive, balanced and cautious.
Here are the funds they recommend in this sector. You can find more information here.
Newton Global Higher Income
Newton Global Higher Income is the biggest fund in the sector, at £4.2bn in size.
It was among the best Global Equity Income portfolios in the down markets of 2008 and 2011. In 2008 it lost 16.94 per cent compared with a sector average of 18.42 per cent while in 2011 it made 2.54 per cent while the sector lost 2.06 per cent.
It has produced returns in line with or marginally below the peer group average in all rising years for the market, however, which means that although it is top quartile over three years, its five-year numbers put it in the second quartile.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Recently Nick Clay, deputy manager of the fund, said that he and lead manager James Harries would stick with their contrarian stance and remain defensively positioned, implying the fund will continue to underperform if markets remain buoyant.
"What evidence is required to show QE has worked and that we are back in a period of sustainable economic growth? We need to see a material pick-up in full-time employment, growth in real incomes, a pick-up in corporate capital expenditure and real top-line revenue growth. At present, we are seeing limited evidence of progression in any of these areas," he said.
Newton Global Higher Income has ongoing charges of 1.13 per cent. It is included in the Aggressive, Balanced and Cautious Adviser Fund Indices.
FE Trustnet examined the reasons for its recent underperformance in a previous article.
Invesco Perpetual Global Equity Income
The £452m Invesco Perpetual Global Equity Income fund has been more consistent in the four full years since launch, producing top quartile returns in both up and down markets.
It was the best-performing fund out of the 20 in the sector in 2011, returning 4.88 per cent.
Since launch in March 2003 it has returned 121.97 per cent while the average Global Equity Income fund has made 106.21 per cent, the third-best result out of the 13 funds with a track record that long.
Performance of fund vs sector since launch
Source: FE Analytics
That total return has come at the expense of a certain amount of income, however: while Newton Global Higher Income is yielding 4 per cent, the Invesco Global Equity Income fund is yielding just 2.5 per cent.
It has ongoing charges of 1.68 per cent and it is included in the AFI Balanced index.
Threadneedle Global Equity Income
Stephen Thornber’s £630m Threadneedle Global Equity Income fund is yielding 4.4 per cent, more than both the other portfolios.
Over three and five years it has produced second-quartile returns, although over the past 12 months it has jumped up into the top quartile.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund holds REITs and private equity companies, which distinguishes it from most other portfolios in the sector.
Hugo Boss and the Blackstone Group are private equity holdings, while the fund has held REITs including Activa Properties and the Redwood Trust in recent months.
The fund has ongoing charges of 1.65 per cent. It is included in the AFI Balanced index.
Aberdeen World Growth & Income
The performance of this fund has been disappointing for the past two years: it was bottom quartile in 2012 and is in the bottom quartile in 2013 so far.
This can partly be explained by the fact it has retained a higher weighting to emerging markets than many of the other portfolios in the sector.
For example, it has 17.3 per cent in Latin America, the bulk of it in Brazil. This area has been particularly badly hit by the recent sell-off in emerging market assets.
Performance of fund vs sector and indices since Jan 2012
Source: FE Analytics
The high weighting to Latin America is an Aberdeen-wide tactic, with the fund house overweight the region on its global and emerging markets funds.
The fund has ongoing charges of 1.65 per cent and is included in the AFI Balanced index.
In the previous articles in the series, FE Trustnet looked at adviser’s favourite funds in the UK Equity Income and UK All Companies sectors.
