A recent FE Trustnet poll showed that it is a very common strategy with FE Trustnet readers, as 63 per cent of the 2,006 participants said they held a global equity income fund in their portfolio.
With that in mind here we highlight some of the top performing global equity income funds launched within the past three years.
All of the funds mentioned have been top quartile since launch, but don’t yet have an FE Crown rating because of their lack of a track record.
Fidelity Global Dividend
The Fidelity Global Dividend fund has been managed by Daniel Roberts since launch in January 2012.
According to FE Analytics, over that time it has been the seventh best performing fund in the IMA Global Equity Income sector with returns of 31.81 per cent, beating its benchmark – the MSCI AC World Index – which has returned 23.95 per cent.
Performance of fund versus sector and index since January 2012
Source: FE Analytics
The still relatively small £62m fund has yield of just 2.97 per cent, but that dividend is paid out quarterly.
Roberts is currently sitting on a 5.6 per cent cash weighting, but is clearly seeing opportunities in Europe. The fund’s exposure to the region is 37 per cent, which equates to a 20 per cent overweight position relative to its benchmark.
The manager also has the ability to use derivatives in his fund, but at this moment of time, he is keeping a long only portfolio. Fidelity Global Dividend has an ongoing charges figure (OCF) of 1.81 per cent and requires a minimum investment of £1,000.
Fidelity Global Enhanced Income is also an unrated top quartile performer in the sector, though it was only launched six months ago.
Saracen Global Income & Growth
Sticking with the IMA Global Equity Income sector, the £32.5m Saracen Global Income & Growth fund has also been a top quartile performer since its launch in June 2011.
Over that time, the fund – which is co-managed by Graham Campbell and Daniel Leaf – has returned 34.05 per cent and has beaten the average portfolio in the sector in by more than 10 percentage points.
For those investors who want to make sure they don’t have too much exposure to the FTSE’s dividend payers, Leaf and Campbell have decided to keep a very small weighting to the UK and instead favour the US and Europe.
Like Fidelity Global Dividend, Saracen Global Income and Growth has a relatively low yield of 2.7 per cent. It does however, have prominent bias towards defensive stocks with the likes of Novartis, Nestle, Sanofi, Unilever and Vodafone all featuring in the fund’s list of top 10 holdings.
The fund requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.41 per cent.
SJP Global Equity Income
One other fund to consider could be SJP Global Equity Income. The £208.3m is managed on the behalf of St James Place by Invesco Perpetual, with Nick Mustoe – who is the group’s chief investment officer – managing the portfolio.
Our data shows that since its launch in June 2012 the SJP Global Equity Income fund has returned 29.57 per cent, placing it firmly in the top quartile. It has also been the fourth best performing fund in the sector over the past 12 months.
Performance of fund versus sector over 1yr
Source: FE Analytics
Mustoe’s fund isn’t one of the highest yielding funds in the sector at 2.7 per cent, though the manager has been able to increase his net distribution over the past year.
Roughly two thirds of the portfolio are split between the US and European equity income markets, with the remaining assets divided between the UK and Asia Pacific regions. It has an OCF of 1.72 per cent and has a minimum investment of £1,500.Cazenove European Income
The economic outlook for Europe seems to be improving with many experts expecting growth to return to the region over the coming years.
One fund which has taken full advantage of the more optimistic outlook has been James Sym’s Cazenove European Income fund.
It was launched in May 2012 – which was a couple of months before European equities troughed – and over that time it has been the third best performing portfolio in the IMA Europe ex UK sector with returns of 60.82 per cent, beating its FTSE World Europe ex UK benchmark by 20 percentage points in the process.
It has also been the second best performing fund over the past 12 months with returns of 25.55 per cent.
Sym, like his UK counterpart Matthew Hudson, follows the business cycle approach. The now £234.5m Cazenove European Income fund has a yield of 3.6 per cent, while Sym has overweight positions in the financial and industrial sectors.
It is a firm favourite with Schroder’s Marcus Brookes and Robin McDonald, who have decided their colleagues’ fund is a way to play the recovery in Europe. It has an OCF of 1.65 per cent and a minimum investment of £1,000.
Blackrock Continental European Income
Andreas Zoellinger and Alice Gaskell’s Blackrock Continental European Income fund is another that is making waves in the IMA Europe ex UK sector.
The £220m was launched in May 2011, which was a turbulent time for the region’s equity markets as the eurozone crisis deepened.
However, since its launch it has been the sector’s second best performing fund with returns of 33.59 per cent, which are more than double the returns of its benchmark.
Performance of fund versus sector and index since May 2011
Source: FE Analytics
It has also performed well in the recent rally as Zoellinger and Gaskell’s fund boasts top quartile returns over one year.
The fund’s largest regional weightings are in the more stable European markets such as Germany, Switzerland and the Netherlands. However, the managers are also overweight Italian equities.
Like Sym’s fund, Blackrock Continental European Income fund is overweight financials. It has an OCF of 1.7 per cent and the minimum investment is £500.
Threadneedle US Equity Income Institutional
The US has not normally been a major hunting ground for UK investors, however Diane Sobin’s Threadneedle US Equity Income fund has managed to grow its net distribution each year since its launch in May 2011.
The fund , which like others in the sector has a relatively low yield of 2.5 per cent, has been the ninth best performing fund in the IMA North America sector since its launch with returns of 42.31 per cent, beating the S&P 500 by 5 percentage points.
It has also beaten the sector in each of the last two discrete calendar years.
Threadneedle US Equity Income gives investors exposure to some of the larger names in the index, with Apple, Verizon, Chevron and Philip Morris International all in featuring in its list of top five holdings.
As its names suggest, the fund is primarily geared towards institutions, not retail investment. However, it is available on a number of fund platforms such as Nucleus, Interactive Investor and Aviva Wrap.
In the last article in the series FE Trustnet looked at top-performing new funds in the IMA UK Equity income sector.