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Longevity rise makes stable income funds more popular

Funds that offer stable income streams are becoming popular as people live longer and need more money to support retirement, according to Shane O’Neill, head of UK distribution for Bloxham.

By Julia Bradshaw | Published Jun 30, 2011 | comments

Mr O’Neill said changing demographics meant more people would require equity income funds in their portfolios because they offer long-term and growing income.

He said: “The major problem in Europe is that the population is getting older and people are living longer in retirement. They will need more income from their pensions and savings to support them, but there are not many products out there that will give you an income stream over time.”

Mr O’Neill said dividend-generating equity income funds were reaping high returns because cash flow in corporate Europe “has never been in such good health”.

He said: “Lots of European companies have grown dividend streams from 5 per cent to as much as 20 per cent.

“In the US, chief executives are upbeat from a corporate perspective. And, as you have increasing numbers of people looking for growing income products, more money will go into them and therefore more money will go into the company to pay a bigger dividend.”

His comments came as Bloxham reported an eighth consecutive year of dividend growth for its Dublin-based Elite Global Equity Income fund.

The UK equivalent, which was launched in 2008, has £24m of assets under management, up from £6m assets under management when it first opened.

Mr O’Neill said the fund was on track to meet its target dividend growth of 7 per cent for this year, from its current 3.6 per cent.

He said: “We are not a big firm in the UK, but ours is an important story. We want to increase our exposure in the UK IFA market.”

The Bloxham UK Global Equity Income fund is on Hargreaves Lansdown’s Vantage platform and one of the company’s 150 top picks. The fund spreads risk geographically and through different sectors and has both direct and indirect exposure to emerging markets.

Mr O’Neill added: “The UK market is a long-term target for us, but we need to make sure that we get out message out to IFAs.”

Rob Morgan, investment analyst for Bristol-based Har-greaves Lansdown, said: “We like the equity income sector. We have seen this sort of fund outperform recently. At the moment there are signs that defensives are doing better and there has been a resurgence in interest in high-yielding stocks.

“The Bloxham UK fund does have a short track record, but we base it on Bloxham’s previous track record which is longer. The Bloxham team isn’t particularly well known in the UK, but the fund is well managed we have good access to the managers and are happy with what the fund manager, Pramit Ghose, is doing.”

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