Investors go global in search for income

The sector moved up from sixth place in December 2012 to fourth in January 2013, recording £148m in net retail sales for the month.

In comparison, the UK Equity Income sector only recorded £46.5m in net retail sales for the first month of the year.

Inflow data for 2012 shows that investors have been turning away from the UK for some time. Between January and December 2012, the Global Equity Income sector saw inflows of more than £1bn in net new retail money, whereas the UK Equity Income sector only saw inflows of roughly £680m.

Benefits of investing globally

The IMA Global Equity Income sector did, however, lag behind the more established UK Equity Income sector in both performance and yield terms in 2012 overall, according to research carried out by Investment Adviser at the end of last year.

The research found that the 22 funds in the sector at the time with at least a one year track record posted an average gain of 9.9 per cent for 2012, compared with 12.9 per cent for the UK Equity Income sector.

The Global Equity Income sector’s average yield of 4.3 per cent was also shown to be behind that of the UK Equity Income sector’s historic average yield of roughly 4.5 per cent.

Sheridan Admans, investment research manager at The Share Centre, explains: “The benefits of investing globally for income include geographical risk diversification, industry diversification and exposure to stronger performing economies and markets.

“Economies such as China and India have been growing fast, often generating national wealth as well as increasing the spending power of their citizens.

“Having a stake in this changing balance of economic activity provides a good hedge against the prospects of slower growth in more mature economies.”

The IMA launched the Global Equity Income sector in January 2012 in response to the growing number of global income products available and it contains some heavyweights – Newton Global Higher Income, Standard Life Global Equity Income and M&G’s Global Dividend fund, for example.

Bandwagon

Steven Richards, associate director at Thesis Asset Management, says: “The grandaddy of the sector is the Newton Global Higher Income fund, although many have been launched by other houses as they jump on the bandwagon to asset gather through the ‘need for income’.

“We are naturally most familiar with this fund, however its inclusion on our recommended list from many years back was actually only as a solution to boost clients’ income where investing internationally often saw income dampened.”

Mr Richards adds, however, that Thesis have never been “global fund investors”, outlining that it takes away from the ability for them to geographically allocate.

He says: “Additionally, with the same fund houses now launching so many more regionally specific equity income funds – European income, Emerging Markets income, Asian income, North American income – we are increasingly able to stick to our own asset allocation and provide income.”

Jenny Lowe is features editor at Investment Adviser

Global Equity Income

Key funds launched in 2012

-Fidelity Global Dividend

Launched in January and managed by Daniel Roberts.

-St James Place Global Equity Income

Managed by Invesco Perpetual’s co-managers Paul Boyne and Doug McGraw.

-Jupiter Global Equity Income

Sebastian Radcliff and Gregory Herbert sit at the helm of this fund.

-CF Canlife Global Equity Income

This fund is managed by Craig Rippe.