Global funds offer mix of income and growth
INVESTORS are going global in their search for companies or funds that provide them with the opportunity to earn a mix of income and long-term capital growth.
Demand is being driven by both a search for income against a backdrop of low interest rates and dividend protection while stock markets are volatile.
According to funds broker Chelsea Financial Services, purchases so far this year of global equity income funds have surpassed those for the whole of 2011.
Darius McDermott, managing director, says: ‘Investors want to diversify their income strand and the global income case is being given the oxygen of publicity by new fund launches.’ Fidelity and St James’s Place have launched new global equity income funds this year.
Until recently, most investors in search of income from shares did not have to look beyond Britain, opting either to compile a DIY portfolio of FTSE 100 companies renowned for growing dividends or buying a fund investing in dividendfriendly companies.
But although many big British companies, such as Vodafone and Shell, remain committed to raising dividends, they are dwarfed by the number of businesses in the US and the Far East that do the same.
‘There are seven times as many dividend-paying stocks outside the UK than there are quoted on the London stock market,’ says Brian Dennehy, managing director of the investment fund specialist fundexpert.co.uk.
‘And with an ageing global population I see a virtuous circle developing where growing investor demand will encourage more companies to pay and grow dividends. This will
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encourage more investors to buy dividend-conscious companies.’
Global equity income funds pay a gross income of between four and five per cent with either half-yearly or quarterly payments. This income can be protected if the fund is held inside a tax-friendly Isa. The maximum annual investment that can be made inside an Isa is £11,280.
Income does not have to be taken – it can be reinvested. It is an approach that Jonathan Griffin, 43, from Woking, Surrey, has adopted with his portfolio of income-friendly British companies such as AstraZeneca and Vodafone, and income funds including Threadneedle Global Equity Income.
Jonathan, a business manager for a London-based hedge fund operation, is married to Wendy, 42, an aerobics teacher. They have three children, Michael, 14, Daniel, 12, and Alex, 9.
Jonathan says: ‘My income shares provide the core of my Isas and selfinvested pension. The dividend stream is my comfort blanket when share values fall.’ Jonathan invests though Hargreaves Lansdown.