Diversified global fund focuses on yields

SUSAN HELY

Income funds are the hot new funds being rolled out by investment managers as cash and bonds’ yields fall. One of the latest income funds that invests in companies with high-yielding dividends is the actively managed Threadneedle Global Equity Income Fund, available through the Australian group Certitude Global Investments.

Why should you consider it? The Threadneedle Global Equity Income Fund has beaten its benchmark, the MSCI AC World Index, consistently since it first started in 2007. The fund chooses not to use the MSCI High Yield Index, which would seem a more appropriate benchmark given its objective. The fund returned 13.4% for the year to the end of November 2012, compared with the index gain of 11.8%.

Global funds don’t benefit from franking credits, so for an Australian investor this is a relatively low equity yield before tax.

Because it is unhedged to the Australian dollars, the fund is exposed to currency risk. If the dollar appreciates, performance suffers.

The fund is managed in London by Stephen Thornber, who has been with it since 2007. The fund currently invests in 84 companies and Thornber and his team target international companies that pay a dividend of more than 4% a year. Around 34% is invested in North America, 24% in the Pacific, 16% in Britain and 16% in Europe.

The minimum investment is $5000 and the fund pays a quarterly dividend. No derivatives or hedging are used.

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