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The bottom line on global funds

Reported by Susan Hely
Wednesday, February 6, 2013
Companies forced to change their nameConflict in Iraq and Syria is causing serious headaches for companies who happen to share the ISIS moniker
By Susan Hely

Money magazine, February edition


Income funds are the hot new funds being rolled out by investment managers as yields fall for cash and bonds. 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 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.

MONEY VERDICT

The Threadneedle Global Equity Income Fund has had an impressive run, buoyed by strong performance in 2010 and 2011 – but will this continue? The investment management fee of 1.15% per annum is charged against capital. This is around a quarter of the fund’s historic yield of 4.8%. While this gross yield looks good compared with the yield on the benchmark of 2.8%, it is less remarkable compared with the 4.6% yield on the MSCI High Dividend Yield Index.

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22/11/2014 21:15Sydney, Australia. 22 November,2014
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