Threadneedle unveils dividend fund

Threadneedle has launched a Pan-European Equity Dividend fund, managed by Chris White. The fund, which targets a dividend yield 10% above the MSCI Pan European index, was unveiled on May 8. While it is primarily aimed at the Continental European market, White says British investors should also consider buying.

“There are not many comparable funds in the UK,” says White. “Dividend income is of increasing importance and a lot of companies are forecast to grow their dividends over the next few years. Firms are becoming more Anglo-Saxon in their attitudes, with an increasing level of shareholder pressure for income.

“Bond yields remain low and people in Germany and France, as in the UK, can no longer rely on state pension schemes. Equity income will provide an alternative to bank interest and bonds.”

White says the fund was seeded with 5m at launch. The current overweights include oil, mining, insurance and utilities. Underweights include banks, telecommunications, electronics, support services, beverages, software and information technology.

The portfolio’s largest allocation was to Britain (35%), followed by France (19%), Germany (10%), Italy (9.5%) and the Netherlands (5.7%), on May 19. White says the allocations are a function of a bottom-up selection process, although there are some top-down themes. Companies with strong cash flow and sustainable dividend growth are preferred.

The fund holds between 55 and 60 companies, with an emphasis on large caps. The portfolio holds more than 90% of its assets in firms with capitalisations above €5bn (3.4bn).

The deputy manager for the fund is William Davies, Threadneedle’s head of European equities. White also manages the firm’s 110m Monthly Extra Income and 150m Managed Income portfolios. He ran the 390m UK Equity Income fund until the arrival of Leigh Harrison earlier in the year.

The annual management fee is 1.5%, with an initial charge of 3.75%. The minimum investment is 2,500 as a lump sum, or 750 for subsequent investments.