Just how ‘global’ are global income funds?


Maybe it is a sign of age but I can still remember writing about the new wave of equity income funds that were not invested in the UK, the traditional perennial favourite of the domestic retail investor.

The year was 2005. At the same time that Newton was launching both an Asian equity income fund and a global equity income, 2CG’s Charles Glasse, the former manager of the M&G European Dividend fund (a pan-European equity income fund which launched in 1989 and closed in 2000 owing to poor sales), set about launching the first continental European Equity Income for the retail market – the Zenith European Income fund.

Flash forward nine years to 2014 and global equity income funds are big business. Such were the number of funds launched that the IMA created the standalone Global Equity Income sector in 2012 and as at the end of July some £11.7bn was invested in the 34 funds in the peer group. This compares with the £53.1bn in the UK Equity Income sector.

The IMA has not yet “yielded” to the demands by some to create a standalone European Equity Income sector but equity income funds invested in Europe, Asia, the US and even emerging markets have all increased in popularity over the past decade as income – given interest rates being held at 0.5 per cent since March 2009 – has become a cornerstone of many retail investor’s portfolios.

Yet in all the debate of the merits of such funds versus the UK, one question never seems to have been asked, just how globally invested are the so-called global equity funds? With the regional funds investors know what they are getting access to but in this month’s cover story, James Smith says when in comes to the global offerings several funds are very developed market-tilted in their exposure at the expense of their developing peers.

Meanwhile in this issue – which we have branded the income issue – the Investment Committee goes on its own hunt for yields, Smith & Willamson’s Tineke Frikkee assesses her progress one year into managing her new UK income fund and the AIC’s Ian Sayers extends the equity income debate to open-ended versus closed-ended offerings.