Aim: Income and growth by investing globally in a portfolio of high-yielding equities that are held in other Lazard funds
Minimum investment: Lump sum £2,000
Investment split: 100% in global equities
Isa link: Yes
Pep transfers: Yes
Charges: Initial 3.75%, annual 1.5%
Special offer: Initial charge reduced to 3.25%
Offer period: Until November 30, 2007
Commission: Initial 3%, renewal 0.5%
Tel: 0800 374 810
Lazard’s global equity income fund invests mainly in high-yielding stocks that are already held in other Lazard funds for growth.
Putting this fund into its market context Hargreaves Lansdown senior analyst Meera Patel says: “The advantage of this fund is that it offers diversification away from the UK market through an equity income portfolio.”
Patel notes that the fund aims to target a yield of 5 per cent, which she considers appealing. “Although the yield is very attractive, this is not a pure play on yield as the manager appreciates there is a risk of falling into a value trap. Part of the investment strategy focuses on companies which have the potential for capital appreciation first,” says Patel.
Patel observes that once these stocks are identified, the manager has an additional filter to identify those that have the ability to pay dividends and grow them over time,” she says.
Patel points out that up to 25 per cent of the portfolio can invest in emerging markets. “This may make it a more spicy offering, but it does offer potential for greater capital growth. Having said this, the fund can have a zero weighting in emerging markets if there are no ideas here.”
Turning to the potential drawbacks of the fund Patel says: “Equity income is an extremely popular asset class. The only problem with this fund is that it is new and does not have a long enough track record. Patrick Ryan has run an offshore fund along similar lines but his track record is not long enough to assess his ability to deliver consistent long-term outperformance.”
However, she adds that if the fund performs well going forward, she can see it being a success and attracting a great deal of attention from investors.
“Other than the lack of a demonstrable track record there is little I don’t like about the fund,” says Patel.
Identifying the main competitors Patel says: “We have seen a small number of global equity income funds launch this year including the JPMorgan global equity income and the Schroder global equity income funds. There is also the Newton global higher income fund, which has been around longer and has built an excellent track record so far. “
Summing up Patel says: “We have seen a long period of outperformance from value style investing and there have been signs of growth performing better than value. In this environment there is a risk that equity income funds may not perform well as they tend to be more value style in nature. However statistics show that value style investing has delivered superb returns compared to growth over the longer term.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average