Lazard says that dividend yields can provide a more stable source of income than returns from price appreciation. Overseas companies are increasingly paying dividends that are growing at a faster rate than in the UK. This has created investment opportunities that did not exist a few years ago, enabling portfolios to be diversified across region and sector.
The new fund has a target yield of 5 per cent and is based on the institutional world dividend equity strategy that Lazard has been running for the last two years. It will be managed by a team led by portfolio managers Patrick Ryan, Andrew Lacey and Kyle Waldhauer, who will also draw on research from Lazard’s global network of analysts.
The investment team will select 60-100 of the highest yielding stocks on from a universe of 900, taking a bottom-up approach. They will also consider the sustainability of dividends, looking for companies with a long-term record of consistent dividends while avoiding those who pay high special dividends on a one-off basis. According to Lazard, strong sustainable returns suggest a company has a competitive advantage that would be hard for other companies to destroy.
The commitment shown by companies to future dividends and how much capital will be available for payments is also assessed. Holdings will be sold when better opportunities are found or they no longer appear in other Lazard portfolios, subject to a 10 per cent limit on stocks outside this universe.
Schroders, JPMorgan, Newton and Neptune already offer funds in the global equity income space but Lazard believes its distinguishing feature is that it will include stocks that have already been scrutinised and endorsed by the company, However this limit, and those imposed on maximum region, sector and stock weightings, could be seen as too rigid for a fund that is unconstrained by a benchmark.