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R&M launches global high income

Investment boutique River & Mercantile Asset Management has launched the global high income fund, its third global equity fund.

The fund aims for a high and rising level of income with the potential for long-term growth by investing globally in equities, which have above average yields. It aims to provide a yield of 50 per cent above that of the FTSE All World index and has an estimated initial yield of 4.3 per cent. It will be diversified by country, industry and currency. O’Reilly can invest wherever the best opportunities are, including stocks with dividend outlooks that are underestimated by the market. Around 60 per cent of the stocks in the portfolio will also feature in the existing global equity and global opportunities funds.

Fund manager Alex O’Reilly joined from Newton in 2009 with R&M head of global equities Alex Stanic. The global equity team recruited financials analyst Alexei Kapkin and equity technology hardware analyst Tomas Tomason from Lazard Asset Management last year.

The team takes a thematic approach, which is used to identify areas in the markets that are likely to benefit from trends and to avoid areas that may be facing setbacks. The other important aspect of the process is valuation. Focusing on themes and stocks that are attractively priced leaves the team with a shortlist of stocks for further analysis and R&M also believes it removes the need for unnecessary research on areas that offer few opportunities.

Finding firms outside the UK that pay dividends used to be difficult but now many companies around the world have attractive dividend yields and dividend growth is now higher outside the UK than in the UK. According to  IFA firm Hargreaves Lansdown, the global market has delivered 5 per cent dividend growth over the last 10 years, while the UK has  delivered 3.4 per cent.

One positive is that R&M is not tied to any region, so it can take advantage of dividend growth in areas such as emerging markets while remaining diversified to spread risk. However, investing in emerging markets will increase risk in the portfolio. Competition could come from many global equity income funds including Schroders, Threadneedle, JPMorgan, Lazard, and Invesco Perpetual.


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