Type: Unit trust
Aim: Growth and income by investing globally in equities
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 100% in global equities
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7658 3894
Schroders has introduced its global equity income fund, an Oeic that aims for a rising level of income and capital growth by investing in high yielding stocks around the world.
Looking at how the fund could be of use to advisers and their clients, Hargreaves Lansdown senior analyst Meera Patel says: “ This fund offers great diversification both geographically, but also away from the traditional UK equity income funds. The UK has been traditionally seen as the home of income funds and it is pleasing to see more companies around the globe placing greater emphasis on dividends and growing dividends for the longer term. I envisage this trend to be sustainable,” she says.
Patel observes that the fund targets a yield of at least 2 per cent above the MSCI World Index. “This currently generates a portfolio yield of around 4 per cent, which many investors would find attractive, particularly with the added benefit of potential capital growth,” she says.
In Patel’s view, fund manager Sonja Shemmann has a solid track record. “She has built a great reputation for running a global income fund in Germany. Since she has been with Schroders, she has delivered excellent returns for managing the Schroders offshore global income mandate and I believe she has the talent to reward long term investors with this new fund,” she says.
Patel thinks the fund has a very clear and transparent strategy which puts another tick in the box in terms of its plus points. “The fund will not typically invest in stocks that have no yields. By the same token, it looks to avoid value traps and so the manager will be wary of companies paying unsustainably high dividends. One thing Sonja Schemmann takes seriously is capital preservation with the aim to deliver lower volatility of returns through her strategy, which I feel is an attractive proposition overall,” says Patel.
There is little Patel dislikes about this product. “The only criticism would be that the fund does not hedge the currency back into sterling so the returns can be subject to currency fluctuations. However, this is more the norm for most funds anyway and the majority of UK registered funds do not hedge the currency,” she says.
Patel expects the main competition to come from JPM global equity income, Newton global higher income and Neptune global income, although she expects more global income fund launches over time as their popularity increases.
Summing up Patel says: “This type of product dovetails extremely well with UK equity income funds or more growth orientated global funds. The case in favour of global equity income investing is compelling, with 92 per cent of stocks in the world yielding at least 3 per cent based outside the UK.”
Patel concludes that it is worth bearing in mind that returns from global equity markets have been exceptionally strong in recent years and while corporate balance sheets are very healthy, there could be a period of modest returns. “While I believe this fund has the potential to outperform its global peers, anyone looking to invest in the global equity market needs to have realistic expectations of returns going forward,” she says.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average