This fund will have an estimated gross yield of 4 per cent at launch and aims to provide investors with a rising income as well as capital growth. It will be run as a best ideas portfolio so fund manager Gert Woort-Menker will not be constrained by sector, region, company, size or benchmark weighting.
Woort-Menker will not simply focus on companies that are currently paying out high dividends – ideally they will also be able to pay strong dividends in the future.
According to JPMorgan, dividends are one of the biggest influences on long-term share price performance because companies with high dividend yields tend to be supported by strong free cashflow. It launched an international equity income fund for Japanese investors in November 2005 and will build on this approach while managing the new fund.
JPMorgan also says UK investors have traditionally favoured their home market for income but companies around the world are recognizing the importance of paying dividends to shareholders. As a result, there are more investment opportunities for income around the world.
Woort-Menker will identify 40-70 of the best equity income ideas. He will focus on undervalued stocks to ensure he is not paying too much for each company.
Many investors are looking for income and global equities, which can produce a rising income, could be attractive because investors will also benefit from geographical diversity.
However, some UK equity income funds are using a type of derivate known as covered call options to boost income. This might be the preferred option for some investors who are unhappy with the yields available on traditional UK equity income funds but are more comfortable with their domestic market.