3 Top Global Funds for Income Investors

With central banks across the globe engaged in extensive QE programmes, this has put pressure on bond yields, meaning investors have rushed into equity income funds

Jeffrey Schumacher, CFA 8 November, 2016 | 2:50PM
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With investors continuing to hunt for yield, global equity income funds remain in the spotlight. The popularity of the funds is a phenomenon that started following the financial crisis in 2008, when investors rushed into safe haven assets. Dividend stocks provided a welcome shelter from the storm. With central banks across the globe in a dovish mood since then, extensive QE programmes put pressure on bond yields, providing another reason for investors to rush into equity income funds.

Since the trough of the financial crisis in March 2009 until July 2016, the Morningstar category Global Equity Income has seen a total net inflow of €43.2 billion. This pushed total assets under management to €82.6 billion, which is an increase of 1,200% from the €6.3 billion that was invested in global equity income funds in March 2009. This significant growth dwarfs the 248% organic growth achieved by equity strategies in general.

Global Income Fails to Deliver

Despite their popularity, global dividend funds have had difficulty beating the MSCI World Index over the past three years. Only five out of 38 strategies in the IA sector Global Equity Income managed to achieve a superior performance versus this benchmark. It has been a difficult environment as higher-yielding stocks lagged the broader market, while value stocks trailed growth stocks. In addition, US stocks, which have historically been a strong underweight versus the MSCI World Index, outpaced European stocks, which have typically been popular among equity income portfolio managers for their higher yield and lower perceived valuations.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
DWS Invest Top Dividend LD175.72 EUR-1.70Rating
M&G Global Dividend GBP A Acc388.16 GBP-1.81Rating
Veritas Global Equity Income A GBP203.83 GBP-1.27Rating

About Author

Jeffrey Schumacher, CFA  is fondsanalist bij Morningstar Benelux