Looking beyond the local market and investing in global equities doesn't mean giving up the benefits of franking credits, and could be a way to diversify a portfolio with the addition of consistent income according to Columbia Threadneedle's head of Australia Jon Allen.
Speaking to ifa, Mr Allen said the decision to launch its Threadneedle Global Equity Income Fund in Australia nearly three years ago was in response to advisers wanting to increase global allocation, while maintaining strong income flow for their clients.
He said there was the common perception that domestic equity funds were more desirable because of consistent income gained from franking credits. But the tide is turning, as advisers look to raising allocations into global equity, due to the diversification benefits.
"Income has become extremely scarce globally and finding it is forcing you to take part in traditional income assets like fixed income that may mean you take either higher credit risk or potential illiquidity risk," Mr Allen said.
"One of the clear messages we get is that diversifying income provision beyond the traditional sources that sit in Australia is an obvious requirement."
Mr Allen said the Threadneedle Global Equity Income Fund aimed to give investors an equivalent yield globally, without the franking credits, by focusing on companies that offer consistent dividends.
"When we looked at the market and looked at what people were saying, ... no one was flat out targeting income," he said.
"We invest in high-quality growth companies with responsible shareholder management that are committed to paying three per cent dividend or more globally. The dividend tilt is a specific outcome of this fund."
Mr Allen said that Columbia Threadneedle believes that high-capital growth, with responsible shareholder management was the key to their investment decisions, with attractive dividends representative of a company's commitment to this.
According to Columbia Threadneedle, dividend-paying companies generally have "established, profitable franchises with competitive advantage including scale, strong governance, improve capital discipline and a long-term focus with a steady approach to growth, reducing risk".
The fund invests in 75-95 companies globally and as a result of it focusing on a +3.0 per cent dividend the portfolio offers investors an aggregate yield of between typically between 4.0 per cent to 4.5 per cent per annum.
The fund is suitable for clients in drawdown phase and looking for additional income, or young investors wanting to take advantage of the compounding which comes from reinvesting dividends back into the fund.
Columbia Threadneedle Investments is a global asset management group that provides a range of actively managed investment strategies and solutions for individual, institutional and corporate clients around the world.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Apr 2018Govt launches new corporate criminal crackdownBy Reporter
- 20 Apr 2018AMP CEO retires immediatelyBy Reporter
- 19 Apr 2018Commission questions compulsory FPA membershipBy Killian Plastow
- 19 Apr 2018CBA admits to fresh FOFA breachesBy Reporter
- 18 Apr 2018Royal commission villains could face jailBy Aleks Vickovich
- 18 Apr 2018CBA accused of ‘misleading’ royal commissionBy Aleks Vickovich and Killian Plastow
- view all