While dividend growth funds are often associated with retirees on the hunt for income, Columbia Threadneedle says they can also be a good solution for defensive investors looking for surety amid volatile markets.
Speaking to ifa, Columbia Threadneedle analyst James Foreman said funds like the Threadneedle Global Equity Income Fund can be used as a total return solution since the fund delivers global growth exposure but offers downside protection.
"They are a particularly strong solution for those unsure about the direction of markets, who would like to have exposure to global growth yet receive regular income," he said.
"Our strategy is to invest in companies with a dividend that is high, growing, and sustainable – avoiding bond proxies and value traps."
Mr Foreman added that despite this, due to fluctuations in global markets, dividend strategies have faced challenging times since 2011.
"A lot of people have had the perception that dividend strategies are a one-way ticket to sectors like financials and energy which have really weighed on the space in general," he said.
"Certainly in 2014, when there were fears of reduced QE, that was certainly a tough 'yes' for dividend stocks."
As a result, Columbia Threadneedle has repositioned the portfolio to take on more defensive characteristics.
"We think that the outlook on interest rates, commodities and global growth will continue to trend downwards for a longer period of time. However, the prospects for returns are reasonable and valuations are more attractive than they were a few months ago, so it's not all doom and gloom out there," Mr Foreman said.
"There are risks for deflation and in terms of the way that we are positioning our portfolio, we're looking for companies that are more defensive and have pricing power and aren't exposed to the fluctuations of commodity-driven sectors," he said.
APRA-regulated super funds could create better member outcomes by taking the sam...
Australian high-net-worth investors lost more money than their global counterpar...
The negative impact of COVID-related market volatility on clients’ super inves...