Every year Money Observer runs the rule over 11 popular fund sectors from which it picks the Premier League team. Find out which investment vehicles made the cut in: Premier League of Funds delivers super returns.
Funds Premier League: All the world is an income stage
Global Equity Income Funds
Newton Global Higher Income
Money is good, but more money is better; the mantra of all investors. And in today's edgy markets, this means renewed enthusiasm for income funds. Newton Global Higher Income Fund underlines the new reality, with private investors outweighing institutional holders by combined value.
From launch seven years ago, the fund now controls assets of £3 billion and its manager, Australian-born James Harries, is the inaugural winner in our new Premier League category, global equity income.
At the fund's outset, when the world was nonchalant about the build-up of terrifying debts, Harries sought out income from companies geared to the emergence of China and other emerging markets - mining, steel, cement companies and the like. That game is now over and instead Harries places his main bets within the US and Europe. He steers clear of companies exposed to high levels of the Australian and Canadian dollar - "commodity currencies", he points out.
"The US has cheap energy and cheap housing; strains in the labour market might not be so good for workers, but they mean the country is becoming more competitive. There is now potential for an industrial renaissance," he says.
By value, roughly one-third of his 57 holdings are in the US. "The percentage has doubled in the past two years," says Harries. Holdings include the usual income suspects, such as tobacco giants Philip Morris (PM) and Reynolds American (RAI); Sysco (SYY), a food distribution company; and consumer goods companies such as Proctor and Gamble (PG).
"We took a strong view, about 18 months ago, to buy large, high-quality companies and while valuations have now moved up somewhat, they are likely to continue being highly valued," he says.
The UK component of Harries's fund, at some 11% of the fund, is roughly "on benchmark" - not that Harries is a slave to that yardstick. "I am happy to diverge," he says, "as we were very underweight the US when we launched." UK holdings include GlaxoSmithKline (GSK), Vodafone (VOD) and BAE Systems (BA.).
Elsewhere, his fund has "select" banking exposure in Norway and Asia. Swiss holdings include Swiss Insurance and Roche, the drug company. The latter yields 3.7%.
Harries says that while income has grown every year since launch, growth this year, like last, will be "flat." But for 2013 he forecasts growth of between 3 and 5%. Right now, his fund yields above 4%.
Coming up next: mixed investment 40-85% shares funds.
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