Funds that beat their peers in 2022
2022 has been a difficult year for most asset classes. War in Europe, persistently high inflation...
When prices are rising, it’s important that income investors have a growing income stream that can match inflation.
Bond funds are probably not the best bet in this environment, as yields are already very low and, with most bonds, the income is fixed. So, investors are vulnerable to rising inflation and capital could be hit.
And while an optically high income on an equity fund may look attractive, in structurally challenged businesses is not going to protect you from inflation.
“Remember, when you’re buying shares or an equity fund, you’re buying the future and a growing dividend is one of the best ways to preserve the purchasing power of your investments,” commented James Yardley, senior research analyst at FundCalibre.
This fund invests in companies across the whole Asia Pacific region, including Australia and is slightly different to its peers in that it is concentrated into just 36 equally-weighted stocks. It has a one-in, one-out policy, so conviction is always strong, and the managers are looking for a combination of capital and dividend growth. They take the unusual step of not analysing dividend potential until the final stage of their process and then they focus on companies that can sustainably grow their dividend into the future. Dividends in Asia fell sharply in 2020, as they did around the globe. This fund’s dividend however, held up better than the market in 2020 and rebounded by more than the market in 2021.
The manager of this fund seeks to understand the cash-generative nature of companies as he believes this lies at the heart of their ability to pay dividends. “Capital appreciation will follow if a dividend is strong and growing,” he said. Launched in October 2017, it invests in companies of all sizes – from the very small and those listed on the AIM stock market, through to the FTSE 100. The manager believes dividends are the most important driver of total returns and, while he is targeting a yield higher than that given by the UK stock market, he is also looking for steady dividend growth.
This fund provides an opportunity to diversify income streams by investing globally in companies that provide stable and rising dividends. Commenting recently, the manager said, “We remain vigilant about the dividend outlook. Being selective will be paramount. Balance sheet strength is a key consideration in our company research to ensure that dividends are sustainable in the current climate. We take comfort from the fact that many of our holdings are carrying net cash. We continue to believe that the majority of our holdings can sustain dividend growth in the core 5-15% range over the long term, and that the fund is well placed to deliver on its objective of providing a rising income stream.”
The manager of this fund looks to identify undervalued European companies that offer reliable, sustainable dividends; potential dividend growth; and protection against inflation, with a lower level of risk. The investment process is focused on fundamental company analysis, with a strong awareness of macroeconomic trends. The mandate is flexible with regard to company size and country exposure, and he will actively manage the portfolio to find a balance of companies with large, but secure dividends, and those able to grow dividends faster than the average company. Research is central to the investment process and a key source of added value for the fund.