Global equity income: a natural bulwark to AI?

By Juliet Schooling Latter on 26 November 2025 in Equities, Global

For much of the past decade, global equity income funds have been the also-rans in investor portfolios. If investors wanted global equity exposure, they wanted technology and they wanted the US. Neither were well-represented in global equity income funds. The sector had been relegated to a dusty corner of many investment portfolios.

Performance for the sector has been steady but unexciting. Year to date, the average fund is up 10.6%, a little lower than the average 11% return in 2024*. However, at a time when investors are starting to question the wisdom of technology sector valuations and call out a potential AI bubble, ‘steady but unexciting’ may start to have more appeal.

Global equity income funds have a role as a natural hedge to other global funds. After a decade of powerful performance for US stock markets, the MSCI World is now 73% weighted to the US, and 29% weighted to the technology sector**.

In contrast, among our Elite Rated funds, the Guinness Global Equity Income fund has around 56% in the US***, while the IFSL Evenlode Global Income and TM Redwheel Global Equity Income have just 29%^ and 32%*** respectively. The three funds have 15%, 10%^ and 10% in technology***. This is a typical profile for many equity income funds. If investors are looking for a place to diversify, they make a compelling option.

Equally, the overall global dividend picture appears to be rosy. The Capital Group Global Equity study shows that dividends are solid and growing. Global dividends rose to a fifth consecutive third-quarter record in 2025, with core dividend growth of 6.1%. The study showed 88% of companies increased or held payouts steady^^.

Financials and Software/IT services led the way, rising 11.0% and 17.1% respectively, but most sectors saw gains^^. The only weak spots were the mining and chemicals sectors. Most major regions also saw strong growth. Companies in Europe ex-UK delivered 10.2% dividend growth, while Japan also maintained its rapid growth, with dividends rising 13.0%^^. There were pockets of strength across Asia as well: Hong Kong surged 15.4%, while Taiwan was up 25% and Korea was also strong. Emerging markets saw dividend growth of 11.2%^^. Only Australia was noticeably weak, with a fall of 7.4%^^. Global equity income investors have a rich selection.

Valuation discipline

Matthew Page, fund manager on the Guinness Global Equity Income fund, says the situation with AI stocks is not the same as the Dotcom bubble. The companies that are leading the charge on AI are generally cash generative. However, there are clear concerns on the amount of capex from the sector, and some “creative, circular and unusual” deals.

There are also concerns over valuation, in both AI stocks and beyond. He points out that with the exception of the UK, Japan and China, valuations across equity markets are near all-time highs. He sees that as a cause for concern, even if return on capital, earnings and revenue growth remain above expectations. Global equity income funds tend to have a natural valuation discipline that could prove very important if the technology sector wobbles.

Matthew contrasts the current situation in the technology sector with the consumer staples sector, where the Guinness fund has around 25% of its holdings***. “In the consumer staples sector, valuations have been stable. It used to trade at a premium of 10% to the wider market and now trades at a 10% discount.” He believes there may be an inflection point in the sector, with companies such as Diageo and Nestle emerging from difficult periods^^^. Dividend growth has been accelerating and fears around the impact of obesity drugs have not materialised. Consumer staples companies should also provide a good defence should inflation pick up again.

More importantly, he says, the sector has outperformed in all but one of the major drawdowns going back to 2011^^^. “If investors think the market is getting a bit toppy, or that there’s too much excitement round the AI trade. Then these companies are going to provide some nice protection if we see a market drawdown.”

Ben Peters, manager on the IFSL Evenlode Global Income fund, agrees that there is a growing gap on valuation between certain segments of the market: “A valuation disconnect has opened up between the market and our portfolio. Whether looking at free cash flow yields, price earnings multiples or our long-term discounted cash flow modelling, the valuation of the portfolio looks comfortable while that of the market is expensive.”

He believes the market is currently putting a high valuation on both super-normal growth and certain cyclical sectors at the expense of companies that persistently churn out high returns on capital. “This presents us with the opportunity to own these companies at attractive valuations for the long term, even if the short-term momentum is elsewhere.”

The other side of AI

Equally, at the value end of the spectrum, global equity income managers will always be looking in places that other global managers are not. This can put them on the other side of the AI trade, looking at the potential disruptees rather than the disruptors – and by extension, the cheaper parts of the market. Nick Clay, manager on the TM Redwheel Global Equity Income fund, says: “When equity markets fixate on a single narrative, quality businesses are often unduly punished, creating opportunities for disciplined, value-driven investors.”

He sees this happening at the moment with the IT services sector: “The narrative is that Artificial Intelligence will disrupt the entire business model, automating away both maintenance and consulting work, rendering human services obsolete. The entire sector has been repriced, with Accenture, a global leader, falling 40% from February to August 2025.”

“…while technological innovation can increase efficiency and productivity and reduce complexity, it simultaneously creates vast new opportunities for IT businesses to add value through complex implementation and integration. The success of an AI implementation hinges on having a fit-for-purpose database, a task that requires deep consulting expertise. Our conviction is that AI will follow the same pattern, creating more demand for IT services, not less.”

For more insights, listen to our April interview with manager Nick Clay, who outlines the key traits of strong dividend-paying companies, the sectors offering the most compelling opportunities, and the macro factors shaping global equity income investing.

The global equity income sector is a natural choice for those looking to diversify away from the frothier parts of global stock markets. The most recent IA statistics show it was one of the very few equity sectors to see net inflows in recent months^^^^. Investors may already be getting the message.

*Source: FE Analytics, discrete calendar performance in pounds sterling, 25 November 2025

**Source: index factsheet, 31 October 2025

***Source: fund factsheet, 31 October 2025

^Source: fund factsheet, 30 September 2025

^^Source: Capital Group Global Equity Study, November 2025

^^^Source: Guinness Global Investors, 16 October 2025

^^^^Source: Investment Association, September 2025