Investors seeking income from equities have traditionally been largely confined to UK funds, but the case for global income funds has increased markedly in recent years. Factors such as changes in tax legislation have led to an increase in dividend paying companies worldwide, whilst scandals such as Enron mean US investors place a higher emphasis on dividends as tangible evidence of companies’ profitability. Meanwhile the poor performance of UK Equity Income funds during the credit crunch has drawn attention to the dangers of their limited investment universe.
As a result there has been a flurry of launches of global income funds, of which the strongest performing by far has been Newton Global Higher Income. Though nominally run by James Harries, the fund benefits from input across Mellon’s investment team. Stocks are initially selected by Mellon’s global analysts, who pick the best of breed in their sectors. Their selections are honed by Mellon’s global fund managers into a model portfolio, which is further refined by Harries to achieve the fund’s 4% target yield. The entire stock selection process benefits from themes identified by Mellon’s strategy group - this has enabled the fund to avoid financial stocks during the credit crunch and to ride the booms in commodities and emerging markets.
The strength of the process is demonstrated by outstanding performance across Newton’s global fund range, and we have awarded the Newton Global Higher Income fund 3 stars.