“You never know what’s going to add value. To limit yourself to relatively broad country or asset weightings is restrictive,” Sarasin & Partners’ chief investment officer Guy Monson tells Gary Shepherd of Portfolio Adviser. “I try to monitor many different indicators”.
This open-minded view seems to work for the Sarasin International Equity Income Fund. Launched in May 2006, over the three years to 31 May, the £91m fund was down 1.7%, compared with an 8.8% fall in the MSCI World ex-UK index. The fund gets its dividend stream from a diverse portfolio of global equities, co-manager Mark Whitehead tells James Kenny of FTfm. As such it avoids becoming too concentrated, a trap that has ensnared many UK equity income funds.
These days, says Whitehead, many such funds are becoming too dependent on just five stocks (the oil majors Royal Dutch Shell and BP, banking giant HSBC, pharma group GlaxoSmithKline and telecoms group Vodafone). “There is also a lot of cyclical risk from investing in the oil companies.” In contrast, by being benchmarked to the MSCI World ex-UK index, Whitehead has a full 1,700 companies to choose from, of which 584 were yielding more than 4% at the end of last month.
In terms of regions, “Europe has always produced a high yield and payout ratio, and a lot of US companies are getting better at progressive dividend policy”. Emerging market returns have also been “excellent”. Whitehead likes two Chinese stocks just now – Shanghai Industrial, a toll road operator and infrastructure giant, and hygiene product producer Hengan.
Contact: 020-7038 7000
Sarasin International Equity Income Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Lorillard Inc | 2.5 |
| Wyeth | 2.5 |
| Home Depot Inc | 2.2 |
| Woolworths Ltd | 2.2 |
| Waste Management | 2.1 |
| Singapore Telecommunications | 2.1 |
| Royal Dutch Shell Plc A | 2.1 |
| McDonalds | 2.0 |
| Exelon | 2.0 |
| Deere & Co | 2.0 |