All this week we bring you the best income opportunities across the globe, as picked by top fund managers, professional investors and our own stock and fund analysts as part of Morningstar’s Guide to Finding Investment Income.
Pictet Emerging Markets High Dividend
Yield: 4.87%
This fund is the highest yielding in the sector, and has delivered an impressive three-year annualised return of 7.5% – although it underperforms the average fund in a competitive sector, according to data from Morningstar Direct. The fund’s largest sector exposure is financials, with more than 26% of the fund in banks and insurers. The second largest allocation is towards technology stocks.
Two thirds of the fund is invested in Asian stocks with the five top holdings all stocks listed in China. The largest holding is China Mobile.
JP Morgan Emerging Markets Income
Yield: 4.03%
This fund is rated Bronze by Morningstar fund analysts, thanks to a robust process and impressive performance record. In 2016, the fund delivered 41% to investors, but investors should be prepared to stomach volatility – the previous year the fund lost 17% in value.
Around 60% of the portfolio is invested in firms that can grow their earnings and dividends and deliver yields of 3% to 6%, whilst the remainder will be spread across high- and low-yielding names. This flexibility of investing in stocks with different yield characteristics gives the manager a better chance of achieving the dual objective of income and capital growth.
The fund has the ability to invest in emerging-markets debt, which it did from launch until December 2012, reflecting the uncertain market environment.
Polar Capital Emerging Markets Income
Yield: 3.83%
Polar Capital Emerging Markets Income is a good choice for emerging-markets equity income, says Morningstar fund analyst Simon Dorricoot. Manager William Calvert enjoys the support of Ming Kemp and Neil Denman, both of whom worked with him at AXA Framlington before moving to Polar Capital in 2010. The three have now worked together on emerging-markets mandates for over eight years, and this stability and familiarity is a key attraction of this fund.
In August 2013, Sam Wightman was added to the team in a more junior analytical role. Further support is available from the sector teams at Polar Capital, but the analytical work for this product is almost entirely conducted by this dedicated team using their established approach. The fund earns a Bronze Morningstar Analyst Rating.
Charlemagne Magna Emerging Markets Dividend
Yield: 3.81%
Over the past 12 months this fund has delivered an incredible 50%, outpacing the category average and the benchmark. The fund has a large weighting to financial stocks, technology and consumer cyclical companies. The largest holding is the Taiwan Semiconductor Manufacturing Company, which the manager has recently sold shares in, taking profits.
As with the Pictet fund, the managers at Charlemagne have a large weighting to emerging Asia – with 74% of the fund invested in the region, including Chinese, Malaysian, Indian and South Korean companies.
Newton Emerging Income
Yield: 3.8%
Of the funds listed here, Newton Emerging Income scores the highest Morningstar Sustainability rating, meaning that the managers invest in stocks with high environmental, social and governance scores. The fund has a three-year annualised return of 7.5% and is up 39% over the past year. However, this lags the sector average and the benchmark.
The fund is the least invested in financial services of the five, instead carrying a large overweight in utilities stocks, consumer defensive companies and real estate companies. The fund also has the least allocation to technology stocks of the five.
Regional allocations also differ widely from the other four funds listed here, with more invested in South America than emerging Asian stock markets. Latin American stocks make up a quarter of the fund, with Kimberly Clark de Mexico, Fibra Shop Portafolios, Alupar Investimento and Aguas Andinas all appearing in the top 10 holdings.
