Managed by Stuart Rhodes, who has been a member of the Global Equity Team since 2005, this fund has a total return objective that combines both income and capital growth with the aim of outperforming the FTSE World Index as well as other global equity income funds.

It also seeks to provide a dividend yield in excess of the FTSE World Index through
the selection of the best investments from the universe of publicly listed companies worldwide.

Minimum investment:  £500 lump sum and £10 per month for regular savings
Initial charge: Four per cent
Annual management fee: 1.5 per cent
Contact: www.mandg.co.uk

Richard Wallis says:
Equity Income Funds have traditionally always been based in the UK because it was believed that an established dividend culture was only predominantly embraced by companies based in this country.

Whilst this historic belief is not strictly accurate, as there has certainly been a dividend culture in the US and in parts of Europe for some time, there has definitely been a change in thinking in recent times, as companies in other parts of the world now recognise the importance of shareholders’ demand for dividends, particularly in less developed markets such as Asia.

Furthermore, it is now believed that global income growth may outstrip UK dividend growth in the coming years, particularly if you take into account the potentially much lower dividends from banks, which have traditionally provided above average levels of income, for at least the next twelve months.

Despite the investment potential of global equity income funds, there have only been a relatively small number of fund launches in this area in recent years. M&G has recently added its name to this list with the launch of the M&G Global Dividend Fund. M&G believes that this fund will appeal to those investors who are looking to diversify their existing traditional UK equity income investments, thereby potentially reducing the overall level of risk, through investment in an overseas portfolio.

The fund represents a new addition to the already strong range of M&G Global Equity Funds. The Global Equity team currently manages £10 billion of assets (as at the end of March 2008) and is well regarded in the industry, with responsibility for a number of funds that have achieved very strong five-year performance records.

The fund will be managed on a bottom-up basis and Rhodes will be targeting those companies that are committed to both the payment of, and growth of, dividends for inclusion in the portfolio. These companies will be taken from three main areas, namely those that have undervalued business franchises, those that are undergoing internal change or those that are benefiting from external change.

Furthermore, each company needs to meet an additional income criteria in that the stock must not only offer a sufficient yield, but it must also increase the income level over time. Rhodes believes that through investment in stocks from all three areas, he will be able to increase portfolio diversification, thereby lowering the overall level of risk, as well as offering the potential to maximise long-term returns.

This fund offers an alternative to investing in UK Equity Income Funds with the potential to benefit from the attractive dividend yields that are now available globally and not just in the UK. For investors who have only traditionally invested in the UK, a global equity income fund could provide useful diversification and potentially lower the overall level of risk within the portfolio.

Whilst we cannot comment on the performance of the fund, as it was only launched in July in what has been a very difficult period for equity markets, M&G’s considerable strength in the management of global equity funds makes this fund certainly one to watch.

4 Stars