The struggle for equity income
With rates cut to record lows and companies slashing dividends, it is unsurprising that no fund in the Australian equity income sector has managed to report positive returns over the past year.
According to FE Analytics, within the Australian Core Strategies universe, over the year to 31 October, 2020, none of the 35 funds in the Australian equity income sector had seen positive returns.
Analysis from the Reserve Bank of Australia found the average dividend yield was about 4.5% in 2019 but dividend cuts had been a factor this year due to the pandemic. Banks in particular, were told by the regulator to keep their dividends below 50%.
Funds in this sector aimed to invest 80% of their assets in high-yielding Australian equities with the aim of producing a greater yield than the fund’s benchmark.
The least losses were seen by Microequities High Income Value Microcap Ordinary fund which lost 1.2% compared to a sector average loss of 8.4%. This fund, managed by Carlos Gill, had just 32 holdings with the largest amount sitting in the diversified financial and capital goods sectors.
This was followed by losses of 2.9% by the Merlon Australian Share fund and 4.3% for the Lincoln Australian Income fund at 4.3%.
The worst-performing fund in the sector were both exchange traded funds; BetaShares Legg Mason Real Income ETF lost 20.2% and the Russell High Dividend Australian Shares ETF lost 19.1%.
The BetaShares fund had a large exposure to the AREITS, utility and infrastructure sector which had detracted from performance compared to the performance of Australian equities.
AUTHOR
Laura Dew
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
