A New Approach to Income in a World of Low Interest Rates
Craig Stent, the Portfolio Manager of the Harbour Australasian Equity Income Fund, has prepared the attached paper “Equity Income: A new approach to income in a world of low interest rates”. It makes interesting reading.
This is a timely, relevant and considered paper that we hope you get some benefit from reading.
A Summary Follows:
- With interest rates globally and locally falling over recent years, and forecast to stay low for some time, investors are finding it more challenging to source adequate income from traditional investments such as term deposits, bonds and cash.
- A well constructed portfolio of New Zealand and Australian equities can provide investors with an alternative source of income, and the potential to grow the real capital base.
- Relative to other developed markets, New Zealand has over the long-term paid a high dividend yield. In the 10 year period to 31 December 2011 dividends contributed the majority of the total return. The picture is not too dissimilar for the Australian or US market.
- Companies in Australia and New Zealand are generally in a good financial position post the Global Financial Crisis (GFC). Many companies potentially have surplus cash on the balance sheet and are either returning capital to shareholders via dividends or undertaking other capital management initiatives.
- Harbour Asset Management has launched an Australasian Equity Income Fund which follows a quantitative and fundamental investment process in selecting a diversified portfolio of companies across the New Zealand and Australian markets. We believe that used in a balanced portfolio, this approach should provide investors with an attractive level of income with some capital growth relative to traditional income asset classes.
Tags: Managed Funds
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