Top-rated global equity income funds

Investment trends can change rapidly. Not long ago, investing in developed economies such as the US was regarded as considerably less desirable than putting your money into the fastgrowing economies of Asia and the emerging markets.

Now the pendulum has swung back in the other direction and investors have started focusing more on developed markets.

Until relatively recently, it was more difficult for income-oriented investors to gain international diversification, as most funds were constructed with the objective of providing capital growth.

Generally speaking, it is a good idea to have some exposure to as many markets as possible in order to access the best companies. Even when Europe was going through severe difficulties at the height of the euro crisis, fund managers were making the point that they were investing in companies rather than countries and that Europe, as is the case with the US and Japan, is home to many world-class companies which can prosper even when times are hard.

An easy way to ensure you have most bases covered around the world is to opt for a globally diversified fund. These funds can act as useful core holdings in a portfolio, but there may be times when gaining extra exposure to Europe, Japan or the US is beneficial.

To find out the methodology behind Money Observer's Rated Funds, read: How 2014's Rated Funds were chosen.

Artemis Global Income

It also favours large-cap rather than mega-cap companies, giving it greater potential for yield and capital growth. In essence de Tusch-Lec focuses on companies generating free cash flow, following the same investment approach that has been employed to great success by his fellow managers running the Artemis Income Fund.

Invesco Perpetual Global Equity Income

Invesco Perpetual Global Equity Income would qualify for the Premier League if its sector were not considered too small to be eligible at present. Managed by Nick Mustoe, Invesco Perpetual's chief investment officer, it has achieved excellent performance since it was launched five years ago.

Mustoe's strategy is to look globally for companies on attractive valuations that he believes can sustain profit margins and deliver returns throughout the economic cycle, and which offer growing and sustainable dividends. He seeks to invest in high-quality companies, with balance sheets with a conservative level of debt and attractive franchises. The fund's portfolio is relatively concentrated with around 50 holdings.

M&G Global Dividend

M&G Global Dividend has received Money Observer awards for its consistent performance for the past two years. Manager Stuart Rhodes focuses on total return. He does not want to be forced into investing in high-yielding companies, as he feels high yields can be a sign that a company is in trouble or has limited growth potential, so this fund is categorised as a growth fund rather than an income fund by the Investment Management Association (IMA).

Rhodes' strategy is to pick stocks from three distinct dividend-generating categories - quality well-managed companies with steady dividend growth, asset-backed cyclical businesses with good capital discipline, and finally high-growth companies that can translate their growth into dividends.

Threadneedle Global Equity Income

The Threadneedle Global Equity Income fund was the winner of our best larger global equity income fund award last year. It was one of the first global income products to be launched in 2007 and its manager since inception is Stephen Thornber.

In order to ensure it meets its income objective, he does not invest in any shares yielding less than 4%; but he makes sure that the companies he chooses, as well as being able to deliver high and sustainable dividends, are financially robust and can generate growth. In order to reduce risk, he keeps position sizes small and maintains broad diversification by sector and region.

Securities Trust of Scotland IT

Securities Trust of Scotland is an Editor's Selection. It seeks to produce long-term capital growth as well as a rising income from a focused portfolio of global equities. It has been managed by Alan Porter since August 2011, when its mandate changed from UK equity income to global income.

He will only buy stocks with a prospective yield greater than the MSCI World index. Similarly, he will sell stocks that offer a prospective yield of less than 75% of the index. Apart from those parameters, his stock selection is driven by fundamental research, with input from Martin Currie's global sector research team.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.