The Schroder Global Equity Income Fund has been transferred to the IA Global sector from the IA Global Equity Income sector. This is because the fund's yield has fallen below the level required to remain in the Global Equity Income sector.
The IA (Investment Association) requires funds in the Global Equity Income sector to achieve a yield at least 10% higher than the MSCI World Index as at the end of the fund's financial year. This is measured over 3-year rolling periods with an average taken. If the average yield on the fund is not at least 10% higher than the index the fund is removed from the sector. If the yield is subsequently high enough to qualify the fund will be reinstated to the Global Equity Income sector.
If the average yield on the MSCI World was 3% for example, the fund would be required to yield at least 3.3% to remain in the sector. This is a simplified example, but it illustrates the point.
At the end of the fund's last financial year it had failed to meet the yield requirement to remain in the IA Global Equity Income sector. The main reason is because the underlying shares have performed strongly over the past three years. As share prices rise yields fall. For example, if a company has a share price of £1 and pays a 5p dividend the yield is 5%. However, if the share price rises to £1.10 the yield drops to 4.5%.
Over the past three years the fund's total return (capital growth plus reinvested dividends) has been 19.7%* compared with 17.0% for the average fund in the IA Global Equity Income sector, although please remember past performance is not a guide to future returns.
|Annual percentage growth|
| March 11 -
| March 12 -
| March 13 -
| March 14 -
| March 15 -
|Schroder Global Equity Income||6.2%||13.16%||6.44%||20.17%||-6.4%|
|IA Global Equity Income||2.95%||16.14%||5.78%||12.63%||-1.79%|
Source: Lipper IM to *01/03/2016. Past performance is not a guide to future returns.
There has been no change to the way the fund is managed or to its long-term objectives. The aim is to achieve an attractive total return over the long term, combining both income and capital growth. The fund invests in a relatively concentrated number of stocks and has the flexibility to invest in emerging markets, both of which add risk.
We do not believe investors need to take any action following the announcement, providing the fund still meets their objectives and they are happy with the level of income being generated. The fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
Please note the fund’s charges can be taken from capital which can increase the yield but reduces the potential for capital growth.