The search for income

With interest rates hovering around historic lows globally, SMSF investor appetite for alternative income sources has markedly increased. In the current environment, uncertainty is writ large; challenges come at investors from all angles – global and domestic, as well as longer-term structural challenges.

In many cases, investors are going further out on the risk curve, taking on more risk than they usually would, to generate a nominal return to meet their income needs. This is particularly pertinent to retirees living on a fixed income. History tells us that the further investors push out along the risk curve, it’s all fine until it isn’t.

Where can you go for income?

GSFM offers two Funds with an objective to provide income:

Epoch Global Equity Shareholder Yield Fund

The Epoch Global Equity Shareholder Yield strategy aims to deliver attractive total returns with an above-average level of income by investing in a diversified portfolio of global companies with strong and growing free cash flow.

The Global Equity Shareholder Yield strategy provides three distinctive benefits:

1. Consistency of income, the most stable driver of returns

The strategy focuses on companies
that have the ability to generate
consistently high levels of dividends
to shareholders, whether they take
the form of cash dividends or share
buybacks, to provide consistent income for investors. Historically, a significant number of stocks in the Fund’s portfolio have increased their dividends each year and have raised their payouts at a higher than average rate.

2. Active management, determine whether a company’s payouts have the ability to grow

Identifying the companies with the
highest dividend yields is easy.
Figuring out which ones will be able
to sustain their dividends is another
matter, hence the importance of active
management. Epoch’s team focuses
on the drivers of a company’s cash flow to assess whether the firm’s business model will generate the cash flow needed not just to maintain the current level of dividends and buybacks, but to raise those payouts in the future.

3. Lower volatility, which in the end leads to greater wealth for the investor

If a portfolio can generate the same
average annual return as the market,
but does so with less volatility, the
investor will end up with a higher
annualised return than the market.
In other words, they will have more
money than if they simply matched the index return each year. Low volatility is more than just a theoretical talking point; it is a very tangible benefit.

Payden Global Income Opportunities Fund

The Payden Global Income Opportunities Fund is an actively managed absolute return fixed income fund designed to provide investors access to a highly diversified and well-researched portfolio of global fixed income from developed and emerging markets.

The Payden Global Income Opportunities Fund provides three distinctive benefits:

1. A focus on positive returns

Staying true to the basic definition of
‘Absolute Return’, the strategy aims
to produce positive returns with a
performance hurdle of a specified
currency’s funding rate – for this Fund, Bloomberg AusBond Bank Bill Index +2.50% (after fees) per annum over the medium term. The underlying strategy has produced a positive return for each calendar year since inception.

2. Unanchored from traditional
benchmarks

Being unanchored from traditional
benchmarks allows Payden the
flexibility to search for attractively
valued assets. The result is a ‘best
ideas’ portfolio that reflects the most
promising risk-adjusted opportunities
around the globe.

3. A low duration portfolio

Benefitting from more than 35 years
in fixed income management, the
foundation of Payden’s strategy is a
low duration fixed income portfolio
where risk premia from global interest
rate curves and credit markets provide
dependable and repeatable returns.

Other Funds from GSFM

We offer a diverse range of global and domestic investments through our alliances with leading fund managers.

Global equities Cambridge Global Smaller Companies Fund

Munro Global Growth Fund

Munro Concentrated Global Growth Fund

Redpoint Global Infrastructure Fund

Australian equities Redpoint Industrials Fund

Tribeca Alpha Plus Fund

Tribeca Australian Smaller Companies Fund

Alternatives Man AHL Alpha (AUD)

Man Diversified Alternatives

Triple3 Volatility Advantage Fund