Investors worried about the twin threats of inflation and armed conflict on their portfolio should not ignore income as a decent yield can help shore up returns during periods of market volatility.
Jason Hollands, managing director of DIY investing platform Bestinvest, said: "The income on an investment is generally the more reliable – though not guaranteed – component of overall returns, and adds valuable ballast to a portfolio through thick and thin.
"But it can prove especially reassuring during times of volatility."
Here are Hollands' five global fund ideas for income seekers to consider for their 2021/22 ISA.
Redwheel UK Equity Income
This fund – managed by boutique Redwheel (formerly RWC Partners) has a ‘value’ approach of targeting cheap stocks which are typically larger companies. Its holdings include value stalwarts Legal & General (LGEN.L) and Dettol maker Reckitt Benckiser (RKT.L). Another more glamorous stock is Revolution Beauty Group (REVB.L) which produces vegan lipsticks and skincare products.
Revolution Beauty Group performance over the past six months. Chart: Yahoo Finance UK
Evenlode Global Income
This fund invests in a concentrated portfolio of 36 stocks that the managers have targeted because they provide a high return on capital and generate strong free cashflow.
These are typically larger companies and the managers tend to hold them for the long-term. Unlike most global funds which can look more like US funds when you look below the bonnet, Evenlode Global Income is 38% invested in the US, holds a similar amount in Europe and has 21% in the UK. Current holdings include US consumer firm Proctor & Gamble (PG), which owns brands ranging from Pampers to Old Spice, and Swiss pharmaceutical giant Roche (RHHBY). It favours companies delivering sustainable real dividend growth rather than focusing purely on high yielders.
Swiss pharmaceutical giant Roche is known to provide sustainable dividend growth. Chart: Yahoo Finance UK
BlackRock Continental European Income
As well as a high yield this fund target dividend growth and long-term outperformance, and since launch have delivered all three. Its holdings include Danish pharmaceutical firm Novo Nordisk (NVO) and Italian energy group Enel (ENEL.MI). The fund stands comparison not just with the top income funds, but those in the whole European sector.
The fund has been managed since launch in 2011 by Andreas Zoellinger, who has spent almost his entire career at BlackRock. In 2021, Brian Hall joined as co-manager.
Jupiter Japan Income
This is a high-yielding Japan fund that aims to provide long-term capital and dividend growth. It currently yields 2.24%. Japan has historically been a low-yielding market but in recent years reforms have encouraged companies to become more shareholder friendly, with dividend payouts more commonplace.
The Jupiter Japan Income fund invests predominantly in Japanese equities, but does have the freedom to invest 30% of the fund outside of Japan or in other funds. The investment process focuses on finding companies with the ability and willingness to grow dividends.
The fund managers have stressed they do not aim to maximise yield but rather are willing to invest in high-growth areas as long as they offer some yield. Recent purchases included Roland (7944.T) (high-yield with some growth), Tokyo Electron (TOELY) (high-growth with some yield) and Aruhi (7198.T) (high-growth with high-yield).
Chipmaking giant Tokyo Electron has been targeted by investors betting on a semiconductor boom. Chart: Yahoo Finance UK
This fund has provided consistent outperformance relative to other Japanese higher income funds. Since inception it has outperformed the MSCI Japan index 87% of the time.
Schroder Oriental Income
This investment trust, managed by Richard Sennitt, has delivered a growing dividend every year since it launched in 2005. It is currently yielding 4%, with distributions paid quarterly. While it predominantly invests in equities, it also has the flexibility to invest in bonds and preference shares.
The portfolio invests across both developed and emerging Asia, excluding Japan, with the largest country exposures being Taiwan (25%), Australia (17%), Singapore (15%) and Hong Kong (13%). Key sector themes include technology (30%), financials (26%) and real estate (18%). Notable holdings include Taiwan Semiconductor Manufacturing Co. (TSM) (10.2%), Samsung Electronics (SMSN.IL) (7.8%) and Australian mining giant BHP Group (BHP) (4.9%).
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