Investors looking for income yields of around 6 per cent and who are prepared to take on equity market risk have a couple of new exchange traded funds to consider.
ETF provider BetaShares has joined forces with investment manager Legg Mason to launched two exchange traded funds, designed for investors seeking income.
The BetaShares Legg Mason Equity Income Fund and the BetaShares Legg Mason Real Income Fund, which were listed on the Australian Securities Exchange last week, are based on two unlisted Legg Mason funds that have been running for a number of years. Both are actively managed funds.
The Legg Mason Martin Currie Equity Income Fund was launched in 2011. Over the 12 months to the end of December the fund produced a return of 9.6 per cent (8.9 per cent net of fees).
The income distribution was 4.8 per cent over that period, with franking credits boosting that figure by 1.6 per cent. The forecast income for the current year is 6.9 per cent franked.
Over the past five years the fund has produced an average return of 13 per cent a year.
Legg Mason managing director, Australian and New Zealand, Andy Sowerby says the fund selects companies with solid earnings that can sustain higher dividends, match rises in the cost of living, and which are likely to be less volatile that the wider equity market.
The fund’s top holdings include Wesfarmers, Woolworths, Telstra, Coca-Cola Amatil, Westpac, IOOF, IAG, National Australia Bank JB Hi-Fi and ANZ.
The Legg Mason Martin Currie Real Income Fund was launched in 2010. Over the 12 months to the end of December it produced a return of 12.4 per cent (11.6 per cent after fees).
The income distribution was 6 per cent over that period, with franking credits boosting the return by 0.3 per cent. The forecast yield for the current year is 5.8 per cent franked.
Sowerby says the fund aims to give investors access to listed companies that own “hard assets”, such as property, utilities and infrastructure, that deliver strong dividend income from reliable revenue streams that can grow ahead of inflation.
The fund’s top holdings include Vicinity Centres, Scentre Group, Stockland, Transurban, AGL Energy, Ausnet Services, Westfield Corp, Mirvac Group, Contact Energy and APA Group.
Both funds aim to generate income yield above that of the S&P/ASX 200 Index and grow income above the rate of inflation over the long term. The funds have a management fee of 85 basis points.
Sowerby says: “The biggest single problem for investors is how to get high, sustainable income.”
BetaShares chief executive Alex Vynokur says: “Until recently, exchange traded products available on the ASX have been passive index-tracking strategies primarily. Thanks to innovation in the industry, investors now have access to a growing set of top-performing active strategies as simply as buying a share on the ASX.”
