Another question is what yield will investors ultimately see in their accounts? A headline yield may not match the actual distribution. Some countries, such as the US, may withhold taxes on dividends originating from that country.
On top of this, a fund’s management fee may be taken from income, reducing the yield, or from capital, preserving the yield but reducing the potential for capital appreciation.
In terms of asset allocation, how does the underlying equity strategy complement other investments in the client’s portfolio? While the focus may be on generating income, advisers should still evaluate a new strategy in the context of a client’s overall investment portfolio.
The benefits of equity income strategies are clear, but selecting an equity income strategy is not as simple as selecting the highest yielding fund. The challenge presents another opportunity for advisers to guide their clients’ investments to their client’s benefit.
Stephen Tong is director and senior equity product specialist at HSBC Global Asset Management
