Artemis Global Income - sitting tight through the storm

Jonathon Curtis | Wed 23 January 2019

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• We’ve recently added the fund to the Wealth 50.
• The manager thinks large companies will do better than smaller ones if markets remain volatile.
• Long-term performance has been good, but more recently has been disappointing.

Our view

Many investors seeking income naturally look to the UK stock market. It’s one of the best in the world for companies paying good dividends. But there are lots of other income opportunities in the rest of the world. That’s where Jacob de Tusch-Lec comes in.

He’s managed Artemis Global Income since it launched in July 2010. He’s done a good job of growing the fund while providing investors with a good income. The fund currently yields 3.5% as I write, although that’s not a reliable guide to future income.

We think de Tusch-Lec’s a talented fund manager. He’s impressed us with his long-term performance and has shown skill when picking companies for both growth and income potential. Because we rate him so highly, we’ve recently added the fund to the Wealth 50 list of our favourite funds.

How’s the fund performed?

The fund’s performed well since it launched in 2010. It’s grown by 143% in that time compared with 141.9% for the FTSE All World index and 110.4% for the IA Global Equity Income index.

Recent performance has been disappointing though. The fund didn’t hold up well during the global market falls at the end of 2018. While the benchmarks have also slumped over the past 12 months, the fund’s fallen further in value. Banks and energy companies make up more of the fund than most other sectors but both have performed poorly recently.

These are short-term movements though. We think it’s more important to focus on long-term performance. And of course how the fund’s done in the past doesn’t indicate how it’ll do in the future.

Charges are taken from capital, which can increase income but reduce the value of investments over time.

Artemis Global Income performance since launch

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018

How does the manager invest?

De Tusch-Lec divides the portfolio into three categories:

• Core income - mature companies with high and normally stable yields but low dividend growth.
• Dividend growth - companies paying above average and growing yields.
• Special situations - unloved companies with high yields and the potential to turn themselves around.

Until 2016 ‘core income’ companies made up roughly half the fund. But since then the manager’s favoured many of the ‘dividend growth’ and ‘special situations’ companies instead. Many of them are ones whose fortunes ebb and flow with the state of the global economy. These include materials and financial businesses.

Lots of these companies have been out of favour with investors recently. Instead they’ve preferred those less reliant on the economic cycle, like healthcare and consumer goods businesses. De Tusch-Lec thinks shares in these companies have been expensive though, so he hasn’t invested much in them.

The manager invests in companies from a broad range of countries, including Israel, Italy and Japan. US companies make up by far the biggest single part of the portfolio though. The manager also invests in some higher-risk emerging markets. He invests some of the portfolio in smaller companies too, which also increases risk.

Manager’s outlook:

The manager’s concerned about US political actions, including rising interest rates and the trade war with China. He thinks global growth outside the US will slow down. Companies that rely heavily on borrowing are the ones he thinks are most at risk. That’s why he’s invested in companies with relatively low levels of debt.

He’s more confident in the future prospects of large companies over small and medium sized ones. That’s why he expects to invest more in big businesses if market volatility continues.

De Tusch-Lec’s disappointed with the fund’s recent performance. But he shares our view that if you want to beat the market over the long term there will inevitably be rough patches along the way. Overall he’s happy with the portfolio, so he’s not planning to make big changes any time soon.

Find out more about this fund including charges

Please read the Key Features/ Key Investor Information in addition to the information above.