Global dividend investment trusts can be a great way of generating income in retirement, but are all too often overlooked. These two could give your pension pot a real boost.
Desperately seeking Alpha
Investment trust Apax Global Alpha Ltd (LSE: APAX) is one of the highest yielding funds I have seen, currently paying 5.65% a year, according to Trustnet.com. Launched in June 2015, it invests in a portfolio of funds run by Apax Partners, with 59% in private equity and 41% in derived investments.
The £729m trust has just published its quarterly results to 30 September which show adjusted NAV dipping by €26.2m to €881.9. However, this was primarily down to the generous semi-annual dividend of €23m paid in the quarter and negative FX effects of €20.5m. The portfolio delivered a total net asset value (NAV) return of 2% on a constant currency basis.
Apax Global Alpha offers a broad global spread as it is 48% invested in the US, 31% in Europe, 10% in India, 4% in the UK and 2% in China. Trustnet shows a return of 8.3% in the last year, against 18.2% for the private equity postmark sector, so it is definitely lagging. It trades at a discount of 9.67%, which might suggest it is a bargain, or maybe that investors reckon performance could be better. Income of getting on towards 6% is not to be scorned though, especially as you near retirement.
I am more excited by Henderson International Income Trust (LSE: HINT), recently highly commended in the Money Observer investment trust awards 2017. Launched in 2011, this global trust could balance your UK equity income holdings quite nicely because it excludes this country to focus on three regions: North America, Europe, and the Far East, none of which can account for more than half of its investments.
Big names abound in its portfolio, with Microsoft, Novartis, Roche and Coca-Cola featuring in the top 10. It cannot invest more than 5% in any single company. The trust aims to be a core savings product and manager Ben Lofthouse’s performance has been good, with Trustnet showing growth of 58% over the past three years, against 50% across the global equity income sector, and 85% over five years, slightly trailing its sector return of 90%.
This week’s annual results to 31 August showed the trust achieving double-digit total returns, with NAV per ordinary share up 18.8% and the ordinary share price jumping 19.3%. This compares to a total return of 19.1% for the MSCI World (ex UK) Index. Management lifted the dividend 5.4% from 4.65p to 4.90p a share, giving a current yield of 3%.
Henderson International Income trades at a narrow discount of just 1.28%, with the board happy to see it reverting to trading at a premium and stating that it will implement share issues or buy-backs to keep it roughly in line with its peer group. The yield is a little below its sector average, but NAV total returns are well above. You could quite happily buy and hold this fund for the next 25 years.
Making the right investment calls can shave years off your working life and allow you to enjoy a fruitful retirement as well.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.