However, even though HSBC’s 5.7% dividend yield is attractive, I’ve recently stumbled across another financial sector peer that I believe could be a better income and growth buy for your portfolio. 

Global income

One of HSBC’s most attractive qualities, apart from its market-beating dividend yield, is the group’s international diversification. And the same can be said for investment firm Apax Global Alpha (LSE: APAX). 

Apax isn’t your average investment. In its own words, the company offers “unique exposure to an extensive portfolio of private equity investments” as well as “tailored investments in equity and debt.” To put it another way, Apax Global is a globally diversified investment fund, investing around the world, and across asset classes to achieve the best returns for investors. 

Unfortunately, since its IPO in June 2015, it has failed to live up to expectations. Shares in the investment business have added just 8.8% excluding dividends since going public. Over the same period, the FTSE 100 has gained 13%. 

I believe it’s only a matter of time before this performance is reversed. 

Underlying growth 

Shares in Apax might have struggled since June 2015, but the underlying business is charging ahead. Net asset value per share, which was 127p at the time of IPO, has grown to 170p (at the end of June 2018), up from 165p at the end of 2017 according to the firm’s numbers for the first half of 2018, published this morning. 

These numbers indicate to me that shares in Apax are severely undervalued. NAV has increased 34% over the past three years, but it seems as if the market does not understand the opportunity here. As well as trading at a 25% discount to NAV, today management has announced the group’s first semi-annual dividend of 4.3p per share. Including the full-year payout (4.2p based on last year’s distribution) the shares are set to yield 6.3% this year. 

To me, this market-beating dividend yield, coupled with Apax’s discount to NAV, looks too good to pass up. This is why I believe the stock is a better buy than HSBC. 

Limited growth 

HSBC might be a FTSE 100 dividend favourite but I believe that its growth potential is limited. City analysts seem to agree with EPS growth of just 7% expected for 2018, followed by growth of 4% for 2019.

Based on these figures, shares in the bank are trading at an attractive forward P/E of 12, but while cheap, this multiple looks expensive compared to Apax’s NAV discount. 

Another advantage Apax has over HSBC is flexibility. As a bank, HSBC’s growth opportunities are limited to the financial services industry. Its private equity business can invest in companies in any sector. I believe this exposure gives the group more scope to grow and should lead to higher, more predictable long-term returns. 

In other words, if it is just income you’re after, HSBC is a good investment. If you want income and growth at a bargain basement price, my money’s on Apax.

The post Why I’d shun the HSBC share price for this 6%+ yielding small-cap appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended HSBC Holdings. 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.

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 predator

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.

Henderson presents

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%.

Premium trust

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.

The post These 2 global dividend investment trusts could help you retire early appeared first on The Motley Fool UK.

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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.

APAX predator

Closed-ended investment trust APAX Global Alpha (LSE: APAX) invests 59% of its money in global private equity funds run by Apax Partners, which manages more than €40bn in total across its operations, and the remaining 41% in a tailored mix of derived investments. Roughly two-thirds of the fund is invested in the tech & telco and services sectors, with the remainder in healthcare and consumer. This £729m trust is 48% invested in the North America, 31% in Europe, 10% in India, 4% in the UK and 2% in China.

Recent performance has been strong, with the fund up 17% in the past 12 months, on top of a yield of 5.44%. However, today’s unaudited interim results for the half year ended 30 June disappoint as currency headwinds halted recent strong growth. 

Naff NAV

APAX Global Alpha posted a negative total net asset value (NAV) return of 0.7%, as the euro strengthened 8% against the US dollar. On a constant currency basis, NAV growth was positive at 4.2%. Adjusted NAV fell by €30.6m to €908.1m, due to adverse FX movements and the 2016 dividend payment of €23.8m. 

Apax Global Alpha chairman Tim Breedon said the portfolio continues to demonstrate strong fundamentals despite the setback. “Due to FX headwinds, the headline performance was weak however the outlook is positive as AGA’s Investment Adviser continues to realise value in a relatively young portfolio and is finding investment opportunities against a challenging market back drop.” That may be true but performance looks even more underwhelming when I compare it to one of my favourite global investment companies, Scottish Mortgage Trust, which recently delivered a 38.1% rise in NAV.

India calling

I have done well from my stake in Jupiter India, which is up 20% over the past 12 months, and 158% over five years, according to Trustnet. However, I would have done even better with India Capital Growth Fund (LSE: IGC) which is up 29% over the past year, and 160% over five. The investment trust has just published its interim results for the six months to 30 June with the highlight a 23.8% leap in NAV to £124m, giving net gains of £24m. Now that’s how to do it, APAX.

The share price increased by 27.7% to 93.25p over the year, while its two largest holdings, Dewan Housing and Federal Bank, soared 79.4% and 68.8% respectively. The AIM-quoted company is now seeking a listing on the main London market.

Discount delight

A rising tide is lifting all funds and India has been boosted by Prime Minister Modi’s reform agenda, which continues to attract investors, including strong overseas inflows of $8.5bn and another $3.3bn from domestic mutual funds. Still, you have to catch that tide, and India Capital Growth’s certainly did that.

Interestingly, it still trades at a whopping discount to NAV of -19.75%. If that hasn’t narrowed after recent successes it may never do so, but it does offer protection against further widening. If you believe the India tide can rise even higher, this fund could be a good way to ride it.

The post 2 high-growth funds thrashing the market right now appeared first on The Motley Fool UK.

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• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Harvey Jones holds units in Jupiter India but has no other position in any 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.