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Guinness Asset Management Challenges the ETF Market with a Low Cost Share Class for its Actively Managed Global Equity Income Fund

LONDON, November 8, 2012 /PRNewswire/ --

  • Guinness Global Equity Income Fund extends its lower cost, clean fee share class at a TER of 0.74% to all investments over £100,000
  • The 22 month old Fund reached $25 million after its initial book build earlier this year which offers qualifying investors an actively managed fund at exceptionally low cost for a limited period
  • The Fund's retail share class (AMC: 1.5%) was 3rd in the IMA Global Equity Income sector in 2011, and is now 3.8% ahead of the MSCI World Index since launch

Guinness Asset Management is making its "Z" share class - with an AMC of 0.25% and a maximum TER of 0.74% - available to investors in its Global Equity Income Fund.

Tim Guinness, CEO and manager of the US$280m Guinness Global Energy Fund, commented, "I believe strongly in charging fairly for managing investments and that is what we are setting out to do. It saddens me to see that the City I remember has changed and that fees for raising capital or managing investments have risen to such an extent over recent years."

"We've researched fund costs in both the IMA Global Equity Income and the global income ETF arenas, and we think this book build proposition offers attractive value to investors."

Fee analysis: IMA Global Equity Income Sector

The firm's analysis of the IMA Global Equity Income sector shows that the current median TER is 1.57%, with a range of 0.75% to 1.99%. Guinness Global Equity Income Fund's Z class TER of 0.74% therefore makes it the cheapest share class available in the sector (analysis includes all share classes available in the sector and all Guinness share classes but excludes classes for pooled pension funds, funds with fees paid by separate agreement or "founder" classes; see Notes to Editors).  

Fee and performance analysis: Global Income ETFs

Similarly, analysis of Global Income ETFs (listed in Financial Express) shows the median TER at 0.58% per annum, the average at 0.60%, with a range of 0.46% to 1.14%. There is a similarly wide range in performance. From 31.12.10, the best performing ETF is up 7.66%, while the worst is down 11.12% (in GBP, total return to 06.11.12).  On the same basis, based on the actual return of its 1.5% AMC GBP share class adjusted for fees, Guinness Global Equity Income Z class would have returned 10.7% (see Notes to Editors).  The volatility range amongst the ETFs is 11.62% to 21.32%, against which the Guinness Fund comes in relatively low at 12.78%.

Guinness Global Equity Income Fund: performance and process

Guinness Global Equity Income's Z class return of 10.7% since launch (based on the 8.4% return of its 1.5% AMC GBP class and adjusted for fees) is 6.0% above its MSCI World Index benchmark.  Its first year yield was 3.5%. "We don't chase yield, we want steady capital and dividend growth," says co-manager Matthew Page, CFA. "We invest in companies that offer reliable and growing dividends at valuations that offer the potential for long-term capital growth, which is particularly attractive in the current uncertain economic climate."

In 2011, its first year, the Fund finished 3rd in the new IMA Global Equity Income Sector; it now sits comfortably in the top decile of all global equity funds (i.e. a combination of the IMA Global Equity Income and Global sectors).  

Co-managers, Dr Ian Mortimer, CFA, and Matthew Page, have developed a process that seeks out sizeable, financially sound global companies that are steady generators of cash. They invest in companies that have delivered cash flow returns on investment that place them each year for 10 consecutive years in the top quartile of all companies on this measure. Of 14,000 listed global companies, only around 300 survive this test, and of these 35 are selected on value criteria for inclusion in the portfolio.  

"It's a rare achievement for a company to meet our investment criteria - top quartile return on investment every year for ten years is a mark of genuine quality.  That's where our portfolio starts - looking at companies that are persistent cash generators, not just high yielders," says Mortimer.  

95% of companies that have achieved this consistency have gone on to do so again the following year. Page and Mortimer believe these companies therefore have the capability of paying a reasonable and growing dividend into the future.  Investors can then benefit from the well-recognised compounding effect of dividends reinvestment over time.

The Fund's outperformance has been achieved with a lower level of volatility than both its benchmark and its peer group. "Our sensible portfolio of consistent cash generators means that we expect to deliver a reasonable total return with lower volatility than many peer funds," says Mortimer.

The current intention is that the 'Z' share class offer will soft close once the Fund, currently $25 million in size, reaches a size of £100 million, although it will remain open to Charity clients. 

Guinness Asset Management launched its clean-fee share class ("X" class) for all seven of its Dublin OEIC sub funds in March, with an AMC of 0.75%.

For further information please contact:
Deborah Kay +44(0)20-7222-2037,
Nick Pilkington +44(0)20-7222-3719,
Notes to Editors - click here

SOURCE Guinness Asset Management

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