AXA IM Rosenberg Equities’ analysis turns ‘growth versus yield’ debate on its head
Income-oriented retirees can benefit from exposure to higher dividend yield stocks, even at the expense of dividend growth
Sydney 24 October 2016: Research from leading global asset manager AXA Investment Managers (AXA IM) has offered a fresh perspective on the growth versus yield debate, when looking at compelling sources of income for retirees in a low-yield environment.
The new analysis ‘Hunting for Yield or Hunting for Growth?’ debunks some of the common misconceptions around high yield strategies in contrast to growth strategies, such as perceived levels of capital risk and income payment risk.
The report’s author Michael Kollo, Deputy Head of Research at AXA IM Rosenberg Equities (AXA IM’s fundamental quantitative equity manager), is in Australia this week to discuss and explore the findings with Australian institutional investors.
“The exceptionally low rate environment has those preparing for retirement scrambling, as traditional sources of income – in the form of government bonds and bank deposits - are unlikely to provide the yields necessary to maintain spending power. In this context, we believe from our research that income-oriented investors will benefit from exposure to higher dividend stocks, even at the expense of dividend growth,” he said.
The research stress-tested two portfolios in terms of realised or ‘delivered’ income, capital risk, ability to hedge against inflation and resilience in periods of an earnings crisis. One composed of a diversified set of high dividend yield companies with zero to negative dividend growth (the ‘high yield’ portfolio) and another set of lower yield but higher dividend growth companies (the ‘high growth’ portfolio).
“When looking at income investing, ‘growth’ is often synonymous with success and ‘decay’ conjures images of distress. It is perhaps not surprising then that much of the investment industry advertises itself as providing dividend growth for members.
“Yet, our analysis suggests that a higher yield, lower dividend growth strategy provides investors with a superior delivered income experience with equivalent risk, even during times of economic crisis,” Mr Kollo said.
Craig Hurt, AXA IM’s Director of Australia and New Zealand, said the firm was looking to partner with local funds to help identify and design workable retirement solutions for members.
“Individuals in Australia face similar issues as those in the rest of the world – low interest rates, longer life expectancy and more responsibility over their wealth and well-being in retirement.
“Drawing on our global expertise, we look forward to working closely with Australian institutional investors to develop meaningful post-retirement solutions,” said Mr Hurt.
A copy of “Hunting for Yield or Hunting for Growth?” is available on request.
Maggie Liu – 02 8248 3744 – firstname.lastname@example.org
AXA Investment Managers Asia (Singapore) Ltd (ARBN 115 203 622) (“AXA Investment Managers Asia”) offers financial services in Australia only to “wholesale investors” within the meaning of the Corporations Act 2001. AXA Investment Managers Asia is exempt from the requirement to hold an Australian Financial Services Licence and is regulated by the Monetary Authority of Singapore under Singaporean Laws, which differ from Australian laws.
About AXA Investment Managers
AXA Investment Managers is an active, long-term, global, multi-asset investor focused on enabling more people to harness the power of investing to meeting their financial goals. By combining investment insight and innovation with robust risk monitoring, we have become one of the largest asset managers in Europe with ambitions to become the chosen investment partner of investors around the world. With approximately €679bn in assets under management as of end March 2016, AXA IM employs over 2,350 people around the world and operates out of 29 offices in 21 countries. AXA IM is part of the AXA Group, a global leader in financial protection and wealth management.
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