The stock markets rose strongly over the first few months of 2019, but they’ve been struggling in recent weeks due to a resurgence of the trade war between the US and China. Meanwhile, bond yields are still painfully low. How might multi-asset investors react in these circumstances? One option for investors to navigate this tricky environment could be to allocate to a quality income equity strategy.
With bond yields low, investors have the choice to switch out of bonds into suitable equities or sit tight. One idea for investors wary of making seismic changes to their asset allocation could be to switch from low-quality bonds into high-quality equities – a change that puts balance sheet strength ahead of anything else.
Why might this be an attractive choice? Taken at face value, the potential income available from high yield bonds looks like it should exceed dividends. But high yield bond indices are made up of the lowest-quality companies in the market, and there’s no guarantee they’ll be able to meet their obligations. One option for investors looking to allocate to high-income equities could be the SG Global Quality Income index. It’s an equity index that seeks to provide a dependable, high-quality dividend stream. Unlike the MSCI World High Dividend index, which tends to outperform the broad global markets on a total return basis but has struggled in return-only terms, the SG Global Quality Income index focuses on corporates that can pay and grow their dividend, and aims to maintain its dividend payments regardless of the market backdrop.
By sticking to the same careful, repeatable process, the SG Global Quality Income index has been able to avoid more than 80% of the major dividend cuts that have taken place since the global financial crisis in 2007. Learn more about Lyxor’s range of Global and European SG Quality Income strategies.
FOR PROFESSIONAL CLIENTS ONLY. CAPITAL AT RISK.
Important information
This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2014/65/EU. These products comply with the UCITS Directive (2009/65/EC). Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com.
Except for the United-Kingdom, where this communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658, this communication is issued by Lyxor International Asset Management (LIAM), a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2014/91/EU) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority).
The products mentioned are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.
Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product. This document is of a commercial nature and not of a regulatory nature. This material is of a commercial nature and not a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.