London-based Argonaut Capital has unveiled plans to launch an income focused European equity fund that will be managed by Greg Bennett (pictured).
The Argonaut European Income Opportunities Fund, subject to FCA approval, will aim to achieve higher yield than the overall index, through investments in higher yielding companies with sustainable dividends.
Argonaut’s current model portfolio has a gross yield of about 5.7%, far in excess of the 3.6% yield for the MSCI Europe ex UK Index, the firm specified.
“Our investment process, which is central to all Argonaut funds, focuses on understanding corporate earnings trends and balance sheet analysis,” Bennett commented.
“This will not only assist us in identifying companies with the ability to pay dividends higher than expectations, what we refer to as ‘dividend surprise’, but also assist us in avoiding yield traps,” he added.
Bennett assesses looking to Europe for dividend exposure stocks helps to avoid the current crowded trade in UK-listed income generators.
“While there are far fewer dedicated European equity income funds (than UK equity income funds), there are approximately twice the number of stocks yielding more than 4% in the MSCI Europe ex UK Index than the FTSE 350.
“At a time when more than 60% of outstanding European sovereign and corporate debt is negative yielding; high dividend equities offer a useful, liquid and alternative source of income,” Bennett said.