Managers looking to shares for yield

High dividend yields are attracting fund managers in the low interest rate environment, with Harbour Asset Management (Harbour) the latest to target companies with strong dividends.

Monday, October 10th 2011, 6:50AM

by Niko Kloeten

Harbour's Australasian Equity Income Fund invests mainly in New Zealand and Australian listed securities in order to generate attractive dividend yields.

Its announcement follows soon after boutique fund manager Pie Funds launched its own fund targeting New Zealand and Australian companies with attractive dividend payouts.

Harbour's managing director Andrew Bascand said, "Many investors, in the pursuit of real sustainable income, are re-considering their approach to income generation within their personal investment portfolios.

"Traditionally cash and fixed income investments have provided strong income returns for investors.

"Now, with many central banks holding interest rates at multi-decade lows, fixed interest yields have fallen sharply. At the same time many equities are offering higher yields."

Craig Stent, the fund's portfolio manager, says, "New Zealand and Australian dividend yields are attractive relative to cash and bond yields, at a time when investors believe that the New Zealand economy is showing signs of improving.

"A current diversified portfolio of about 50 equity securities may yield over 6% in the next year, compared with about 4.3% on a 10 year New Zealand government bond, and around 4.2% on a 6 month New Zealand term deposit."

He expects the portfolio to generally hold 40-60 securities.

"The portfolio will be more diversified than typical equity portfolios, which reflects our intention to provide a more consistent yield for investors.

"We intend to pay distributions on a quarterly basis, and we have the capacity to invest up to 35% in cash, and government and corporate bonds using Harbour's fixed interest team."

Harbour was established in January last year with capital and infrastructure provided by First NZ Capital, the Harbour team previously worked together for up to 10 years as the New Zealand equity team at AllianceBernstein.

In just over 18 months, it has grown to around $900 million under management in New Zealand fixed interest and Australasian equities.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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