Russell Investments has allocated to BNY Mellon affiliate Ankura Capital for the first time, amid a host of new mandates supporting two new income-based multimanager funds for Australian equities and Australian bonds.
The two new funds, the Russell Australian Shares Enhanced Income Fund (RASEIF) and the Russell Australian Bond Income Fund, are both aimed at satisfying increased demand for consistent income payments, according to portfolio manager Kathy Cave.
“Companies are starting to restore dividend payments as balance sheets strengthen, and bond yields are now at relatively high levels,” Cave said, explaining why the creation of the two funds was a “logical step” for Russell.
As equity markets headed into a period of potentially lower growth, Cave said a greater proportion of investors’ total equity return would be driven by dividends.
The RASEIF has employed Ankura, a quant manager with a small cap bias; Perennial Value, a traditional stockpicker with a focus future earnings and dividends; and the Russell Australia High Dividend Echange-Traded Fund, which is benchmarked to the Russell index of the same name.
Cave said that index, which comprises 50 large cap companies weighted toward those with the best after-tax dividend characteristics, aimed to return 1 per cent above the ASX/S&P 300 index, while the new multimanager fund aimed to add 1 per cent again, for 2 per cent total net alpha.
Meanwhile Cave said the bond income fund would seek stable quarterly distributions from an Australian fixed income market where “the yields are higher and the issuers are generally of a high quality” in comparison with most of the developed world.
Two existing Russell managers, Aberdeen Asset Management and Western Asset Management, will be employed on the product, which like its equities counterpart will feed into Russell’s diversified funds.