Just came across the Allspring Global Equity Enhanced Income Fund from Endowus recommendation on dividend funds besides Fidelity Global Dividend Fund and Fidelity Asia Pacific Dividend Fund. Interesting thing about this Allspring unit trust is that it invested in global dividend stocks as well as employ an option strategy to earn option premium. Of course, if market performs well, this Allspring fund may lack behind due to the use of option.
1. Performance of Allspring Global Equity Enhanced Income Fund
It has outperformed the high dividend benchmark and peers since its inception in 2020 while providing clients with a consistent quarterly dividend income stream. It offers a target pay-out of 6% with 4% from a high yielding equity component and 2% from an options overlay strategy. Options overlay is dynamically managed to ensure that the upside of the equity sleeve is not adversely compromised.
Its NAV also has a good overall uptrend unlike some funds which pays high dividends of more than 8% per annum but is actually paying this out of their capital with NAV going downwards.
2. Low overall annual management fees of only 0.8% per annum at fund level
This is way lower than many of the equity funds (over 1%) out there with only 0.8% per annum.
3. Be careful of its US sector exposure
I think that the US stock market is overly valued. This fund does have close to 20% exposure to US with tech stocks such as Nvidia in its stock holding portfolio. For those who thinks that the AI bubble will burst, then there maybe potential downside from holding on to this particular fund. It is also not very clear and transparent on 76% of its geographical allocation as it show up as "Unclassified". So the big question mark is what is "Unclassified"?
The fund size is actually very tiny relative to the Fidelity Global Dividend Fun of S$22.9 billion as well as to the Fidelity Asia Pacific Dividend Fund of S$500Mil. There is the probability that this Unit Trust may be closed down by its fund manager and one maybe exiting their investment at the worst possible time due to market downturn.
Parting Thoughts
I maybe allocating part of my future portfolio into this fund for diversification. Do note that there is another similar USD funds by Allspring with the same name. However, one should go for the SGD hedged fund to minimise one's forex risk. Another point to note is that this fund pays out distributions on a quarterly basis and not monthly.
6%with forex risk & options risk. Not worth sia.
ReplyDeleteHi Damn, good day to you. There are some hedging to protect against full impact of forex downside and as for options overlay strategy, it involves adding options positions to an existing portfolio of assets to adjust its risk and return profile without changing the underlying holdings.
DeleteIt helps in diversification as its portfolio is a high conviction balanced portfolio of more than 60 stocks.