merrill lynch adds a EUROPEAN EQUITY GROWTH fund to its luxembourg sicav platform
Merrill Lynch Investment Managers has launched a European equity growth fund as part of its Merrill Lynch International Investment Funds Luxembourg Sicav.
The euro-nominated MLIIF European Growth fund, managed by Olivier Rudigoz, invests in large and mid-cap pan-European growth companies and is designed to maximise capital growth.
Elizabeth Corley, managing director of MLIM's retail business, said the fund fills a gap in the MLIIF range and complements the European Value fund.
'There are a number of large European companies showing great growth potential and this fund will look to offer investors favourable returns relative to the broader stock market,' she said.
In July, Merrills integrated Mercury Selected Trust, Merrill Lynch Equity/Convertible Series and the Merrill Lynch Global Currency Bond Series into one Luxembourg Sicav.
Merrill Lynch also released research showing high-yield equity funds tend to have bigger total returns than growth funds.
From January 1986 to August 2002 the FTSE 350 high-yield index on average had a dividend yield of 4.8% per year while the FTSE 350 low yield index had a dividend yield of 2.5% per year.
In theory, the share prices of the low-dividend stocks should have grown by 2.3% per year faster than the high-dividend stocks to compensate for their lower yield. But in fact the price of the high-yield index grew by 8.6% per year, while the lower-yield stocks rose by 4.7% per year over the period.
In terms of total annualised compound return, the FTSE 350 high-yield index returned on average 14.1% per year, while the low-yield index returned 7.7% per year. The average volatility of the higher-yield index was also slightly below that of the low-yield index.
In terms of ongoing performance, at 31 October the yields on the higher-yield and lower-yield indices were 4.6% and 2.3% respectively, so the share prices of the low-yield stocks will need to grow 2.3% faster per year if they are to outperform the total return from high-yield stocks in the future.
'The lesson from this research is not just the value of a steady income stream from dividends each year but, the power of a growing income stream over time,' said MLIM head of UK third party retail Michael Jones.
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