How to profit in a low growth environment

BONDS

Parmeshwar Chadha, manager of the Newton Global High Yield fund, explains why lacklustre economic conditions suit the high-yield asset class.

A strong case has been made over the last year that in this period of low growth, investors should focus on equity dividend income strategies. And though there is a rationale for this case, I believe high yield provides an equally good if not better alternative. Figure 1 shows the cumulative returns of US high yield as compared to the FTSE 100, S&P 500 and S&P 500 Dividend + Index on a total return basis from October 2001 to the end of October 2011. The returns of FTSE 100 and S&P 500 at around 61% and 47% respectively are well below the S&P 500 dividend + index return of around 108%. Ho...