Key benefits

Low-beta, low-volatility core US equity exposure, with long-term capital appreciation potential

An attractive diversified source of income in a rising rate environment

Strong competitive performance with attractive risk characteristics

How the fund works

The fund aims to produce an attractive income, alongside the potential for long-term capital growth, by investing in a portfolio of 85—110 US large and mid-cap stocks that meet three key criteria:

Quality - Companies with durable franchises, consistent patterns of earnings, high return on
invested capital, conservative financials and strong management teams

Valuation - Companies that are trading at attractive valuations

Income - Companies that can deliver income by paying a minimum 2% dividend yield

Companies that meet these three criteria should support a healthy dividend at a low payout ratio, ensuring that income payments are strong and sustainable.

A low payout ratio generally means that these well-managed companies can reward investors with a dividend today while leaving capital available to grow shareholder value and enhance the dividend for tomorrow. The best-performing stocks over the past 20 years have been those with above-average yields and below-average payouts.

Investment approach

The fund's manager, Clare Hart, is supported by a team of over 25 dedicated research analysts based in the US, who focus solely on US companies. Clare and her investment team, have a long history of investing in US dividend-paying stocks. The fund's investment team aims to identify attractively valued companies that are in good financial heath and can pay sustainable dividends.

Growth of $1 based on differing dividend yield/payout ratio combinations

Source: J.P. Morgan Asset Management Quantitative Equity Research. The lines illustrate the growth of $1 from 1/1/1990 – 31/12/2013. The Y-axis illustrates the portfolio values with a log scale. Each yield/payout combination illustrates compounded total returns : price appreciation & dividend payment. The benchmark is the S&P 500 Index.

Using the fund in a portfolio

This fund is designed for investors looking to gain exposure to the attractive growth potential of the US stock market, and who appreciate the benefits of reinvesting dividends over the long term. The fund can help investors seeking to produce a regular income from a single-market equity fund. It may also provide a good source of diversification for portfolios that are focused on UK equity income funds.

Key Facts

Benchmark: S&P 500 Index (Net of 15% withholding tax)

* Rayner Spencer Mills rating as at July 2014. Copyright - © 2014 Morningstar, Inc. All Rights Reserved. Morningstar RatingTM as at October 2014, in the US Large-Cap Value Equity categoryTM. FE Trustnet crown rating as at July 2014. Square Mile Research rating as at August 2014. The value of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.