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Australian equity mutual funds provide diversification to a traditional investment portfolio. Australia has a wide range of natural resources, and the country plays an important role in the mining industry. Additionally, the Australian dollar is one of the major world currencies; therefore, if the U.S. dollar falls, in relation to the Australian dollar, Australian equities may see a rise in value. Investors looking to diversify their portfolios with investments in Australian equity mutual funds while receiving high dividend yields should consider these three Australian equity mutual funds.
AMP Capital Australian Equity Income Fund
AMP Capital issued the AMP Capital Australian Equity Income Fund (40660.AX) in 2013. The fund aims to provide dividend income, including franking credits, that is greater than the dividend income provided by the S&P/ASX 200 Accumulation Index, its benchmark index. The fund aims to provide an annual yield of 6 to 8% over the long term. As of March 31, 2016, the fund charged an annual expense ratio of 1.10%. The fund focuses primarily on high dividend-paying sectors, such as financials, telecommunication services and consumer discretionary.
As of March 31, 2016, the fund’s top five sector allocations were 49.1% in financials, 7.4% in telecommunication services, 7.4% in cash, 7% in consumer discretionary and 6.8% in materials. The fund had a dividend yield of 6.81%, which is in line with its goal of providing an annual dividend yield between 6 and 8%. As of March 31, 2016, the fund had total net assets of just AUD$450,000.
T. Rowe Price Australian Equity Fund
T. Rowe Price issued the T. Rowe Price Australian Equity Fund (19448.AX) in 2012. As of April 30, 2016, the fund had achieved an average annual return of 9.87% and outperformed the S&P/ASX 200 Index, the fund’s benchmark index. The fund aims to provide long-term capital appreciation by holding a diversified portfolio of Australian equity securities. If investors choose to invest directly with T. Rowe Price, there is no minimum investment requirement for those investing using an investor direct platform service. However, if investors do not invest directly with T. Rowe Price, there is a minimum initial investment requirement of AUD$500,000, which is extremely high for the average investor. The fund charges an annual management fee of 0.9%.
As of April 30, 2016, based on trailing three-year data, the fund had an average annual volatility, or standard deviation, of 12.42%, while its benchmark had an average annual volatility of 12.68%. During this period, the fund had an R-squared of 95.31, when measured against the S&P/ASX 200 Index. The fund’s R-squared value indicates that 95.31% of its historical price movements could be explained by fluctuations in the benchmark index.
As of April 30, 2016, the fund’s top sector allocations were 44.65% in financials, 13.97% in materials, 12.16% in consumer discretionary, 7.46% in health care and 4.28% in consumer staples. As of March 31, 2016, the fund had total net assets of AUD$16.19 million, and 34 holdings. Additionally, the fund had an attractive dividend yield of 7.13% and return of 4.96% in March 2016.
Aberdeen Australian Equities Fund
Although the Aberdeen Australian Equities Fund (5685.AX) does not offer yields as high as those of the T. Rowe Price Australian Equity Fund and the AMP Capital Australian Equity Income Fund, the fund had a yield of 4.12%, as of March 31, 2016. Aberdeen Asset Management issued the Aberdeen Australian Equities Fund in 1999. The fund seeks to outperform the S&P/ASX 200 Accumulation, its benchmark index, over rolling three-year periods. To achieve its investment objective, the fund invests primarily in equities of 20 to 40 companies listed on the Australian Stock Exchange (ASX) that have increased earning potential and the potential for capital appreciation. Investing in the fund requires a minimum initial investment of $20,000 and an annual management fee of 0.8%.
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