Investing

Global Equity Enhanced Income Fund

An innovative and dynamic approach designed to deliver a high level of consistent income and capital growth, now with a three-year track record.

Delivering an equity income portfolio can often result in a tug-of-war between income, capital growth and a balanced portfolio. The Allspring Global Equity Enhanced Income Fund has been designed to overcome this challenge.

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Why Global Equity Enhanced Income?

Watch this latest video for insights and performance of the Global Equity Enhanced Income Fund around the three-year anniversary.

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Sophie Careford: So, we launched GEEI (Global Equity Enhanced Income Fund) in July of 2020 and since then, we've experienced a global pandemic, spiraling global inflation and one of the fastest central bank rate hiking cycles that we've seen in history. It's fair to say it's been a pretty eventful time, but we're really pleased with how GEEI has performed. So, since inception, we've delivered a total return of 9.9% on an annualized basis and 6% in terms of yield across a variety of different market environments. Further to that, we've also proven that we can deliver consistent alpha generation in both up and down markets. The fund outperformed the benchmark by approximately 200 basis points in both 2021 and 2022. Not only do we have strong benchmark relative numbers, but the fund is stacking up really well against its peers. We're in the top decile in our Morningstar peer group.

Eddie Cheng: When it comes to income investing, the technology sector doesn't often get a lot of attention due to its lower dividend payout tendency. However, this sector was one of the most important drivers of capital growth in the last few years. Our balanced approach actually allows us to have a much more holistic view of our stock selection process, regardless of its sector, its country, or its style classification. In fact, one of our top holdings is a technology company, which specializes in providing the key components of the software infrastructure, as well as the solution. And this holding not only provides a modest level of the income contribution, but also offers a crucial growth exposure for our overall portfolio to retain that potential for capital growth. Given our holistic approach in income investment, our quantitative research plays a crucial role to enable us to screen through a wide range of universe in a consistent way. But different from a typical quantitative manager, we pay equal amount, if not more attention, to our fundamental review process to those companies screened from our quantitative process. For example, recently, a communication company actually scored very highly from our quantitative process because its valuation metrics are very attractive, as well as a very high level of the dividend. However, after reviewing in detail through our fundamental review process, we decided to depart this company, given it's a higher than industry average level of the debt, as well as its deteriorating growth potential. A few months later, after we passed this company, this firm actually discontinued its dividend paying, as well as went into a significant restructuring program. This highlights the benefit and the power of combining quantitative, as well as the fundamental review process, which we call a quantamental approach.

Elevate your income with global equities

Watch this video for insights from Eddie Cheng, portfolio manager, and Sophie Careford, product specialist.

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Eddie Cheng: Income has always been one of the most important aspects of our investors' investment objectives. In fact, in a recent conference I attended, over 80% of the participants shared that they either already had some income exposure or they are looking to add to this allocation. However, we increasingly hear from our investors that today they not only focus on the level of their income, but they increasingly want to pay more and more attention on two other aspects of the income generation. First, they really value the stability and the sustainability of their income. Second of all, they also want their income generating asset to have a strong potential for long-term capital growth, so that they can protect their real purchasing power. As a result, we really think hard to focus on delivering these multiple objectives while we can pay a consistent and stable income for our investors. And this is why we started our Global Equity Enhanced Income strategy three years ago.

Sophie Careford: So, we think there are three core differentiators when it comes to GEEI (Global Equity Enhanced Income Fund). First, we're able to preserve stock-specific alpha within our equity portfolio because we use index options in our options overlay strategy. Second, we're able to capture broad equity market exposure because we're able to invest up to 10% of our portfolio in low or non-dividend paying stocks. Third, we explicitly avoid the style and structural biases that you often see in equity income strategies. We target balanced factor, industry, and region exposures to deliver a well-diversified portfolio.

Eddie Cheng: For our Global Equity Enhanced Income strategy, they are two main sources of income. First, we start with a well-diversified, dividend-focused equity portfolio as the first source of income. Here, we leverage our investment process to combine the best of quantitative modeling, as well as fundamental review to identify a high-quality company that delivers an attractive level of dividends directly linked to their business model. We then create a well-diversified portfolio in order to capture the different market drivers to retain the high potential for capital growth. Second, we enhance this income through collecting option premiums through an actively managed option strategy. Here, essentially, we sell core options and what it does is to allow us to sacrifice a very small portion of that potential upside in our equity portfolio in exchange to become a much more stable and consistent option premium. With these two different sources of income, we then leverage our decades-long asset allocation experience to actively manage and balance between these two different sources of income at a different part of the business cycle, so that we can actually deliver a consistent income for our investors while maintaining a strong potential for that capital growth.

Sophie Careford: So, we think are two primary use cases for this portfolio. First off, investors can use it as an income generator. We target high consistent yield and we really think that investors value that consistency element. The way we designed the portfolio means it's a really nice complement to other equity income strategies and it's also very diversifying for other income-generating assets, such as fixed income or money markets. Second, we think that the portfolio can be used as an equity diversifier. Because we target returns in line with the MSCI ACWI (All Country World Index), it can easily fit within an existing equity allocation. And because it has a more defensive profile, it can diversify existing holdings. So, because we target both income, total return, and try and do this with a well-balanced portfolio, we think that this positions GEEI as one portfolio that can meet more than one investor need.

What: A fund designed to deliver a high, consistent income plus access to the growth potential of global equities

01.

Enhanced Income

Targets a high, consistent yield — 6% p.a. (paid quarterly)*

02.

Growth potential

Designed to capture the long-term growth potential of global equities

03.

Balanced exposures

Helps mitigate style swings while capturing growth opportunities with a globally diversified portfolio

*As of 31 December 2023. The figure is based on Class I (USD) Distributing share class. 
A target is indicative only, not guaranteed and does not take into account fees or charges which will reduce returns.


A diversified approach to income delivery

Diversified sources of returns are dynamically managed to deliver the targeted income while generating robust total returns for investors.

1The fund intends to make consistent quarterly income distributions. Capital gains from both equity and option portfolios can be utilized in addition to equity dividends to achieve the target distribution. 2Only partial potential upside is given up in order to preserve long term capital growth.

One portfolio, two uses

Why: Global equities provide a broad opportunity set for income seeking investors while delivering robust capital growth in excess of inflation

01.

Global opportunity set

Avoid concentration risk with a diversified portfolio

02.

Long-term capital growth

Income investors also need to grow their assets

03.

Robust real returns

Help overcome the impact of inflation

Annualised real returns
7.7% High dividend equities
6.4% No dividend equities
2.3% 10 year treasuries
0.5% Cash

How: An innovative and dynamic approach to delivering income

Savings One

High, consistent income

  • Two sources are dynamically managed.
  • Balance the trade-off between income and equity returns.
Globe

Captures equity growth

  • Our proprietary ‘Quantamental’ investment process combines the best of quantitative tools and fundamental analysis.
  • High conviction portfolio of 60 to 80 stocks.
Balanced Portfolio

Balanced portfolio

  • Portfolio constructed to avoid common style biases and structural underweights.
  • Complements other income generating approaches.

Who: Meeting investors’ specific needs

The systematic edge team is a global quantitative capability that offers a broad range of investment products and solutions designed to help meet clients’ goals.

Built on award-winning research, the Systematic Edge team provides clients with specialist insights that are combined with cutting-edge portfolio construction techniques to provide targeted outcomes.

1 Allspring does not provide investment research; awards for research are for papers published by a third party and authored by Allspring investment professionals. They are not a guarantee of future performance at Allspring.

The Systematic Edge Platform in Numbers

$25.8bn
Assets under management*
$5.1bn
Assets under advisement*
69
Investment professionals
*Source: Allspring as of 31 December 2023. Individual team AUM may not sum to this total due to double counting. Systematic Edge total AUM is U.S.$25.8bn and Systematic Edge total AUA is U.S.$5.1bn.

Learn more about the fund:

Visit the fund page for performance, deeper investment details, and fund documents.

View Fund Page

Featured insights

Check out our insights and perspectives.

We explain how artificial intelligence can be used to improve an equity income portfolio’s stability by gauging sentiment around company dividend policy.

Eddie Cheng, Vince Fioramonti, and Megan Miller manage components of Allspring’s Global Equity Enhanced Income (GEEI) strategy. Here they discuss how GEEI addresses the equity income tug-of-war.

In times when downside risk may lie ahead, a combination of diversifying and defensive equity approaches can potentially improve the probability of achieving positive outcomes.

Megan Miller, head of Systematic Options, is living proof that investment in interns can yield big returns. Read about Megan and her views on the options market in this issue of PM Spotlight.

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Fund risks
Market risk: securities may decline in value due to factors affecting securities markets generally, and equity securities generally have greater price volatility than debt securities. Smaller-company securities risk: securities of companies with smaller market capitalisations tend to be more volatile and less liquid than securities of larger companies. Geographic concentration risk: investments concentrated in specific geographic regions and markets may be subject to greater volatility due to economic downturns and other factors affecting the specific geographic regions. Global investment risk: securities of certain jurisdictions may experience more rapid and extreme changes in value and may be affected by uncertainties such as international political developments, currency fluctuations and other developments in the laws and regulations of countries in which an investment may be made. Derivatives risk: the use of derivatives presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities. The use of derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. ESG risk: applying an ESG screen for security selection may result in lost opportunity in a security or industry resulting in possible underperformance relative to peers. ESG screens are dependent on third-party data and errors in the data may result in the incorrect inclusion or exclusion of a security.