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Delightful dividends + quality income = Inflation hedge

 

The threat of inflation is very much on the horizon for many investors.  Although not coming through in the numbers yet, fixed income ETF investors are positioning their portfolios for rising inflation by buying Inflation linked bonds, Inflation expectations and floating rate notes.

The question now is how you create a similar level of protection for your equity portfolios? The answer may be hiding in dividends, the long established driver of equity market returns: 

 

Dividend growth essentially tracks inflation - Global Dividend growth vs CPI growth

 Dividend growth essentially tracks inflation - Global Dividend growth vs CPI growth

 

Source: SG Cross asset research / Equity quant. July 2017 

But only quality companies can be relied on – forecast vs realised dividend yield on SGQI

 

 

But only quality companies can be relied on – forecast vs realised dividend yield on SGQI

 

And quality companies can provide better returns, for less risk – Sharpe Ratios

 

And quality companies can provide better returns, for less risk – Sharpe Ratios

 


Highest quality 2 3 4 Lowest quality
Compounding return 10.0 8.4 7.6 6.6 6.9
Annualised volatility 10.6 12.8 15.3 15.3 25.5
Sharpe ratio 0.94 0.66 0.50 0.50 0.27
Max drawdown 35.5% 41.9% 51.3% 51.3% 61.8%


Finding quality 

Quality companies can be described as those with a fundamentally strong business, healthy balance sheet and stable share price. These are the key tenets of both the FTSE and SG quality income indices. By focusing on quality, stable companies with a strong balance sheet, these strategies aim to deliver an attractive dividend and equity market performance that can be sustained.​

Name Code Charge Estimated index Yield* Passporting
Lyxor SG Global Quality Income SGQP  0.45% 4.95%

BE, DK, FI, FR, GE, IT, LU, NL, NO, SP, SE, SW, UK

Lyxor SG Europe Quality Income SGQE 0.45% 5.37%

BE, DK, FI, FR, GE, IT, LU, NL, NO, SP, SE, SW, UK

Lyxor FTSE US Quality Low Vol Income BUCK 0.19% 2.97% GE, FR, IT, LU, SP, SE, UK

Lyxor FTSE UK Quality Low Vol Income

DOSH 0.19% 3.84% FR, LU, UK


 *Index data correct as at 30th June 2017. These figures are not a reliable indicator of the yield of the ETF, which may be reduced by the effect of commissions, fees, taxes or other charges borne by the investor. Changes in currency exchange rates may have an adverse effect on the net asset value (“NAV”) or income of the product.

    

Disclaimer

All data: SG Cross Asset Research, Equity quant, Factset, July 2017.

The figures relating to past performances refer to past periods and are not a reliable indicator for future results. This also applies to historical market data.

This communication is for professional clients only. This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets In Financial Instruments Directive 2004/39/EC.

This document is of a commercial nature and not of a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor International Asset Management or any of their respective affiliates or subsidiaries to purchase or sell the product referred to herein.

We recommend to investors who wish to obtain further information on their tax status that they seek assistance from their tax advisor. The attention of the investor is drawn to the fact that the net asset value stated in this document (as the case may be) cannot be used as a basis for subscriptions and/or redemptions. The market information displayed in this document is based on data at a given moment and may change from time to time. The figures relating to past performances refer or relate to past periods and are not a reliable indicator of future results. This also applies to historical market data. The potential return may be reduced by the effect of commissions, fees, taxes or other charges borne by the investor.

Lyxor International Asset Management (Lyxor ETF), société par actions simplifiée having its registered office at Tours Société Générale, 17 cours Valmy, 92800 Puteaux (France), 418 862 215 RCS Nanterre, is authorized and regulated by the Autorité des Marchés Financiers (AMF) under the UCITS Directive and the AIFM Directive (2011/31/EU). Lyxor ETF is represented in the UK by Lyxor Asset Management UK LLP, which is authorised and regulated by the Financial Conduct Authority in the UK under Registration Number 435658.     

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