What do you get for losing money in 2014 and averaging 3.83% since inception?
A positive feature story in Barron’s.
There is a huge universe of top performing mutual funds to write about. When a prestigious publication chooses to highlight a money manager you would expect they had determined there was wisdom to be gleaned.
When I clicked on Barron’s own link HFQAX Fund Details it took me to Lipper’s evaluation of the fund’s history. What I found was surprising. The Henderson Global Equity Income Fund ranks among the low end of its peer group since its Nov. 2006 inception date.
Its total return was less than thrilling, at 3.83% excluding a hefty 5.75% sales load, over the more than eight years it has operated.
Barron’s praised fund manager Alex Crooke for his dividend capture strategy. He likes to sell shares soon after ex-dividends dates while replacing them with other stocks close to distributions of their own. This led to a 6.2% stated yield on the fund. The average European Equity Income fund pays out 3.35% in dividends.
That technique pushed turnover of Mr. Crooke’s fund to about 103% per year. The HFQAX's long-term results trail most peers meaning all that frantic trading has not goosed returns. It has hurt tax efficiency, though.
U.S. News noted HFQAX sports higher than average fees, a bad thing for investors.
Make the adjustments for Henderson Global Equity Income's high initial load, frictional trading costs, greater than normal management fees and tax bills. Lipper calculated that buy-and-hold types, unlucky enough to have stuck with the fund since inception, earned a paltry 1.27% annualized through the end of 2014.
The real question to be asked is not whether dividend capture is a viable strategy. Readers should want to know, “Why did Barron’s choose to highlight this fund?”
