HARTFORD, CT – February 9, 2021 – According to Conning, high dividend equity strategies can serve institutional investors in this period of low interest rates by enhancing income and portfolio diversification along with the potential for capital appreciation. Conning’s U.S. high dividend equity strategy, which leverages the firm’s deep investment research capabilities, was introduced by Conning 10 years ago and had $1.75 billion assets under management at the end of 2020.
“While in recent years market returns have been driven by large cap technology names, we believe that a high dividend equity strategy focused on companies with strong balance sheets may provide an income opportunity in a low-rate environment, and may also offer an attractive combination of market upside participation and downside protection,” said Cindy Beaulieu, a Managing Director and Chair of the Investment Policy Committee at Conning.
Conning’s U.S. high dividend equity strategy has built incremental value for portfolios since 2011, generating an average annual 13.67% net return since inception, outperforming the MSCI USA High Dividend Yield Index by 138 bps. The U.S. high dividend equity strategy's 10-year return and risk-adjusted return, as measured by its information ratio, both ranked in the top decile of the eVestment Alliance Dividend Focus Manager Universe.
“There are several reasons why institutional investors continue to be attracted to high dividend equity strategies,” says Don Townswick, Director of Equity Strategies at Conning. “For one, ultra-low bond yields generally raise the appeal of equity dividends. Other considerations are whether a market correction may be nearing. High dividend equities not only demonstrate lower volatility but also tend to outperform equity markets in down periods,” added Townswick.
Conning’s strategy employs a multi-stage quantitative screening process that narrows the S&P 500 Index to a target portfolio. The firm’s research team then performs a qualitative investment analysis, utilizing its extensive experience in fundamental analysis. The portfolio consists of 40 to 60 names which are equally weighted and diversifies exposures across industries to avoid the cyclicality of many high dividend strategies. In addition, Conning’s strategy focuses on companies with strong balance sheets in sectors that will allow them to maintain their dividend payouts in periods of economic uncertainty and increase dividends as the economy strengthens.
According to Conning, the benefits of its high dividend equity strategy include:
- Dividend yields that are attractive relative to yields on fixed-income securities
- Potential for dividend increases and capital appreciation
- Tax savings for certain insurance companies due to the dividends-received deduction
- Diversification of risk
About Conning & Conning’s U.S. High Dividend Equity Strategy
Conning (www.conning.com) is a leading investment management firm with approximately $198 billion in global assets under management as of December 31, 2020.* With a long history of serving the insurance industry, Conning supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.
*As of December 31, 2020, represents the combined global assets under management for the affiliated firms under Conning Holdings Limited and Cathay Securities Investment Trust Co., Ltd. (“SITE”). SITE reports internally into Conning Asia Pacific Limited, but is a separate legal entity under Cathay Financial Holding Co., Ltd. which is the ultimate controlling parent of all Conning Holdings Limited controlled entities.
For more information on Conning’s U.S. High Dividend Strategy, please see the fact sheet at this link.