In a world increasingly shaped by geopolitical tension, stubborn inflation, and rapid technological change, global equity income funds have the potential to stand out as resilient and pragmatic investment strategies.
When investors are willing to source investments across global equity markets, they can potentially create a blend of capital preservation, diversified income, and long-term growth – qualities that are especially valuable in today’s fragile macro environment.
Pressured supply chains, tariff uncertainty and intense business model scrutiny has actually created a backdrop that is potentially an ideal hunting ground for those of us running global equity income funds. We seek businesses that are managed for resilience, which in our view could be capable of growing dividends ahead of inflation over the long term.
The power of diversification
These businesses can be found across the globe, and sometimes in sectors that might be surprising. When packaged together, such companies can potentially provide a greater level of resilience for portfolios and help to smooth returns by avoiding oversized exposure to any single region’s political risk or a single sector’s technological risk. As investors seek to navigate interconnected risks, income strategies can offer a measured approach to achieving long-term diversified returns.
When packaged together, such companies can potentially provide a greater level of resilience for portfolios.
While headlines remain focused on certain key themes, industries and geographies, market leadership is gradually rotating, and dividend strategies are gaining renewed attention [1]. After a prolonged period of dominance by US mega-cap growth stocks, 2025 has brought a clear broadening of market performance [2]. Value-oriented equities have outpaced growth, and international markets, particularly within Europe and developed Asia, have delivered stronger returns than the US [3]. This perhaps reflects a shift back towards fundamentals, with investors seeking sources of underappreciated cash flow generation, balance sheet strength, and capital discipline.
We have looked to capture this within our income strategy, which has benefited from both the rally in financial stocks, and the broadening out of performance in the technology sector [4]. But we think there could be further opportunities for income investors in the current environment. A focus on identifying undervalued, dividend-paying companies across a range of corporate Life Cycles, sectors and geographies, while steering clear of overexposure to expensive areas of the market like certain US mega-cap growth stocks will be important. And if capital continues to flow into the market’s higher-priced assets, we think long-term opportunities will emerge elsewhere – most likely from those stocks trading at attractive discounts while offering more attractive income profiles.
If capital continues to flow into the market’s higher-priced assets, we think long-term opportunities will emerge elsewhere.
Avoiding temptation
Income funds are typically constructed to be relatively defensive, outperforming in challenging market environments but struggling to keep pace in more favourable conditions. Income is easier to source from certain geographies like Europe, from certain sectors like consumer staples or financials and from certain styles like value (‘the cheaper the price the higher the yield’). However, there is a risk is that an appetite for income draws you towards yields that are unsustainable in a downturn and constrains you from investing across a wide range of opportunities for capital growth in an upturn.
Our understanding of the corporate Life Cycle has helped us avoid falling into these traps. Thanks to a focus on delivering as balanced portfolios as possible, we managed to keep pace, and even outperform, in 2023 and 2024 when volatility was lower and markets were strong [5], and protect capital relative to the market when rates spiked in 2022 [6]. The last year has been a good stress test for the strategy, assessing our ability to protect capital during the sharp market sell-off in the first half of the year and to attach our capital to companies which benefited from the sharp rebound that we have seen since. In a year when certain styles, regions and sectors have dominated, stock-specific risk has driven the vast majority of our performance [7].
Wide moats, deeper tunnels
As things stand, we remain slightly overweight to areas like the eurozone and the UK, where we continue to find some potentially very interesting investment opportunities. In France, for example, we currently see multiple compelling opportunities in the middle of Life Cycle (Compounding and Slowing & Mature), with discounted valuations for firms that have historically been strong creators of shareholder wealth. Like any investor, we like businesses with ‘wide moats’, protecting them from the threat of competition. However, we recognise that often the wider the moat the greater the desire of regulators to tunnel beneath. This is the case for employee benefits company Edenred. The stock provides an example of the importance of understanding the regulatory environment facing a Compounder and the potential opportunity available if they are equipped to navigate through it.
Like any investor, we like businesses with ‘wide moats’, protecting them from the threat of competition.
Edenred (Life Cycle stage: Compounding)
Edenred’s core business is provision of services and payments for companies, connecting employers, employees, and partner merchants. This includes corporate payments, such as meal vouchers, fuel cards, and electric vehicle charging services. Edenred has attractive internal qualities, enjoying long-standing dominance in its key markets, partly due to high barriers to entry, which have made it incredibly difficult for new competitors to disrupt its position [7]. Beyond first needing to understand the economic reality of the business (ie its a good business but perhaps more levered and a bit less cash generative than its first appears) the main catch is that the level of profits that it generates is at risk from regulation.
Edenred’s largest segment, employee benefits, faces risks in three important markets – Italy, France and Brazil. Stepping back, when the industry speaks to authorities it is generally because they either want more solutions for customers as a matter of worker equality, or a fairer merchant fee arrangement. The former is the issue that Edenred is trying to address, with clear evidence supporting the value of these solutions. For example, it argues that access to good food ultimately improves productivity and population health. The latter issue, its fee level, is a byproduct of Edenred’s strong value proposition, with authorities appearing increasingly keen to review the parameters that will be in place for the next decade.
Management has done a good job building scale, realigning the business, reducing regulated exposure, accelerating the topline, and improving pricing structures. Under the bonnet, the capital structure appears appropriate, the reporting quality is clear, and the strategy continues to be successfully carried out. Its capital allocation makes sense – it has consistently bolted on M&A targets, it offers an attractive dividend payout and has ramped up of share buybacks during the period of share price weakness [8].
In our view, while the era of high double-digit growth may be coming to an end for Edenred due to the less favourable macro and regulatory environment, the company is not in decline. Its deeply entrenched B2B2C network, diversification into new digital services, and focus on operational efficiency should allow it to maintain a solid, profitable growth trajectory [9]. We expect the ‘new normal’ for Edenred to be a more resilient, but more moderate, Compounding profile.
While we recognise some of the warning signs in equity markets today, we also remain mindful that over the long term, opportunities such as AI, the onshoring of manufacturing or the rise of anti-obesity medication are powerful investment themes being leveraged by companies to which we want to attach our client’s capital. The beauty of balancing the portfolio across geography, sector and corporate Life Cycle is that we can gain exposure to these opportunities while still potentially delivering the defensive aspects that clients seek from a global equity income fund.
This approach leads us to currently hold more technology stocks than most funds in our peer group. A key focus of ours this year has been refining our exposure to AI, across all five stages of the corporate Life Cycle. A good example of the kind of company that our analysis has unveiled is Micron, which sits in the Mature stage. The stock has performed well on the back of the boom in generative AI, which has created unprecedented demand for its high-bandwidth memory and placed extra stress on constrained DRAM and NAND products. The stock has served as a useful reminder for two things: first, not to anchor ourselves to a view on a certain market (however commoditised that it may initially appear to be); and second, we should remain pragmatic about yield during periods when a company is appropriately reinvesting back into the business. The more open-minded we are to exploring opportunities across the equity market the sooner another Micron might come along.
Micron (Life Cycle stage: Mature)
We classify Micron Technology as a Mature company within the corporate Life Cycle. It sits within the historically commoditised semiconductor memory market, which has often delivered lacklustre returns through industry cycles. We identified a potential shift in industry dynamics and an opportunity that contrasted with the market’s concerns over tariff risks. Our thesis was based on early signs of rising importance for high-bandwidth memory (HBM), driven by strong demand expectations amid accelerating AI workloads and a tightening supply.
Additionally, the company was demonstrating improved capital discipline, suggesting a scenario where returns could recover, potentially enabling excess cash to support higher dividends in the future [10]. At the time, we viewed the valuation as compelling for what was a relatively high-risk but promising opportunity.
Fast forward to today, the memory market is experiencing an extraordinary supply-demand imbalance. Demand is surging due to rapid AI infrastructure buildouts, with hyperscalers and cloud service providers significantly increasing investments in data centres and AI servers. This trend contributed to sharp price increases across all forms of semiconductor memory [11].
On the supply side, constraints persist, which have intensified the imbalance, fuelling speculation among long-term investors about the emergence of a memory ‘super-cycle’. This potential cycle could feature greater duration and magnitude than previous upturns, supported by secular demand drivers and evolving customer behaviours.
The AI-driven demand for HBM appears particularly structural. It is has become a critical bottleneck for AI workloads and as AI proliferates and use cases increase the need for high-performance memory solutions like HBM is expected to remain robust, reinforcing Micron’s strategic positioning in this evolving landscape [12].
In summary, Micron’s transformation from a player in a commoditised market to a key beneficiary of AI-driven demand highlights a significant shift in industry fundamentals. The combination of surging demand, constrained supply, and structural changes in memory technology underpins a potentially compelling long-term investment case. There are certainly still risks. The company remains exposed to the potential boom and bust nature of the memory chip market and having only initiated a dividend in 2021, it will take time to build comfort in its long-term commitment to shareholder payouts. The rapid pace of industry change means Micron will have to continue investing heavily in developing its products, but this offers us a rare chance to benefit from a major industry shift that could offer further potential for both income and growth.
Looking ahead, we suspect markets will remain volatile in the near future. But regardless of short-term movements, our commitment is to deliver portfolios that are designed to navigate the market’s complexities. By remaining committed to a disciplined investment approach, while seeking out opportunities in areas that other income investors are less inclined to explore, we aim to continue providing clients with the outcomes they value most: diversified income, mitigated risks to capital and exposure to long-term opportunities for capital growth.
[1] Why dividend growth investing has staying power | T. Rowe Price
[2] The 2025 Stock Market Rotation: What it Means for Investors
[4] Internal Royal London Asset Management Oct. 2025
[5] Internal Royal London Asset Management Oct. 2025
[6] Internal Royal London Asset Management Oct. 2025
[7] Edenred SA (EDEN.PA): An In-Depth Investment Analysis – The Gemini Report – Investment Deep Dives
[8] EDENRED
[9] Edenred unveils Amplify25-28, its new strategic plan | Edenred
[11] Server memory prices could double by 2026 as AI demand strains supply | Network World
[12] Micron's $130B Memory Gamble: How Supply Chain Constraints Are Reshaping AI Infrastructure
For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.
