The CFS Wholesale Equity Income Fund and the Zurich Investments Equity Income Fund have both received a highly recommended rating as part of Lonsec's 2010 Australian Equity Income Sector Review, which looked at nine funds.
"This sub-sector captures a range of funds, from 'traditional' imputation funds that typically target both a high level of franking as well as index outperformance, to more alternative funds that can use a wide variety of derivative strategies to focus on generating consistent income streams at reduced levels of capital volatility," Lonsec senior investment analyst Duncan Knight said.
In ascribing ratings to the sector, Lonsec said it recognised that operating an equity product, with an objective of distributing income, required a different skill set than that required for managing a long-only large-cap equity fund.
"Products in this universe need to have a multi-level assessment that will not necessarily be found in products with total return objectives," Knight said.
"This can make like-for-like comparisons with other Australian equity products problematic."
He said although Lonsec didn't see many new products this year, a continuing trend was the diversity of styles and techniques in managing equity products with distribution objectives.
"This is unlikely to slow in the near term, especially if the outlook for impaired global earnings flows to the Australian economy in turn negatively impacts corporate dividend payments," Knight said.
Meanwhile, as part of its review, Lonsec also identified that the Australian equity income fund sector can be considered to comprise two distinct sub-sections - traditional income funds and low beta funds.
