DWS Investments has expanded its stable of funds with the UK equity income plus fund. This Oeic aims to produce a rising level of income with some scope for capital growth by investing in 40 UK stocks. It will have an initial target yield of 6 per cent and each of the 40 stocks will be equally weighted at 2.5 per cent of the portfolio. However, weightings are allowed to move 1 per cent either side of this target.
The portfolio will be a more concentrated version of the existing UK equity income fund, which has been managed by Graham Ashby since March 2001. Ashby, who joined the company in 1994, will run the new fund along the same lines. The main difference is that the UK equity income plus fund will aim for a higher dividend yield of 130 per cent of the FTSE All Share index.
Ashby will take a bottom-up stockpicking approach, looking at a company's cash flow, the quality of its management and how competitive it is in its sector before including it in the portfolio.
Many investors are looking for income in the current climate but, while a concentrated portfolio could boost returns, investors are also more exposed to the risks of equities. Dividend yields in the UK are currently under pressure because profit margins are being squeezed, so the success of this fund will depend heavily on stockpicking ability.
According to Standard & Poor's, the DWS UK equity income fund is ranked 45th out of 73 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to January 27, 2003.