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Equity income debut for L&G

Legal & General Investment Management has set up its first UK equity income fund.

Fund manager Richard Black aims for a 3.3 per cent yield from day one and will take a bottom-up stock-selection process that focuses on about 30-40 holdings at any one time.

The target is a minimum 10 per cent premium to the FTSE All-share and the yield is considered at a portfolio level as opposed to the stock level.

The fund, first revealed by Money Marketing in January, will typically hold 3-6 per cent of assets in sustainable high-yield companies, 2-4 per cent in dividend growth stocks and 1-3 per cent in special situations. The dividend yield is predicted to be a minimum of 110 per cent.

At the time of launch, the fund’s allocation is a 10 per cent weighting to small caps, 20-30 per cent in mid caps and the remainder in large.

Although the fund retains the capacity for call-option overwriting, these will be exercised under specific circumstances and are unlikely to be used on high dividend-paying stocks.

Chelsea Financial Services managing director Darius McDermott says: “L&G has a strong presence in the UK and it makes sense to have a UK equity income fund, given the demand in the market.”

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