Fidelity regards the fund as an alternative to with-profits which have suffered a well-documented backlash following poor performance during the bear market and problems with a lack of transparency.
The fund, which will be managed by Richard Skelt and Simon Mugall, aims for income and capital growth through access to a range of asset classes including equities, bonds and property. Low correlation between these asset classes should help to reduce volatility and risk.
In addition, as no single fund management group can be an expert in all regions and asset classes, the fund’s blending of different managers and styles should also help to bolster performance and reduce risk. It is expected that the fund will be invested 40 per cent in equities, 40 per cent in fixed income and 20 per cent in property.
The fund will invest in underlying funds that hold equities – mainly UK equity income funds, fixed income, money market securities and property. On the income side of the objective, the fund has an estimated yield in excess of 4 per cent. This ‘natural income’ can be paid in two six-monthly dividend payments.
Investors can also take income from the capital invested through the fund withdrawal plan, a relatively new feature devised by Fidelity across its fund range.
The fund withdrawal plan works in a similar way to the withdrawal of income from investment bonds. Investors initially decide how much they want to withdraw, subject to a £50 minimum, and whether they want to take this amount monthly or quarterly.
This fund could appeal to cautious income investors who want a good spread of assets and fund managers within a single fund. Its total expense ratio will be capped at 2 per cent, which is a positive for investors, and the withdrawal plan could be useful. However, the fund could still face competition from the longer established F&C Multi-Manager Distribution fund.