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Gilt trip

LIONTRUSTLiontrust Distribution FundType: Unit trustAim: Income and growth by investing in UK gilts and UK equitiesMinimum investment: Lump sum £2,500, Lump sum £1,000 for Isas and Pep transfersInvestment split: At least 60% in UK gilts, up to 40% in UK equitiesCharges: Initial 5%, annual 1.25%Commission: Initial up to 3%, renewal up to 0.5%Tel: 020 7412 1766The Liontrust distribution fund invests in an index-tracking portfolio of gilts managed by State Street Global Advisors and a portfolio of UK equities selected by Liontrust’s Jeremy Lang.

Putting the fund into its market context, Capital Trust Financial Management partner Bruce MacFarlane says: “A high sustainable and regularly paid income is considered by many to be the Holy Grail of investments in the current economic environment, where interest rates remain historically low. The Liontrust distribution fund should therefore be an attractive holding for clients seeking income with the potential for modest capital appreciation.”

MacFarlane feels the projected yield of 4.9 per cent looks reasonably attractive, especially if paid gross when the fund is held via an Isa. He says: “One should remember, however, that many cash funds are offering returns in excess of 5 per cent gross with no capital risks involved.”

Considering the potential drawbacks of the fund, MacFarlane says: “The product is rather bland and its successful promotion to the retail market will depend on the IFA market’s ability to promote the excellent stockpicking capabilities of Jeremy Lang to their clients.”

MacFarlane says it is not the sort of fund that will attract the public in their droves. He points out that these investors are unlikely to be aware of Liontrust’s excellent investment track record. He says: “I would rather have seen the fund invest in a range of corporate bonds rather than the UK gilt market, whereby the yield could have been increased, albeit with perhaps a slightly greater level of volatility.”

MacFarlane concludes: “The distribution market is well covered by many better known names than Liontrust within the insurance company investment bond sector such as that offered by Legal & General. At this stage in the economic cycle, L&G also has a high exposure to the commercial property market which provides a higher level of natural income and a further element of asset class diversification.”

BROKER RATINGSSuitability to market: GoodInvestment strategy: AverageCharges: AverageAdviser remuneration: AverageOverall 7/10


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