Type: Oeic fund of funds
Aim: Income and growth by investing in open-ended and closed-ended investment funds, money market instruments, deposits and warrants
Minimum investment: Lump sun 3,000, monthly 50
Investment split: UK equities 30%, UK fixed interest 70%
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.27%, annual 1.5%
Commission: Initial 5%, renewal 0.5%
Tel: 01483 400400
Premier Asset Managements halcyon extra income fund is an Oeic fund of funds brought out in conjunction with the Nursing Homes Fees Agency. It is aimed particularly, although not exclusively, at older investors who may be looking for ways to fund their long-term care needs.
Independent Personal Financial Management director Luke Gibbon points out that this fund of funds is classified in the IMA cautious managed sector. He says: “The fund can invest 20-40 per cent in equities, 60-80 per cent in fixed interest and up to 20 per cent in cash with a maximum investment of 5 per cent in any one holding. The target income is 4.5 per cent gross and pays dividends half-yearly. The fund has been launched primarily on behalf of an IFA which specialises in long-term care, but it is also open to other IFAs.”
In Gibbons view, the fund would be suitable to clients who want to take a cautious approach, receive a relatively high income while also accepting equity exposure to provide the potential for some growth.
Highlighting the less attractive features of the fund Gibbon says: “The fund has an initial charge of 5.27 which is not unusual for investment funds. But it would be expensive if it was bought via an Isa.
“It must be remembered that additional costs will be incurred by the underlying funds. It is anticipated that the total expense ration will be about 2.2 per cent which, compared to a directly invested fund, is slightly high.”
He also feels that as the fund is being launched in conjunction with a long-term care specialist, a monthly as opposed to a half yearly income w may have been more appropriate.
Gibbon also points out that the target yield of 4.5 per cent is higher than the average yield on the average UK Corporate bond and only marginally lower than the fixed income sector. He says: “Consequently some of the underlying funds will need to have a higher than average yield which could increase the risk to the capital.”
“The main competition will come from other funds of funds that pay a high income,” says Gibbon. He concludes: “This is, however, very limited and I suspect that other fixed-interest funds will provide competition.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average