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Henderson manages income



Aim: Income by investing in eight Henderson funds

Minimum investment: Lump sum: £5,000

Investment spilt: Choice of Henderson corporate bond, Henderson high yield bond, Henderson index linked bond, Henderson long dated corporate bond, Henderson long dated gilt, Henderson preference and bond, Henderson UK gilt and Henderson UK equity income funds

Income facility: Yes

Charges: Initial up to 4% A class shares, annual up to 1.35% A class shares, up to 1.85% X class shares

Commission: Subject to negotiation

Tel: 0800 881144

The panel: Mike Gilbey, Managing director, Atlantean Financial Management,
Alan Buswell, Proprietor, Glenburn Financial Services,
Bruce Bulgin, Partner, Chadney Bulgin
Suitability to market 7.4
Investment strategy 7.4
Past performance 6.0
Company&#39s reputation 7.4
Charges 6.7
Commission 6.7
Product literature 7.0

The Henderson managed income plan, is a portfolio management service that provides access to an actively managed range of Henderson fixed-interest funds and an equity income fund.

Looking at how the product will fit into the market Gilbey says: “This is an internal fund of funds plan that is currently low risk, but potentially could be medium or high risk. It is hard to fit into a structured portfolio easily, but it is cheaper than most fund of funds because it adopts an internal funds-only structure.”

Bulgin says: “It offers a flexible proposition for generating income from a range of primarily fixed-interest funds.” Buswell says: “An actively managed income fund fits well in the market as there are not too many of them around.”

Highlighting the types of clients the plan could suit Bulgin says: “In the main, the fund is suitable for the older investor seeking income. A smaller market is for pension funds, for instance, to provide income from a drawdown fund.” Buswell says: “Any client with money to invest for the medium to long term and not just those looking for income. However, being excessively invested in gilts and bonds is one of the more cautious funds.” Gilbey says: “This product is most suitable for a client who needs income. It would appeal to older or retired clients looking for pension withdrawal income or tax-efficient income via an Isa or Pep.”

Identifying the marketing opportunities the product could provide Buswell says: “There are good opportunities across all types of investment, both private and corporate.” Gilbey points out that it could be used by fee-based and commission-based advisers as a source of income for clients. Bulgin says: “It is useful to promote the idea of a choice or income up to 10 per cent.”

Considering the strong points and useful features of the plan Bulgin says: “The range of funds used and the internal management of these funds, in terms of the proportions in which they are held, and how this can be changed is attractive.” Buswell says: “The active management will be its strongest point, provided this is done in a positive way, as most of these funds tend to be, rather than a reactive and passive way.”

Gilbey says: “The strong points are the income flexibility and the relatively high target income yield from a seemingly low level of risk. Although the bond content contains a high proportion of high-yield bonds and the manager has the discretion to include equity funds without notice. The choice of monthly or quarterly income is also highly desirable, especially in connection to pension fund withdrawal plans.”

Analysing the investment strategy, Buswell says it is fairly cautious. He says this is clearly stated by Henderson and it should be understood by all investors. Gilbey says: “The investment strategy is sound but presented in such a manner as to appear lower in risk than it is, or at least than it can potentially be. It combines a small spread of investment-grade bonds with a high percentage of high-yield bonds, preference shares, convertibles and even some equities. The overall risk level is currently relatively low. However, this owes more to diversification than low-risk investments within the fund.”

Bulgin says: “It looks as if it will work well. There is a wide range of funds ranging from the European high yield bond fund to a gilt fund, which should reduce risk and stabilise returns.”

Turning to the drawbacks Gilbey says: “The main disadvantage is that the product does not clearly fit into any particular sector. It relies on a wider spread of investment for its high yield and the manager has the discretion to construct his portfolio as he sees fit.” Bulgin says: “In some ways it would be simpler to construct an individual portfolio or to opt for one of the funds depending on the individual investor&#39s needs. But in the main, there are few disadvantages.”

Buswell says: “Most of the funds in which money will be invested are very new, with only limited track records. Also, the fund is being launched at the bottom of the market when investors may well be looking for less cautious funds.”

Examining the company&#39s reputation Gilbey says: “Henderson is a long established investment house and is now backed by AMP, so it has little potential resource problems. It also runs a few of my favourite funds in two or three sectors and I would have no problem recommending the portfolio as it currently stands. Henderson is very familiar to investors and it enjoys a very good reputation.”

Bulgin says: “Henderson has a good reputation and offers a number of top-performing funds.” Buswell says: “Henderson has a solid reputation, although some of the gloss has come off lately following the spectacular fall from grace of its flagship technology fund.”

Moving onto past performance Buswell says: “Everybody has suffered badly over the last couple of years and Henderson is no exception.” Gilbey says: “Henderson has achieved very good past performance in the bond and preference & bond arena. It is certainly above average for fixed-interest funds. The managed income plan is, however, too new to have developed a true track record. Although the track record of the underlying funds and managers involved is impressive.”

Bulgin says: “Henderson has not always been top dog and the equity income fund is unlikely to be on many preferred lists. The bond funds, except for the preference and bond fund, and the long corporate bond fund, have little in the way of long-term track records. The preference & bond fund and the long corporate bond fund are first class funds.”

Identifying the competitors the product could face Gilbey says: “The main competitors are likely to remain the high yield bond sector leaders such as ABN AMRO high income, the Aberdeen fixed interest and even its own Henderson preference & bond fund. It is unlikely to compete with the true fund of funds or managed portfolio funds that it is probably aiming for.” Bulgin goes for distribution funds and bond funds from companies such as M&G. Buswell goes for longer established corporate bond funds.

On the issue of charges, Bulgin and Buswell think they are fair and reasonable Gilbey says: “The charges are relatively low for a managed or fund of fund product but this owes much to restricting investments to in-house funds. In context they are fair and reasonable.”

The panel agree that commission is standard in the context of the market.
Evaluating the product literature Bulgin says: “It is of above average quality and is easy to read. I like the idea of the Q & A section.” Buswell feels it is clear and concise.

Gilbey says: “The design is reasonably attractive and the literature is easy to read. It suffers, however, from a relatively complicated product structure and numerous caveats and conditions. The caveats in the easy read brochure are shown in smaller type away from the point they relate to. They should be shown bolder to protect the client and the unwary or busy adviser.”

Summing up Buswell says: “My only concerns are the lack of performance figures due to the high investment content in new funds and Henderson may have missed the boat by launching this too late,”


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