Henderson plans to remove the yield target on two of the multi-manager funds ran by Bill McQuaker’s team after citing the fact the market has “changed considerably” since their launch
The asset manager will remove the targets on the £431.6m Henderson Multi-Manager Income & Growth fund and the £214.2m Henderson Multi-Manager Distribution fund on 22 July 2012.
The funds’ current investment objectives are to provide an income in excess of the yield on the FTSE All-Share Index with the prospect of some capital growth- with the Distribution fund aiming for income “significantly” above the index.
Henderson Multi-Manager Income & Growth’s suggested new objective targets “long-term capital growth with the potential for some income generation”, while Henderson Multi-Manager Distribution seeks “a sustainable level of income with the potential for some long-term capital growth”.
Letters sent to investors explain that when the current objectives were formed at the funds’ inception, in 1998 and 2001 respectively, the income on the FTSE All-Share “was relatively low when compared to other asset classes.
“The yield on UK government bonds (gilts), investment grade corporate bonds, and even cash were all considerably higher than equities. At the time, therefore, it was straightforward for the fund to achieve an income in excess of the FTSE All-Share yield because the yield on equities was lower than other asset classes,” the letter explains.
However, this has changed since 2008, with equities tending to yield more than gilts and cash and almost as much as investment grade corporate bonds. This means the funds find it difficult to yield more than equities without biasing their portfolios towards the asset class or bumping against the limit of the IMA Mixed Investment 20-60% Shares sector.
Henderson says for these reasons it has decided to balance income with capital growth and protection, rather than “simply chase a yield”. Both funds have outperformed the IMA Mixed Investment 20-60% Shares sector and the FTSE All-Share Total Return Index over five years to 31 March.