The fund will contain between 50 and 70 stocks and will be benchmarked against the FTSE All Share index with a tracking error of between 5 and 8 per cent. It will be managed by former Newton manager Clive Beagles, who joined JO Hambro in September.
Beagles has more than 15 years experience of investing in UK equities and managed the Newtons higher income fund between July 2001 and August 2004. He will be supported by UK equity analyst James Lowen, who worked with Beagles at Newton.
The new fund will have an initial target yield of at least 4 per cent. Beagles will be looking for stocks with yields above the FTSE All Share average and will sell stocks immediately if the yield falls below the FTSE All Share average, regardless of whether he still likes the stock.
A 750m cap has been placed on the fund because Beagles feels that if the fund was larger it would take longer to get in and out of stock positions which would have a negative impact on performance over time.
Although JO Hambro is a relatively small fund management group it has some advantages over larger groups. There is no investment committee, so fund managers can get on with managing funds rather than implementing committee decisions. However, Beagles no longer has Newtons large team of analysts behind him and it may take time for him to adjust and replicate the performance of his Newton fund.
According to Standard & Poors the Newton higher income fund is ranked 7th out of 66 funds based on 1,000 invested on a bid-to-bid basis with net income reinvested in the three years to August 2, 2004.