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L&G launches first UK equity income fund

Legal & General Investment Management has launched its first UK equity income fund.

The fund’s manager, Richard Black, says the fund aims for a 3.3 per cent yield from day one and will take a bottom-up stock selection process that focuses on about 30-40 holdings at any one time.

The target is a minimum 10 per cent premium to the FTSE all-share and the yield is considered at a portfolio level as opposed to the stock level.

The fund, which was first revealed by Money Marketing, will typically hold 3-6 per cent of assets in sustainable high yield companies, 2-4 per cent in dividend growth stocks and 1-3 per cent in special situations holdings. The dividend yield is predicted to be a minimum of 110 per cent.

Black says many investors presently pay no attention to dividends at all but he predicts dividends to rise over the next few years, presumably generating greater enthusiasm.

At the time of launch, the fund’s allocation is a 10 per cent weighting to small-caps, 20-30 per cent in mid-caps and the remainder in large. These percentages are subject to change as the fund develops.

Although the fund retains the capacity for call-option overwriting, these will be exercised under specific circumstances and are unlikely to be used on high dividend paying stocks

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