View more on these topics

ML Blackrock goes for enhancement

BlackRock Merrill Lynch has introduced the MLIIF European enhanced equity yield fund, which aims for income and growth by investing in dividend-paying European equities and derivatives.

The fund is benchmarked against the MSCI Europe index, which comprises approximately 580 stocks, and will contain 100-200 stocks. BlackRock Merrill Lynch says the portfolio will represent the risk characteristics of the index at country and industry level, with a higher average dividend yield. It expects to achieve a dividend of around 4 per cent from the equity portfolio, but income will be boosted through covered call options.

Covered call options are used to generate a steady flow of income that can be distributed or re-invested for higher total returns over time. A call option gives the buyer the right, but not the obligation, to buy an asset at an agreed price. A covered call is an strategy where the fund manager will hold a long position in an asset and sells call options on that asset to generate increased income.

The company aims to reach its target yield of 8 per cent a year by selling index call options on approximately 50 per cent of the portfolio. It says the additional income can provide a cushioning effect during market dips. with the overall blend of investments designed to provide equity-like returns, with reduced volatility.

The investment team begins by using quant screens to identify high dividend-paying stocks to give the underlying portfolio a higher yield relative to the benchmark index, while maintaining the overall characteristics of the benchmark.

The team then sells call options on 40-60 per cent of the portfolio to create the extra income. Typically they will be one month call options on the Eurostoxx 50, FTSE 100 and the Swiss Market Index. According to BlackRock Merrill Lynch, option premiums have increased with the increased volatility in the market, allowing extra income to be generated.

Fund manager Jonathan Clark joined the company in 1999 and is responsible for managing derivative strategies for BlackRock Merrill Lynch’s quantitative investments team, He is the lead fund manager for over $4bn in equity structured products. and has previous experience as a trader at MLC Investments, a hedge fund.

Investors may be looking to diversify through a European income fund that also provides the potential for capital growth potential. The use of covered call options may outperform when stockmarkets are falling, which will appeal to some investors, but the strategy may also result in a lower returns relative to the benchmark in a rising market.


Purvey joins C&G in IFA sales roles

Former Bank of Ireland Mortgages head of sales Kevin Purvey has been appointed as Cheltenham & Gloucester’s new head of corporate intermediary sales from the new year.

Nationwide increases rates on two year trackers

Nationwide has increased rates on a number of its tracker mortgages with effect from December 4.On house purchase, a two year tracker – with £599 fee – is available from 5.83 per cent. A two year tracker with no fee is available at 6.23 per cent.A two year tracker with a £1,499 fee is available […]

FSA refers seven mortgage firms for enforcement in industry clampdown

The FSA has referred seven firms to enforcement and forced 65 firms to undertake costly reviews after a series of investigations found several mortgage brokers continue to operate “well below standard”.The 65 firms will have to undertake costly past business reviews or employ specialists to resolve problems.A few firms have ceased business until they can […]


The Brunner Investment Trust – April 2017

Welcome to the latest update for The Brunner Investment Trust PLC from the Trust’s portfolio manager, Lucy Macdonald. Market Review Global equities have rallied over the first quarter of 2017, buoyed by signs of strengthening growth and optimism over company earnings, although this rally has faded towards the quarter end. US equities posted their strongest […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm