Aim: Income by investing in fixed and floating rate debt securities, equities including Reits and equity-linked securities
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 100% in fixed and floating rate debt securities, equities including Reits and equity-linked securities
Isa link: Yes
Charges: Initial 4.25%, annual 1.25%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 727 770
JPMorgan Asset Management’s multi-asset income fund will invest globally for income in a range of assets that include high-yielding shares, Reits, investment grade and high-yield bonds, emerging market debt and convertibles.
Considering how the fund could be useful to IFAs and their clients, Flowers McEwan director David Flowers says: “The main appeal is the putative high quarterly income with a lower risk profile due to diversification across asset classes within the fund. If this can be achieved it is indeed a good product for the IFA to have in his briefcase.”
Flowers regards the product literature is unspectacular, but he says it covers the usual ground. “However, there is no mention of commission anywhere. Why not?” he adds.
Asset class diversification is good to have in Flowers’ view He thinks the product competes directly with JP Morgan’s Strategic Bond fund, which does not offer the same level of diversification. “The income is predicted by a very generous 6.5 to – 7.5 per cent, although this is not guaranteed,” says Flowers.
JP Morgan’s track record in income funds over the long term is reasonably average according to Flowers, but it he says it underperforms the main benchmarks.
Turning to the potential drawbacks of the fund Flowers says: “The high income comes with a potential sting in the tail of capital loss, which makes this a higher risk product. I am not sure that risk alongside a lack of certainty over the predicted quarterly income is going to make the product appeal to the archetypal income seeker,” he says.
Flowers finds it hard to see where the income will come from. He notes that at the end of October last year, the fund’s yield was well below the predicted range at as the fund’s current yield, at 6.14 per cent, was well below the predicted range after a very good period for the growth portion of the portfolio.
“With annual management fees of 1.25 per cent and expenses on top of that, the actual income could be more like 4 per cent in Flowers’ view. “The literature is misleading on this as sometimes it predicts a return over Libor of 2.5 per cent and sometimes of 3.5 per cent, net of fees, while publicising an attractive income target of 6.5 to 7.5 per cent.”
Scanning the market for potential competitors, Flowers says: “Clients looking for a high income may be attracted by this fund, but need to be warned of the risks and lack of clarity in the predictions. The only investments that can really offer these sorts of income numbers will be structured products with the relevant risk of loss implied.”
Summing up, Flowers says: “It is understandable that marketing departments are seeking to provide a solution to the income seeker. I remain sceptical as to whether this product can deliver 7 per cent a year over the medium or long term, especially as the literature is not that clear.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average