Nationwide Building Society has filled a gap in its product portfolio with a Catmarked unit trust designed to generate high income.
The high income fund is aiming to produce income of 6.5 per cent a year by investing in UK corporate bonds. At least 80 per cent of the portfolio will go into investment-grade corporate bonds and the remainder will go into high-yielding corporate bonds.
There are three existing unit trusts in Nationwide's range of unit trusts Nationwide balanced, Nationwide tracker and Nationwide UK growth. The new fund is Catmarked like the existing tracker fund, so it has no initial charge and the annual management charge is 1 per cent.
The company feels this will make it more attractive to investors who usually rely on building society accounts. These investors may be looking for an alternative to make their money work harder for them as falls in the Bank of England base rate has affected the interest paid on savings.
The fund invests in a higher proportion of investment-grade bonds than some corporate bond funds which makes it less risky than those producing higher yields. However it may still be too risky for investors who are used to building society accounts, where the initial capital is not at risk.
According to Standard & Poor's, the Nationwide UK growth fund is ranked 112 out of 242 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to October 15, 2001.