Norwich Union has introduced an Oeic that aims to provide a high level of income with the potential for capital growth.
The Norwich Union distribution fund has an estimated yield of 5.7 per cent a year and is divided into a corporate bond portfolio and an equity portfolio. Around 65 per cent of the fund is invested in corporate bonds and this part of the portfolio is managed by Roger Webb. Webb also manages the higher income plus and managed income funds.
With the new fund, Webb will invest mainly in investment-grade bonds, but a smaller part of the portfolio will go into high-yield bonds. He will invest across sectors, with particular focus on bonds in the BBB to BBB+ rating.
The remaining 35 per cent of the fund goes into a portfolio of UK equities managed by Scott McKenzie, who already runs the UK equity income fund. McKenzie will aim to produce a yield of 125 per cent of the FTSE All Share index. He will invest across a range of sectors, but will target companies that can deliver income yields of between 2 and 3 per cent.
This fund could suit fairly cautious income investors who want some exposure to equities, despite recent volatility. This fund has a higher target yield than the 5 per cent a year offered by Jupiters distribution fund but the fund managers will have to ensure that their blend of bonds and equities, which has the same investment split as the Jupiter fund, can meet this yield.
According to Standard & Poors the Norwich higher income plus fund is ranked 6 out of 23 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to November 8, 2002.