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Product matters

Total return funds have not had a very good press lately. A raft of them launched around 12 months ago and, as yet, as far as I can see, none have achieved what they set out to.

A combination of poor market conditions and unrealistic targets has even caused some to do some desperate goalpost shifting and public opinion of them is not very high.

Launching a total return fund into this headwind might seem like marketing kamikaze but Royal London Asset Management is the latest firm to move into this area and, having met the team in charge, we think it could be one of the first to succeed.

It has an experienced bond team at the helm in Jonathan Platt, Paul Doran, Eric Holt and Stephen Booth and it will be a strategic bond fund in the purest sense.

It will be able to move where it likes and will not have to hold assets it thinks are unattractive.

It will be a concentrated portfolio of between 40-60 stocks and will invest in bonds, derivatives, covered call options and equities to achieve their 7 per cent yield target.

They feel that they have multiple sources of performance to do this, from credit selection to equities and enhancing the yield through to the covered calls and interest management generating income with “swaptions”.

We like the concept and the team behind it and think it has a strong chance of succeeding.

It represents a breaking of the mould at Royal London really. Its fixed-interest team are known for getting steady results. This is a high-perform- ance bond fund when compared with their traditional products but we think it will have a broad appeal and will be contacting our clients about its launch.

Darius McDermott is managing director at Chelsea Financial Services


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