DWS's managed distribution fund is another in the longish recent line of distribution funds although this one has a slightly different twist – it is a fettered fund of funds.
It will invest in between six and eight DWS funds but, unlike some other distribution funds, this fund is not going to hamstring itself at launch by setting in stone the asset allocation. It will start off with an equity/bond split of 50/50 but will be able to go to 60/40 either way as and when fund manager Jonathan Arthur feels it is appropriate.
He has been with DWS for seven years and already manages managed funds for them. The majority of the equity portfolio will be initially invested in the equity income fund which obviously helps boost the income in the short term. In addition, it provides a dependable base of companies with which to invest. The bond portfolio will be split between corporate debt – UK and international and gilts.
Distribution funds are seen in some quarters as with-profits replacements. They offer a reasonable yield (in this case, about 4.5 per cent) and the prospects of both income growth and capital growth over the long term.
DWS is one of the biggest institutional managers but is fairly small in the retail market, largely because its team-based approach never seems as exciting to a retail investor. It seems to be trying to set its stall out on providing slightly innovative income products.
This fund should be a solid, dependable long-term performer whose asset allocation is determined by investment decisions rather than by spurious tax legislation.
Ben Yearsley is investment manager with Hargreaves Lansdown