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RSA drives for high income

Royal and Sun Alliance is adding to its range of corporate bond funds with the maximum income bond fund.

The fund aims to deliver a high level of income by investing in high yielding corporate bonds in Europe including the UK. The company believes this will minimise the risk of default, which tends to be higher in countries such as the US.

The fund has three share classes – share classses one, two and three – which have different charges. The fund has an estimated income yield of 10.28 per cent a year, which will be paid quarterly.

Corporate bonds are being increasingly used to provide income whereas equities are being used for capital growth and this fund is likely to suit cautious investors who are seeking high income. Although corporate bonds are lower risk than equities, some corporate bond funds have higher risks than others. This bond fund is one of the higher risk funds and investors should be aware of this.

One useful feature of this corporate bond fund is that charges are taken from income rather than the capital, sparing it from being eroded.

According to Standard & Poor&#39s the Royal & SunAlliance High Income bond 1 is ranked 58 out of 58 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to November 20, 2000.

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