Sarasin has established the Sarasin CI income portfolio, a Guernsey-based unit trust that invests in a portfolio of bonds and equities.
The fund aims to deliver an initial yield of between 6 and 8 per cent, but will also have scope for capital growth. The fund will initially invest 70 per cent in bonds, 20 per cent in equities and 10 per cent in cash. But, this could change if conditions in equity markets improve, with a maximum of 35 per cent going into equities and at least 60 per cent remaining in bonds.
The bond part of the fund will comprise of government bonds and investment-grade corporate bonds with ratings of between AAA and A, although some BBB-rated bonds will be considered. The bonds will be selected with reference to credit ratings and balance sheets.
The equity part of the fund will be managed on a global thematic basis, where stocks are selected according to themes such as survival of the fittest. This looks at companies with strong balance sheets that are performing well when rivals may be struggling. Other themes include e-business and technology, and corporate restructuring.
Investors are increasingly having to take more risk to achieve the level of returns they had in the 1990s and Sarasin's mix of bonds and equities tries to balance risk and reward in this context. But its objective will only be met if the bonds chosen produce the anticipated yields and if the use of thematic investing highlights undervalued stocks with the best yields.
According to Standard & Poor's the Sarasin CI globalsar sterling balanced fund is ranked 32 out of 106 funds based on £1,000 invested on a bid-to-bid-basis with gross income reinvested over three years to July 12, 2002.