View more on these topics

Schroders calls the shots


Schroder Income Maximiser

Type: Unit trust

Aim: Income and growth by investing in higher yielding UK large caps and options on these stocks

Minimum investment: Lump sum 1,000, monthly 50

Investment split: 100% in UK large caps and options

Isa link: Yes

Pep transfers: Yes

Charges: Initial 5.25%, annual 1.5%

Special offer: Initial charge reduced to 3.25%

Offer period: Until November 4, 2005

Commission: Initial 3%

Tel 0800 718 777

Schroders income maximiser is a unit trust that aims for income and growth by investing in higher yielding UK large caps and options on these stocks under the Ucits III rules.

Independent Personal Financial Management director Luke Gibbon points out that idea behind this product is to generate a high yield by investing in 30 to 40 UK large cap stocks which should provide a yield of about 3.5 per cent a year.

Schroders will then sell call options on the shares which it estimates will produce a further 2.5-4 per cent a year in premiums. The dividend and premiums can be accumulated or distributed as income. The fund can therefore be used as a low-risk growth product or a high income fund, he says.

Gibbon notes the use of call options is designed to enhance the fund if the prices of the shares within the portfolio fall or do not rise above the target or strike price. If the share price exceeds the strike price then the excess growth will be lost, he says.

Looking at the structure and charges of the fund Gibbon says: The fund can be purchased via an Isa. The normal unit trust and Isa charges and commissions will apply.

Highlighting the less attractive features of the fund Gibbon says: The concept behind the call options is complex and could be difficult to explain to clients. As an analogy, I take my car to be serviced at a garage in the belief that the mechanics know what is going on under the bonnet. Advisers need to be the mechanics of the finance industry however, we need to explain to our clients how the product works or run the risk of recrimination at a later date.

He also draws attention to the charges are taken from capital which will increase the risk of capital loss.

Casting an eye over potential competitors Gibbon suggests other high income products will provide the main competition. However these will normally contain junk or precipice bonds and cannot be directly compared with this product, he says.

He concludes: As with any product it will only be suitable for certain clients. However I think the product will have a wide market and will certainly be recommending it where appropriate to my clients.


Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10


Doel to run new F&C UK opps fund

F&C is to offer a UK opportu- nities fund which will be run by ex- DWS manager Phil Doel. The fund will hold 25 equ- ally weighted stocks, enabling Doel to back his favourite stockpicks. The launch follows Aberdeen takeover of DWS last autumn. Analysts say investor confidence is picking up and their only reservation […]

Heading for a fall

As the mortgage industry moves into 2006, more than a few people will be relieved that M-Day did not bring the end of the the world, mortgage business is still being transacted and FSA regulation has probably not been as unpleasant as many imagined.

PPF levy soars to 575m

The Pension Protection Fund risk-based levy of 575m this year will cost firms almost double the amount that was forecast initially. The figure is significantly below many industry forecasts, which had ranged as high as 900m but still way above the Governments’s original projection of 300m. Consultancy Watson Wyatt warns that the levy will cost […]

Baronsmead VCT 3 closes early

Baronsmead VCT 3 has closed and issued the final tranche of 24m C-shares at 100p a share.The issue is the first VCT in this fiscal year to reach its fund raising target. Since the prospectus was issued in September 2005 F&C, who market the VCT, say it has taken approximately 30 per cent of the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm