Schroders is to offer a cautious version of its income maximiser that targets an initial yield of between 5 and 6 per cent.
The UK income defensive fund will use two put options to defend investors from potential market instability.
The fund will invest in 30 to 50 mid and large-cap stocks, with put options giving protection against falls in the FTSE 100 and 250 indices.
Schroders’ income maximiser has grown to £251m since launch in 2005.
The portfolio, managed by Richard Lloyd, is more agg-ressive in that it looks to return 7 per cent using covered call options. The strike price on the covered call options sits at around 110 per cent while the options on the defensive income product will be set at 90 and 95 per cent respectively.
The fund is set to launch on March 7 with a minimum investment of £1,000. Charges are 5.25 per cent initial and 1.5 per cent annual.
Hargreaves Lansdown sen-ior fund analyst Meera Patel says: “We are still looking at the long-term performance of the original maximiser so it is likely that we will take the same stance with this new defensive option.”