View more on these topics

Strong presence from L&G

Legal & General Unit Trust Managers – UK Equity Income Fund

Type: Unit trust

Aim: Income and growth by investing in UK equities, with ability to enhance income through derivatives

Minimum investment: Lump sum £500, monthly £50

Investment split: 16.8% oil & gas, 15.3% financials, 12.3% industrials, 10.3% telecommunications, 10.2% consumer services, 9.6% basic materials, 8.7% consumer goods, 8.3% healthcare, 7.5% utilities, 1.25% cash and equivalents

Isa link: Yes

Charges: Initial 5%, annual 1.5%

Commission: Initial 3%, renewal 0.5%

Tel: 0845 070 8684

The Legal & General UK equity income fund aims for income and growth by investing in UK equities. Fund manager Richard Black can also use a covered call strategy to enhance income. Thisinvolves selling options on stocks that are already held in the portfolio, so that some of the potential growth will be sacrificed for an upfront payment. This strategy will boost income if the prices of the shares within the portfolio fall or do not rise above the specified target price.

Putting the fund in to its market context, Chelsea Financial Services Darius McDermott says: “L&G has a strong presence in the UK and this new fund will strengthen its existing range. This presence, coupled with its marketing and distribution potential, means the fund will enjoy company access not available to even some of the existing managers in the peer group.

“In terms of bringing something new to the table, L&G has developed something different, if not unique.”

McDermott notes that the capacity for call-option overwriting is nothing new, but adds that L&G says this will be exercised under specific circumstances. “It is unlikely to be used on high dividend-paying stocks; if so, this represents a more tactical product in the largely homogenous UK equity income space. “

He finds the fund’s charges and remuneration in line with the competition.

Turning to the less attractive aspects of the fund McDermott says: “If anything, L&G is coming quite late to what is an already crowded market place with some very strong payers such as Invesco Perpetual’s Neil Woodford and Artemis income’s Adrian Frost boasting strong track records.”

He points out that the main criticism being levelled at the sector is that its constituents are far too concentrated on a small pool of bigger company stocks and questions whether there is really room for this product. However, he feels the fund does have credentials given that L&G’s UK equity team, headed by Robert Churchlow, has a successful track record.

“It is also important to note that the call option is already well established in the UK equity income sector. Schroder income maximiser has already set the bar very high for this type strategy, hitting a seven per cent yield every year since inception. However, as I said before, the new L&G fund appears to be aiming for a more tactical use of the derivative tool.”

McDermott thinks the main competition will come from the Schroder income maximiser.

Summing up, he says: “The fund’s positioning is a 10 per cent weighting to small caps, 20-30 per cent in mid caps and the remainder in bigger companies. These percentages are subject to change as the fund develops. The fund is aiming for a 3.3 per cent yield, but this is relatively low given that it will employ the call-writing option.”


Suitability to market: Good

Investment strategy: Good

Charges: Average

Adviser remuneration: Average

Overall 7/10


RPS exits sale and rent-back sector

Residential Property Solutions has pulled out of the sale and rent-back sector following the resignation of its managing director, Pete Thomson. Thomson (pictured) and head of operations Guy Todd will leave the firm in June to pursue their own venture. However, Thomson says he cannot reveal what this is at the current time. He says: […]


Premier Retirement Services launches annuity comparison service

Premier Retirement Services has launched an annuity comparison service with designed to encourage people to shop around for a pension at retirement. PRS, which is a joint venture between Just Retirement and JLT Benefit Solutions, says the new service aims to increase take-up of the open market option by allowing customers to compare both […]

N&P returns to buy-to-let sector

Norwich & Peterborough Building Society has returned to the buy-to-let sector. The building society pulled out of buy-to-let lending in June 2009. It has returned with three products, including a two and three-year fixed rate at 5.2 per cent and 5.3 per cent respectively, and a two-year discount rate mortgage at 4.85 per cent. All […]

Key themes for 2017

Capital Market Notes, December 2016 Dave Lafferty, chief market strategist at Natixis Global Asset Management, assesses the accuracy of his 2016 outlook and provides his thoughts and outlook for 2017. Click here to read the full article


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 advice.

    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