Schroders’ call overwriting fund, UK Income Maximiser, has reached a milestone in assets under management, claiming £1bn as of the end of November.
The fund achieved a monthly return of 4.3% to the end of November, matching that of the FTSE All Share Total Return, the fund’s benchmark, but below the 4.8 delivered by the IMA UK Equity Income, which represents the sector average.
Thomas See, head of structured fund management at Schroders, told SRP that the entire Maximiser fund range has had significant inflows and new investment this year.
“We have seen very strong inflows and one reason for this, of course, is the situation the money markets are in,” he said. “With interest rates so low you will get practically nothing on any such investment. We have seen this situation over the last five years.”
See said that investors are seeking fixed income strategies and credit strategies but the yields in these two areas are also minimal at the moment with the risk that interest rates could raise.
“The longer the cheap money is around the more assets it will impact,” said See. “We have found that equities, especially in Europe, are offering attractive yields compared with historical yields and therefore investors continue to be attracted to stocks.”
According to See, the extra source of yield of the Maximiser fund based on the funds overlay has been noticed by investors. “This is a very distinctive strategy in the current market environment, which I don’t think will change in the near future,” he said. “We have been making the 7% distribution every year since we launched. It is not guaranteed but we have been able to achieve the target yield consistently. Some investment portfolios are using our Maximiser funds to enhance the income of the overall portfolio.”
See added that Schroders has plans to increase the Maximiser range, which is now comprised of five funds – the UK Maximiser, the Schroder Asian Income Maximiser, the Schroder European Dividend Maximiser, the Schroder Global Dividend Maximiser and Schroder Global Property Income Maximiser.
“We currently have five Maximiser strategies with a combined £4.5bn of assets under management,” said See. “Our philosophy is to continue to look for opportunities and design funds that can play a role in a portfolio in terms of diversification. We want also to have a varied range covering different areas.”
Overall, however, the firm says that performance since inception favours the UK Maximiser, which has met its target yield of 7% for the last eight years, and delivered 85.9% in total, slightly above the 74.6% delivered by the benchmark and the 69.5% sector average.
“If you have an extra 4% source of income and the markets don’t perform, at least you have that small amount outperforming the market,” he said.
Schroders’ UK Income Maximiser is an open-ended call overwriting product with a minimum investment of £1,000.
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