Lincoln has launched its first corporate bond trust. The asset allocation policy for the fund is to...
Lincoln has launched its first corporate bond trust. The asset allocation policy for the fund is to be 90% invested in investment grade bonds of which 65% must be A rated.
Goldman Sachs is managing the product with the objective of providing a balance between income and capital security.
Lump sum investors with at least £500 to invest attract a 4.75% discount on the usual 5% inital charge. The offer ends on 30 April. Regular savers can invest as little as £50 per month.
The fund offers an income yield of 7.11% with a gross yield redemption of 6.3%, including the discount offer, and is available with an Isa wrapper. The IFA commission on the fund is 3%.
Helen Turner, Lincoln's head of unit trusts, said: "Our strategy is to target most of our resources into investment grade bonds and, within this area, we are concentrating on the lower-rated bonds. These offer a high rate of return but without significantly higher risk of default than the better-rated bonds. By adding a small amount of non-investment grade, high-yield bonds Goldman can spice the trust with higher interest rates without significantly increasing the risk."
Turner says the timing of the launch was set to take advantage of the ISA season and the fall in high street interest rates. Given the current state of the equity markets the group says the bond fund is a good opportunity to gain exposure to equities while not risking capital.
Andy Wills, business development manager at Lincoln, commented: "The timing of the launch is right because people are concerned about equities and this trust offers exposure but is not a 'shoot your lights out' corporate bond. It aims to produce a steady income."
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By Gary McFarlane
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