Hargreaves Lansdown is recommending investors in the Norwich Union Monthly Income Plus fund switch i...
Hargreaves Lansdown is recommending investors in the Norwich Union Monthly Income Plus fund switch into either Old Mutual Corporate Bond or Schroder Monthly Income.
The Norwich Union fund has suffered from having exposure to the income shares of split-cap investment trusts. Fund manager Mark Gull said this has been the primary cause of underperformance and he has been unable to sell these shares because of the lack of liquidity in the market.
Hargreaves recommends those that want exposure to investment grade bonds, but not the higher level of income, switch into the Old Mutual product. The Schroders vehicle is recommended for those prepared for more risk but with a similar level of income, 7%-7.5%.
Ben Yearsley, investment manager at Hargreaves, said the recommendation to move out of the Norwich Union fund is no reflection on Gull, who inherited a number of problems on the portfolio when he took over two and a half years ago.
The fund is ranked 70 out of 72 in the corporate bond sector, returning -5.2% after charges over one year to 5 August, compared to the sector average return of 0.6%.
While the Norwich Union fund falls into the corporate bond sector due its 85% holding in investment grade bonds, Gull said its higher than average yield suggests it is higher risk relative to the sector.
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An added tier of asset management can of course deliver additional benefits for certain investors, writes Graham Bentley - just be sure you can justify it to the regulator and, especially, the client