Edinburgh Fund Managers is reducing the 5% initial charge on its Monthly Income fund to 4% from 30 J...
Edinburgh Fund Managers is reducing the 5% initial charge on its Monthly Income fund to 4% from 30 June.
The discount, which lasts until the end of September, has been put in place to mark the fund achieving a three-year track record. It has been run since its launch in May 2000 by John Cornes of Laing & Cruickshank.
The portfolio, which sits in the Equity & Bond Income sector, can hold a maximum of 40% in equities. As of 9 June the fund had 37.6% in equities with the rest in fixed interest, this compares with a 25% exposure to equities in autumn 2002.
Cornes is cautiously optimistic on the outlook for equities going forward and intends to raise exposure further over the next few months with an emphasis on value rather than growth stocks.
The equity element is focused on higher yield stocks with some 24% of it invested in utilities, particularly water stocks.
Cornes said he took the position to take advantage of a recent decision from the industry regulator allowing firms to increase prices prior to a review due in 2004. One of the main aims of the fund is to pay a regular monthly income each month and then in March pay out any extra income in the fund as a bonus. In December 2002 the monthly income of 24p paid out per unit since the fund's launch rose to 25p. In March 2002 the end of year bonus distribution rose to 38p from 32p in 2000, but in March this year it was 25.92p.
Cornes said this year he chose to hold money in reserve rather than pay out a large bonus.
He added: 'It is quite simply an irregular bonus and it depends on the income received over the last 12 months. In this case I was making absolutely sure for the next financial year there would be a good cushion of income going for the next financial year. It is essential I can keep paying 25p per unit monthly distribution and this is something which requires constant attention, it is never easy.'
The fixed interest element of the fund provides the bulk of the monthly income payments. With decent yields getting harder to find, Cornes said this can make his job more difficult.
He added: 'I find more of what I want in new issues and I invest in euro sterling bonds, never below an A rating. I always buy bonds below par because I will make money if I hold them until redemption. I also build up income at the start of the year through investing in shares of companies that are paying out their final distribution.'
Over the three years to 9 June the fund outperformed its sector average with a 27.1% return against a sector average of -7.9%, ranking it first out of 34 funds in the sector, after charges.
In the 12 months to 9 June it returned -0.9% against a sector average of -10.7%, while in the three months to 9 June it underperformed the sector average with a return of 9.8% against a 12.4% sector average, bid to bid. Over the period it is ranked 30 out of 39.
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