Henderson Investors has cut the initial charge on its European High Yield Bond unit trust. Until the...
Henderson Investors has cut the initial charge on its European High Yield Bond unit trust. Until the end of April the front-end charge will be 3.5% instead of the usual 4% for lump sum investments.
The annual management charge on the £32.4m fund, which was launched in October 1999, will remain the same at 1.25%. Intermediaries can receive up to 3% commission and 0.5% trail is available on Isa investments.
The fund is offering a yield of 9.1% after charges and is ranked in the top quartile of the Micropal UK General Bonds peer group over three months. But the fund should actually be ranked higher than 11 out of 91, according to its manager Dominic Powell.
Powell said: "A lot of our competitors take their charges from capital whereas we take our charges from income. The performance of funds which take charges from capital on a annual basis can sometimes flatter to deceive."
Since launch Powell has built up a portfolio of 40 holdings which he regards as a good level of diversification. Not only in terms of the number of holdings but also the number of different issuers. Although around half of the portfolio is exposed to debt issued by telecom companies.
Powell said: "This may seem a lot but if you look at most European bond indices they between a 70-80% weighting in telecom companies.
"We take the view that it is important to maintain good level of diversification even if it is at the expense of some performance."
The vast majority of stocks are either double B or single B securities. Among the telecom stocks held in the portfolio is Atlantic which offers a yield of 13.25% with the paper now trading at premium. Away from telecom issuants the fund's second largest holding is Weight Watchers. The company has got good cash flow and the paper offers a 12.7% redemption yield, according to Powell.
l In an unconnected move Hendersons has reduced the initial charge on its five-year-old Ethical unit trust from 5.25% to 4.25% for lump sum investments until the end of April. Since the NPI Global Care team, which runs the Global Care Growth unit trust, joined the Henderson ethical team last year, both fund's investment philosophies have moved closer together.
Previously the Henderson Ethical fund was managed on pure ethical approach. Where the manager would establish an ethical screen which would filter through companies which had no links to tobacco, alcohol or arms manufacture.
The Henderson fund is now starting to be managed on a socially responsible basis, like the NPI fund. This process is more pragmatic allows investment in companies, such as BT if even if 1% of their business would not meet the requirements of an ethical screen.
The managers of Henderson Ethical and NPI Global Care Growth unit trusts are looking at ways to differentiate the two funds.
One way this could be achieved would be for one of the funds to mirror the World Index in terms of asset allocation, according to Claire Brook the manager of NPI Global Care Growth.
Currently both funds are overweight the UK with around 35% of their portfolios exposed to the market. In general, world indices give the UK a weighting of 11%.
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