Aberdeen Asset Management is offering a discount on its High Income and Extra Income unit trusts. Th...
Aberdeen Asset Management is offering a discount on its High Income and Extra Income unit trusts.
The 0.5% reduction on the initial 4.25% charge will be available from the beginning of September until the end of the year. The annual charge of 1.25% will remain unchanged.
Both funds are managed by Neil Cumming, head of UK equity income at the group, and the two portfolios have broadly similar objectives. The £192m Extra Income fund is designed to produce a slightly higher yield by investing up to 50% of its portfolio in fixed interest securities including convertibles and preference shares.
At the end of July, 26% of the fund's portfolio was exposed to fixed interest assets, whereas the portfolio of the £419m High Income fund had a 9% exposure only.
Recently the two funds have underperformed their respective Micropal peer groups. This is partly due to the funds' traditional overweight positions in Mid 250 stocks. The High Income fund has a 29% exposure and the Extra Income fund has a 20% weighting in the sector. Mid 250 stocks make up around 15% of the market.
Cumming said: "During the first quarter of the year there was a surge in mid-cap and small cap stocks but they went too far, too quickly. One of our holdings Barratt Development doubled in price. We have held the company for a long time but took some profit in it earlier in the year at 380p. Like other companies from that part of the index it has peaked and traced back slightly.
"Similarly the fund invested in Lex Services a few years ago, which in the 1980s was a run of the mill motor car leasing company.
"Three or four years ago a new management team came in, led by Andy Harrison, and turned the company around.
"We bought shares at around 400p and this year they peaked at 680p and traced back to 620p.
Over three months the High Income fund was ranked 76 out of 89 in the UK Equity Income peer group and fell by 4.3% compared to an average fall of 2.3.
During the same period the Extra Income fund was ranked 36 out of 38 in the UK Equity & Bond Income peer group and fell by 4.5% compared with an average fall of 2.2.
Over the longer term the two funds have performed well. An investment of £1,000 made into the High Income fund at launch 25 years ago would have paid a total income of £10,975. According to the group this is six times greater than the income paid from a deposit account. Similarly, £1,000 invested in Extra Income since its launch 15 years ago would have delivered total income of £1,587.
As well as income the funds offer capital growth. According to the group, £1,000 invested in High Income at launch would now be worth £32,973. The £1,000 invested at launch in Extra Income would now be worth £4,698.
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