Prudential is set to change the mandate of its Distribution fund to a 60/40 bond and equity split ...
Prudential is set to change the mandate of its Distribution fund to a 60/40 bond and equity split to maintain the 10% tax credit on dividends for its Isa investors.
The move is subject to the outcome of Prudential's research into the fund's unitholder base and will be decided either way this week. The group is keen to ensure the portfolio has sufficient Isa investors to warrant the change.
The initial charge on the Distribution trust is being discounted from 3% to 2% but the Pru will still pay 3% initial commission and 0.5% renewal.
Prudential Distribution is currently benchmarked 55% against the FTSE All-Share and 45% against the Merrill Lynch Sterling Corporate All Stocks Index. However, the group is conscious a change in its asset split would potentially benefit a large number of its investors and entice new ones, should the tax credit be rescinded next April, as expected.
Many of the fund's unitholders are investing for income and given the equity portion of the fund targets a yield of between 120%-125% of that of the FTSE All-Share, being able to maintain the tax credit by upping the bond quotient could have a significant impact on returns moving forward.
The consistent performance of the fund, which is listed in the Cautious Managed sector, and the negative press over Prudential's with-profits vehicles, has led the group recently to market the vehicle more aggressively.
Over three years to 21 April, Distribution fell 3.5% offer to bid, compared to a sector average return of -12.2%, ranking it 4 out of 20 funds.
'Historically, the unit trust sector has not been a major push for us, but we are increasingly marketing our investment products and are looking at broadening the range,' Matthew Williams, manager of the £130.4m portfolio, said.
He noted while M&G is seen as a more specialist fund manager with more aggressive performance targets and a somewhat younger customer base, Prudential is targeting the more mature, regular savings market.
Distribution is seen as the vehicle with which to lead the assault on that target market.
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