By Robert Stock Gerrard is reducing the initial charge and commission available on its Intern...
By Robert Stock
Gerrard is reducing the initial charge and commission available on its International Bond & Convertible fund and is to alter the way it takes annual charges from the product.
The initial charge will drop on 1 May from 5% to just 2%, with IFA commission falling from 3% to 1%, although the annual trail fee remains at 0.25%.
This brings the fund's charges into line with the Gerrard UK Fixed Income fund in the UK corporate bond sector.
The slashing of the initial charge comes hand in hand with the adoption of a new charging structure by Gerrard, the new brand for the merged Capel Cure Sharp and Greig Middleton businesses.
Under the new structure, the annual management charge will no longer be taken from income but will come from capital.
The move would make the fund, of which a third is made up of IFA-directed assets, easier to sell in an environment where headline yield is key, according to Barry Russell, Gerrard's head of investment fund development.
He said: "What we have done by taking the charge from capital and not income is to narrow the yield differential between the two funds to something that is not very significant at all."
Russell added that the importance of income, as measured by headline yield, was obvious in the flow of assets switching from the international fund to the UK Fixed Interest fund.
"It was driven by yield and we thought we ought to take away that yield factor which was corrupting people's asset allocation decisions by making them think about pure asset allocation and not income when making their decisions," he said.
The International Bond & Convertible fund, managed by Sofia Skalistiri and a team of two other managers, was originally an Albert E Sharp fund. However, its investment mandate only became truly global a year ago when £14m of Pep assets in the fund were switched into the UK Fixed Interest fund, a Capel Cure Myers portfolio.
Skalistiri has managed the fund for two years but has headed up the UK Fixed Interest portfolio since its launch in 1995.
The aim of the fund is to balance long-term capital returns while achieving a relatively high income by investing in a diversified portfolio of investments including eurobonds, convertible eurobonds, fixed rate bonds, domestic bonds, debentures, convertible preference shares, straight preference shares, floating rate notes and medium-term notes. Issuers can include governments and corporations.
The split of the fund at the end of March was 38% in euro bonds, 3% in euro convertible bonds, 15% in sterling bonds, 1% in conventional gilts, 3% in UK convertibles and 40% in dollar bonds.
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