Schroders has launched a new fund that targets a higher yield than traditional equity-income funds by investing in both UK large cap stocks and covered call options.
The Schroder Income Maximiser is structured as a UK authorised unit-trust and is run by Richard Lloyd, head of the structured investments team.
At launch, the portfolio holds 40 large-cap stocks which have been selected by Nick Purves, manager of the AA-rated Schroder Income fund.
Thomas See, director of structured investments at Schroders, said: "The fund is a sub-set of the Schroder Income Fund as it will draw similar holdings from the FTSE 100. Nick Purves has selected the underlying stocks for the fund, while Richard Lloyd decides on the overlying strategy."
As the fund is targeting a 7% yield, 3.5% of which is dividends from the large cap stocks, Schroders hopes that by selling covered call options on these stocks, the group will be able to increase the yield by 2.5% to 4%, bringing it closer to that mark.
Each quarter the structured products team will select a strike price for the covered call products. This will vary between 5% and 15% depending on the volatility of the FTSE 100.
The fund carries a 5.25% initial charge and a 1.5% annual management fee, the fund is also available to advisers via Cofunds, Selestia, FundsNetwork and Skandia platforms.
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