Schroders has unveiled its third yield enhancing Income Maximiser unit trust, which is based upon the group's Global Property Securities fund.
The Schroders Global Property Income Maximiser fund will target a 7% annual yield by utilising the same call writing overlay as the group's popular £727m Income Maximiser and £70m Asian Income Maximiser vehicles.
Schroders' head of structured funds Thomas See will run the overlay - while stock selection will be made by EII's Jim Rehlaender, manager of the £546m Schroder Global Property Securities fund, as well as Al Otero.
Rehlaender and Otero will aim to generate a yield of about 4% from a globally diversified portfolio of 60 to 80 global Reits and property securities, while See will aim to achieve a 2.5% to 4% yield premium by selling the call options.
While the Global Property Income Maximiser will be managed in a similar way to Rehlaender's existing Schroders product, the new portfolio is likely to have a greater exposure to the high yielding US Reit market.
Subject to FSA approval, Schroders plans to launch the quarterly-distributing Global Property Income Maximiser on 18 February 2011.
See says the fund has been in the testing phase since the summer.
"Similar to the UK and Asian Income Maximiser products, we anticipate selling upside at an average of 10% over trading prices," See says.
"The UK fund has been going for five years and this process has delivered through the entire market cycle, and there could not have been a better period to test the resilience of any investment process.
"By putting together a panel of counterparties, this competition generates attractive prices and allows us to capture the majority of the upside.
"A good example of this was in June and July of 2009, where the fund grew by more than 45%, but the option strategy only gave away less than 3%."
Schroders head of UK intermediary Robin Stoakley expects to see strong demand for the product in the current environment.
"There is a major demand for income generating assets in the market, I believe it is the single most important area for investors right now," he says.
"The majority of investors buy property for income, and in a product like this there is still room for capital growth as well.
"Jim's existing fund is arguably the market leader for property securities in the UK and it has been one of our top five selling funds this year."
Annual management fee on the new product is in line with the group's other Maximiser vehicles at 1.5%, while the TER is expected to come in below 1.75%.
Reasons to be cheerful
Total investment reaches £9m
Medium to long-term capital growth