Bestinvest says
This fund targets a 7% annual yield through investment worldwide in property related equities (although there will be a bias to US property companies). The fund will have some commonality with Schroder Global Property Securities, run by the same manager, but aims to pay higher dividends. To do this it will select stocks with a higher dividend yield and use the option writing strategy used successfully on Schroder Income Maximiser. An interesting diversifier for income portfolios for those willing to sacrifice some capital appreciation for extra income today. The strategy works best in gently rising markets.
The fund's objective is to provide income with potential for capital growth by investing in REIT’s (Real Estate Investment Trusts) and property companies. The universe of investments includes listed property companies world wide. Although the investment process focuses primarily on analysis at the company level, macro inputs also play a part in terms of relative valuation and local property market drivers. Security selection begins with the application of a screen to identify the investable universe, stocks with a market capitalisation under £200m are disregarded, followed by more detailed proprietary research to identify best ideas. There will be about 40% overlap with the portfolio of Schroder Global Property Securities, run by the same manager since in this fund a stock's dividend yield is a more important factor. Dividend income is boosted through employing an option writing strategy, which generates 'premiums'. Therefore portfolio holdings will also be governed by the availability of liquidity in the option market for a given security. The fund will subsequently receive premiums for writing 3 month call options on the underlying securities; these premiums will be distributed to investors as additional income. By selling call options the fund will be giving away an element of a stock's potential capital upside, this may reduce the capital growth prospects of the fund and this strategy works best in gently rising markets. In strongly rising markets the strategy is likely to underperform; in gently rising or falling markets this should outperform. The level of premium income is not guaranteed and will vary according to market conditions. In the event of a fall in dividends or option premium the fund may give away additional participation in any capital upside to maintain income levels.