The £9m Premier Dividend fund has changed its name, strategy and investment universe following the arrival of its new manager, Chris Wright, last month.
As reported in Fund Strategy on September 1, Wright joined Premier from Thames River, where he specialised in hedge funds, to take over management of the Premier Dividend fund, from Paul Branigan. The main reason for the change was to improve performance.
After the changes were approved at an extraordinary general meeting (EGM) last week the fund was renamed Premier Optimum Income and the investment universe has broadened to include pan-European stocks as well as British ones. Wright has also introduced the use of call options to enhance income.
“Including European stocks gives me much more choice,” says Wright. “I don’t have to hold stocks and sectors in the UK that I don’t like. Telcos, facilities and insurers will be a fair chunk of the fund.
“It’s about cash and the growth of cash. It’s something I believe in. We will have call options only on things we own. Selling options reduces volatility. It generates additional income and protects on the downside. It’s taking advantage of behavioural failings, of the over-optimistic expectation that prices will go up.”
According to Wright, 80% of the changes planned for the fund have been made already, with the remaining 20% expected to be complete by this week.
The Premier Optimum Income fund, which was officially launched last week, invests predominantly in British and European large capitalisation high-yield equities. It will consist of about 40 stocks, with an average yield of 5.5-6% and will be largely fully invested.
According to Wright 75% of the portfolio will be invested in blue chip companies. Within that, 40% will be allocated to British stocks, while 60% will be invested in European companies. The remaining 25% of the portfolio will invest in mid-cap companies, of which 80% will be British stocks, while 20% will be European. Wright says mid-sized European companies are more likely to cut dividends than British mid-cap companies.
Holdings include GlaxoSmithKline, Vodafone and KPN Telecoms.