Schroders fund aims for total return

Schroders has expanded its range of equity income funds with the launch of a total-return version of its £971m Income fund.

The Schroder UK Alpha Income fund was soft-launched in December and is co-managed by Ed Meier and Vincent Vinatier.

Although the fund sits in the IMA UK Equity Income sector, Robin Stoakley, managing director at Schroders, says it has more of a sector neutral to slight growth bias than the Income fund, which is managed by Nick Purves and Ian Lance.

“This fund is for investors who want equity income but want it managed more for total return than income growth,” says Stoakley.

Meier and Vinatier have managed the Schroder UK Select Growth fund since November 2006, having taken it over from the departing manager, Tom Carroll.

Vinatier says the way the fund is managed is similar to the approach used on UK Select Growth. He says the crossover in holdings in the portfolios is about 75%.

“The difference on UK Alpha Income is the emphasis we place on yields,” he says. The yield target of the fund is 110% of the yield of the FTSE All-Share.

The other main difference between UK Alpha Income and UK Select Growth, is that Alpha Income invests a small portion of its assets outside Britain, particularly in continental Europe. One European stock the fund holds is Total, the French integrated oil companyHe says: “Until the recent collapse in financials the yields of continental European financial companies were more attractive than those in the UK. As such it was an area we wanted to harvest. The UK is doing better now but this doesn’t mean there aren’t still great companies in Europe. If we so choose we will put 9-10% of the fund in Europe.”

The fund is structured as a long-only British unit trust, and Stoakley says that, while it is open for investment, Schroders is not marketing the fund to investors at this stage. This is to allow the managers to first build a track record.