Troy UK Oeic will try to reduce volatility

To do this, Brooke says it will typically have 70% in equities, although if he is very bearish he can take this down to a minimum 50%; alternatively, he can go up to 100%. The remainder of the portfolio will be in bonds and bank preference shares, which are currently yielding an average 6.5%. Overall, the portfolio is intended to yield about 4%.

The fund will carry no initial charge and has an annual management fee of 1%. It will be targeted at private clients, fee-based advisers and professional trustees. The minimum investment will be £7,000 for Isa investors, and £25,000 outside the wrapper.

Brooke is now in the process of investing the money already in the fund; however, as he is cautious on the market, he says he is unlikely to be fully invested in equities. Within the asset class, he is currently buying good-quality resource companies, utilities and tobacco stocks.

Typically, the fund will have about 10-15% in other assets and currently the bulk is going into bank preference shares. While he can also invest in gilts, Brooke has no exposure to them at present, as he feels he can get a better return from cash.

He anticipates the fund will have about 45 holdings, 35 of which will normally be in equities: “By investing in other asset classes, I am trying to reduce the volatility you would get from investing in a pure equity fund. This fund will do better when the market is weak; however, where there is upside in the market, it can participate in that as well.”

Troy’s first UK Oeic, the Trojan fund, was launched three years ago and is placed in the IMA Balanced sector. Unlike the Income fund, the spread between bonds and equities is more equal, with the current split being 54% equities and the rest in bonds and cash.

l See Patrick Collinson, page 31.