Fidelity seeks enhanced Global Dividend demand

Ben Waterhouse, the sales head, and Dan Roberts, manager of the fund, stressed their aim is to bed down the Global Dividend product, which launched on January 30.

However, Mr Waterhouse said Fidelity would be capable of launching an “enhanced” version of the fund, which would sell covered call options to buy stocks in the portfolio and hence generate an extra income.

Fidelity has run an “enhanced” retail version of Michael Clark’s £430m MoneyBuilder Dividend UK equity income fund since February 2009, in the form of the £36m Fidelity Enhanced Income fund. The derivatives portion of the portfolio is managed by David Jehan.

In spite of generating an extra income, however, the fund has underperformed the FTSE All-Share index and the IMA UK Equity Income sector since launch, generating a 38.6 per cent return compared with 56.3 per cent and 50 per cent respectively. In the same period, MoneyBuilder Dividend has gained 43.7 per cent.

The Fidelity Enhanced Income fund has also undershot the Schroder Income Maximiser fund, its major competitor in the retail covered call market, which has amassed £726m and returned 46.3 per cent.

The stock picks for the fund are based on the firm’s flagship UK equity income strategy, Schroder Income, which is £1.1bn in size and has returned 55 per cent over the period.

Schroder Income Maximiser has a longer record – more than five years – and has returned 8 per cent over the period, compared with 8.4 per cent for the FTSE All-Share and a loss of 1.6 per cent for the UK Equity Income sector.

However, Schroders’ global equity version of Income Maximiser – the offshore $38.9m (£24.6m) ISF Global Dividend Maximiser – has lost 1.58 per cent since launch on July 13 2007 to February 3, according to FE. Its MSCI World performance benchmark has gained 7.77 per cent.

Overall, Fidelity said it remained bullish on the prospects for new income strategies in the UK as central bank interest rates remain near zero.

Andrew Wells, chief investment officer for fixed income at Fidelity Worldwide Investment, said investors would demand an array of income investments to compensate, much as they have done in similar conditions in Japan. He hailed high yield in particular as an asset class that could meet investors’ demand for income, if exposures to underlying instruments were carefully managed.