Schroders’ Global Property Income Maximiser fund is to drop its derivative overlay investment strategy and move towards purer equity and income holdings, subject to investor approval.
The planned changes will see the vehicle’s target yield fall from around 7 per cent to 4 to 5 per cent, and include a rebrand for the fund.
The £61m fund, which has underperformed its FTSE Epra/Nareit Developed index benchmark across one and three years, currently invests in global real estate trusts and property equities, and uses covered call options to increase the income. But if the changes go ahead it will aim to focus on a “liquid portfolio of real estate equities”, targeting listed real estate companies, Reits and preferred stock on sustainable dividends.
The vehicle will be renamed Schroder Global Real Estate Securities Income, and its index will change to the FTSE Epra/Nareit Developed Dividend Plus, which focuses on stocks with a dividend yield above 2 per cent.
Schroders said: “If the change is approved, the fund’s risk profile will not significantly change, and investments will be selected using the existing process and investment framework.”
Investors will vote on the changes on 12 February.
The fund has returned 7.2 per cent over three years, compared with a rise of 25.5 per cent for its current benchmark and a 26.4 per cent increase for the Dividend Plus index, data from FE Analytics shows.
Matthew Harris, owner and independent financial adviser at Dalbeath Financial Planning, said: “We have noticed more and more funds using covered call strategies, which increase the income of the fund in exchange for sacrificing some potential for capital gains if the market rises.
“However, we have not recommended them to our clients due to their complexity, and we are not surprised that Schroders has decided to change the mandate of this fund.”