Multi-asset  

Tilney launches multi-asset UK income fund

Tilney Bestinvest has launched a multi-asset UK income fund principally aimed at UK investors who are at, or nearing, retirement.

Around 80 per cent of the IFSL Tilney Bestinvest British Enhanced Income (BEI) fund will be invested within the UK market with 20 per cent overseas.

It has a multi-cap exposure with half of the fund invested in equities, 34 per cent in fixed income and the remaining allocation in property, absolute returns and cash.

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The fund, which is managed by chief investment officer Gareth Lewis, targets a gross yield of around 4 per cent and will have a 0.75 per cent annual management charge. If investing through a platform, there is a minimum investment of £500. It has a fixed price offer of 100p per share between 1 February and 12 February.

The investment vehicle will initially invest in around 18 holdings, mostly made up of active funds, and will be available on SEI, Cofunds and Pershing from its launch. It is in the process of being added to further platforms.

Provider view

Gareth Lewis said: “It is clear that more and more people are driven by the income their investments yield. This is partly due to people living longer and having to think of ways to fund their retirement.

“There has been a growing trend for this, and the largest proportion of our own multi asset portfolios is [invested] within our income and income plus growth funds. As such, we wanted to have a fund that appeals to investors with these aims, and believe we have achieved this through the British Enhanced Income fund.”

Adviser view

Scott Gallacher, pictured, chartered financial planner at Leicester-based IFA Rowley Turton, said: “I am sceptical about this one. I do not understand why the company would want to launch a multi-asset fund that invests heavily in the UK market. Multi-asset funds tend to be global. I understand that there is a currency risk when it comes to investing in overseas markets, but you can always mitigate that risk by hedging the currency. I also understand that, historically, the UK market has had a dividend bias, but I still do not understand the need to limit the allocation to the many good dividend-producing companies abroad. However, this is not to say that the fund will not do well. The 0.75 per cent AMC [annual managment charge] sounds reasonable.”

Charges

AMC of 0.75 per cent

Verdict

Many experts predicted that there will be a new wave of demand for income funds following the pension freedoms. While the level of increase in demand is open for debate, there has been no shortage in funds for income. Here, having an income fund that invests heavily in the UK marketplace is understandable. Although the UK is not immune to the volatility and uncertainty currenty plaguing equity markets across the world, the market is considered to be less of a risk than emerging markets and developed countries. Risk is something individuals will want to avoid as they enter the decumulation stage of their life. It is likely that managers will dedicate a greater portion of the fund to overseas assets once the performance of global markets picks up.