Schroder Income Maximiser Fund

convict90210

Hi all..My mother if currently considering investing a large sum of nearly 7k into this fund on the advice of her bank (HSBC). She is looking to invest for income but I just wondered if anyone has got any comments about this fund based on experience/past figures and performance/customer services etc.. Personally, I am a bit wary of why the chap from HSBC is so keen on this particular fund, when others like the Invesco Perpetual High Income Fund to name one, seem to get a lot of praise from other posts...

Thanks in advance!

Aegis

Has she seen an IFA or one of their multi-tied advisers? If it's the latter, then your mother is not being offered a solution from the whole of market. This fund in particular is in the 3rd quartile of performers for the last year, and only started in 2005 so detailed further data is not yet available.

I'm not really sure why this particular fund would be recommended over other Income funds. It's possible that some advisers think that this is going to be a big winner in the next few years, but at first glance I can't see it...

All in all, single fund investment in a fairly new fund is a very risky strategy, and it might be a good idea to get a second opinion.


So that you're aware, the Invesco Perpetual Income and High Income funds are towards the top end of the risk levels within their own sectors because of Woodford's choice of shares. His strategy seems to have paid off in the long run, but it does lead to added volatility!

convict90210

I have advised her to see an IFA to get another opinion as the guy she has seen is one of their tied agents ie. salesman. She is willing to take an element of risk but as she is approaching retirement the risk to her capital must be minimal!

meester

Do you mean £7,000? That is not a large sum. With the High Income Fund, yield is about 3%, so £210/year income.

I imagine the reason the bank has recommended it is b ecause of their ties with Schroders, and also because this fund is one of the breed of 7% yield funds (£490/year) that use covered call options, effectively reducing capital growth in order to increase yield. This is not necessarily bad, but effectively the cost of the income must be less than the growth sacrificed, so the overall return is less.

It does not appear to be a bad product at all, but I assume the bank would receive 5% initial commission, and ongoing commission of 0.5% year. There is no reason to pay this, if you like the fund, then invest directly with Hargreaves Lansdown and save this sum.

There are a variety of other funds along similar lines: see here for a new fund from Schroders, the UK Income Defensive with slightly lower yield

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=159042&d=340&h=341&f=342

Other similar funds include

Allianz Global Investors RCM UK Equity Income
New Star Higher Income

cloud_dog

meester wrote: »

Do you mean £7,000? That is not a large sum.

meester, perhaps you want to be a bit more tactful in future. To someone on a low pension, or where the chances of gaining capital, £7k could be a huge amount of money.

dunstonh

I like the Schroder Income Maximiser fund. I use it often and I have it myself. However, certain things in your post allow me to make assumptions. You say large sum of £7k. That suggests there isnt much money left after this as, with respect, 7k isnt a lot unless you dont have a lot. So, would using a medium/high risk fund for 100% of the investment be a wise move?

If it is a large bulk of your mums money then she should look at £1k per fund and have 7 funds and go low risk or even go with a smaller investment and put £3k in a cash ISA and 4k in a stocks and shares ISA with 1k x 4 funds.

meester

cloud_dog wrote: »

meester, perhaps you want to be a bit more tactful in future. To someone on a low pension, or where the chances of gaining capital, £7k could be a huge amount of money.

It is true that 7k is a lot for many people, but never in the context of the OP's question - earning income, because it won't make

We don't know anything about the OP's mother - is she on means-tested benefits for instance, how old is she, what other savings does she have, is she a pensioner, how much is her pension, etc.

So for the question as phrased, 7k is nothing.

It might turn out that the question the OP hasn't asked, 'what should my mother do with £7k, given that she has other savings and income as follows', that the answer is to blow it on a round-the-world cruise, or something similar, as it's possible that having the 7k in savings is costing her more in income from benefits than she could earn invested.

munk

convict90210 wrote: »

Hi all..My mother if currently considering investing a large sum of nearly 7k into this fund on the advice of her bank (HSBC). She is looking to invest for income but I just wondered if anyone has got any comments about this fund based on experience/past figures and performance/customer services etc.. Personally, I am a bit wary of why the chap from HSBC is so keen on this particular fund, when others like the Invesco Perpetual High Income Fund to name one, seem to get a lot of praise from other posts...

Thanks in advance!

As above, all in one fund is risky and that particular fund has a volatility of perhaps 15-20% to date, can your mother bear seeing her investment go down by up to 20% over a relatively short period?

FYI, schroder are planning on starting a new cautious fund based on the same strategy as the income maximizer fund, read something about it today here:

http://www.citywire.co.uk/News/NewsArticle.aspx?MenuKey=News.Funds&VersionID=101187&rssfeed=FundsNews

This fund should be less volatile but of course with a new fund you don't have any past performance to ascertain it's likely future performance.

Independent financial advice is the way forward if your Mum definitely has the need to invest in funds/stockmarket based investments, otherwise go for a high yielding high street fixed rate bond perhaps or even a high interest savings account.

Newly_retired

About a year ago I asked an IFA (for a second opinion) for some suggestions where to invest ( I have other savings ) and he recommended this Schroeder Income Maximiser Fund, for what it's worth.

convict90210

Many thanks for all the replies..
I quoted the phrase 'a large sum' as this was more based on my own circumstances than my mum's! Her situation is that she has around 15k in cash ISAs, 10k invested directly in a portfolio of high yielding shares, 50k in a high interest savings account, 80k invested in several fixed term bonds and three stakeholder pensions valued around 25k. She was advised to invest the 7k into this fund for her Maxi ISA this current year but when I showed her some of the responses today, she told me that the guy from HSBC has advised investing a further 43k into this Schroder fund when a bond matures in the next few months. Is this not too much in a single fund though?
Thanks in advance!!

dunstonh

Is this not too much in a single fund though?

Yes. Single fund investing is a sign of a tied agent or a poor quality adviser. (note: some exceptions exist...but not in this case).

£43k should have 8-10 funds.

Also, why does she have three stakeholders? If she had one stakeholder and combined them then she could get fund based discounts with the right provider.

I think she would do well getting an "independent" IFA to review her situation. Not a tied agent or anyone belonging to salesforce.