HL SELECT UK INCOME SHARES

Introducing the HL Select UK Income Shares fund

Managers' thoughts

Important information - The value of this fund can still fall so you could get back less than you invested, especially over the short term. The information shown is not personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you are at all unsure of the suitability of an investment for your circumstances please contact us for personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.

Steve Clayton - Fund Manager

10 February 2017

Following the successful launch of the HL Select UK Shares fund last year, we are delighted to announce the launch of the new HL Select UK Income Shares fund.

The new fund aims to provide a portfolio of high quality dividend paying shares, chosen and managed by myself and Charlie Huggins, in a single fund.

History shows that investing in dividend paying companies, and re-investing those dividends, is one of the most powerful ways to grow wealth in the stock market over the long term. Please remember past performance is not a guide to the future.

If you have reached the point when you are ready to start drawing income from your portfolio then with interest rates being where they are at the moment, equity income is a very attractive strategy for many investors. Investors should bear in mind that neither the income from shares nor their capital value is guaranteed, so investors could make a loss, whereas cash is secure.

We are aiming to offer an attractive starting yield, with income paid monthly, combined with growth in both income and capital over the long term. Together with the high level of transparency and insight that defines the HL Select fund range.

Investors will be able to see the full fund breakdown shortly after launch and read why each position has been chosen. We will also keep investors up to date with regular blog posts, reporting on the progress of stocks in the fund and our thoughts on the market. When we buy new positions, or sell out of old ones, we’ll explain why. It’s your money and we want you to know what is happening to it.

Dividend growth potential

We want to achieve a steadily rising annual dividend for the fund, because we believe that is likely to lead to capital growth over the long term. Our investment strategy is designed to help achieve this growth in income, first and foremost.

We begin by looking for the dividend sustainability of every share we consider for the fund. So dividends must be well covered by cash flow, and bank borrowings must be well under control, to provide some protection for the dividend, should the economy slip into a rut.

If we are confident that a company’s dividend is dependable, we then start to apply the same sort of criteria that we use in our sister fund, HL Select UK Shares. We’re looking for businesses that make strong returns on their capital, which earn good profit margins and can throw off sufficient cash to both pay shareholders’ dividends and reinvest in growing the business, and any future dividends. Please note that dividends are variable and not guaranteed.

We think long term, and we will only buy businesses that we believe have staying power. Holdings will be sold if we think there is a real deterioration in the prospects for a company, or if its valuation has risen to a point we can no longer justify.

We will invest in a concentrated portfolio of around 30 shares so each holding can have a real impact on returns, although this increases risk when compared to a more diversified portfolio, and that’s why we put so much focus on companies’ financial strength.

How will HL Select UK Income Shares differ from HL Select UK Shares?

The first HL Select fund to launch was the UK Shares fund which simply targets long term capital growth. If it picks up a few good dividends along the way, so much the better.

HL Select UK Income Shares prioritises income rather more. Every holding must contribute toward our income goals. Where we find holdings with great growth prospects and a really attractive dividend outlook too, there’s every chance both funds will hold the stock.

Both funds are aiming to achieve excellent overall returns in the long run. However, HL Select UK Shares will do this by focusing on growth and growth alone. Whilst HL Select UK Income Shares will aim to generate an income level above the broader UK stock market, as well as growth, to contribute to its own total returns.

Investors can choose whether they take this income, which will be paid monthly, or automatically roll it back into the fund to boost long term growth potential.

Please be aware, the closing date for applications at the fixed £1 launch price is 1 March.

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More about HL Select UK Income Shares

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for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.