Skip to main content
  • Register
  • Help
  • Contact us
  • Log out of your HL account
A A A

Schroder Income Fund - sector change

Heather Ferguson | Wed 15 July 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

The Schroder Income Fund has been transferred to the IA UK All Companies sector from the IA UK Equity Income sector. This is because the fund’s yield has fallen below the level required to remain in the UK Equity Income sector.

The IA (Investment Association) requires funds in the UK Equity Income sector to achieve a yield at least 10% higher than the FTSE All Share Index as at the end of the fund's financial year. This is measured over 3-year rolling periods with an average taken. If the average yield on the fund is not at least 10% higher than the index the fund is removed from the sector. If the yield is subsequently high enough to qualify, the fund will be reinstated to the sector.

If the average yield on the FTSE All Share Index was 3% for example, the fund would be required to yield at least 3.3% to remain in the sector. This is a simplified example, but it illustrates the point. At the end of the Schroder Income Fund’s last financial year it failed to meet the yield requirement.

Around 30 of the largest companies within the FTSE All Share yield in excess of 5%, boosting the yield of the index to 3.4%. The fund's managers seek income opportunities across the entire market, including lower-yielding companies where they anticipate dividend growth. Therefore, they don’t restrict themselves to the highest-yielding companies. This strategy has worked well and the managers have grown the income paid by the portfolio each year since they assumed management in 2010.

The fund's headline yield has not grown to the same extent due to the strong performance of the underlying shares. As share prices rise, yields fall. For example, if a company has a share price of £1 and pays a 5p dividend the yield is 5%. However, if the share price rises to £1.10, the 5p dividend equates to a yield of 4.5%.

2010 2011 2012 2013 2014
£ paid per unit of Schroder Income £1.45 £1.72 £1.99 £2.21 £2.54
Yield of fund 3.3% 4.2% 3.9% 3.3% 3.4%
110% of FTSE All Share yield 3.2% 3.6% 3.6% 3.6% 3.5%

Yields are not guaranteed and can fall as well as rise.

Over the past three years the fund's total return (capital growth plus reinvested dividends) was 61.9% compared with 46% for the average fund in the IA UK Equity Income sector*, although please remember past performance is not a guide to future returns.

Annual percentage growth
July 10 -
July 11
July 11 -
July 12
July 12 -
July13
July 13 -
July 14
July 14 -
July 15
IA UK Equity Income 24.01% -1.95% 20.34% 13.07% 6.69%
Schroder Income Fund 17.48% -3.48% 33.31% 13.98% 6.58%

Past performance is not a guide to future returns. Source Lipper IM* to 01/07/2015

Register for free fund research by email

There has been no change to the way the fund is managed or to its long term objectives. The aim is to achieve an attractive total return over the long term, combining both income and capital growth.

We do not believe any changes to a portfolio are necessary following the announcement, providing the portfolio's objectives, including the level of income generated, continue to be met.

Please note the fund's charges can be taken from capital, which can increase the yield but reduce the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


You may also be interested in: