According to the firm, like the rest of the firm’s multi-index range, the L&G Multi-Index Income 4,5 and 6 funds are also risk-targeted, but “aim to produce a greater proportion of total return from income” than the original range.
The funds make use of Distribution Technology’s Dynamic Planner risk profiling tool and have ongoing charges figures of 0.36%, 0.38% and 0.39% respectively. The lowest risk fund, will look to generate a greater proportion of its income from fixed income and at launch had an estimated yield of 3.8%. The remaining two funds, will generate a greater proportion of their income from equities, the firm said, and had an estimated yield of 4.1% and 4.2% respectively.
The three new funds will be managed by the same team as that which manages the rest of the L&G Multi-Index range: Justin Onuekwusi and Andrzej Pioch will be lead managers and will work alongside co-managers Bruce White and Martin Dietz.
According to Onuekwusi, the persistent low-interest rate environment has seen demand for multi-asset income funds targeting high-yield levels grow rapidly in recent years. But, he cautions there are clear dangers that come with chasing income.
“It may not be sustainable or may force a change in a fund’s risk profile in order to meet yield targets,” he said.
“Advisers are looking for greater certainty of risk over time on behalf of their clients… Rather than maximising income, we believe the focus should be on maximising total return for a given level of risk. Therefore, our Multi-Index Income funds do not target a specific yield, but bias sources of total return towards income producing assets while maintaining the suitability of risk profiles.”
