McKenzie has run UK equity income portfolios for 20 years in roles at Britannia, Aviva Investors and Martin Currie. He will use a multi-cap, non-index approach to stock selection referencing Saracen’s proprietary research.
The new fund aims to deliver ‘high and growing income’ from a UK equities portfolio. Yield at launch is 4.2%, or around 115% of the FTSE All Share index.
It will have a ‘high-conviction, concentrated portfolio’ typically holding 30 to 45 stocks, with significant exposure to small and medium cap companies. At launch this exposure will be 70% of the portfolio.
The firm will offer an initial share class with an AMC of 0.50% on the first £50m of assets raised across income and accumulation classes, with ongoing charges of 1.16%.
“Against a backdrop of subdued levels of yield across asset classes, the demand for income-producing investment products has never been higher,” noted CEO Graham Campbell.
“While there is a proliferation of equity income funds, the Saracen UK Income Fund is marked out by its flexible approach, wholly unconstrained by index considerations. Its focus on mid and small cap companies makes it an excellent diversifier from other funds in the sector which might have a high exposure to the same FTSE 100 stocks. We anticipate constraining capacity on this fund to ensure it can remain true to this focus,” he added.
“The Saracen UK Income Fund’s concentrated portfolio demands a highly-disciplined approach to stock selection as each holding must contribute to the fund’s income stream in a meaningful way,” said McKenzie. “We believe there are significant opportunities in higher yielding medium and smaller companies: with ten large UK companies comprising more than 50% of UK market dividends, we believe there are structural issues ahead for income investors.”