Unit trusts alter charging structure to boost income

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The Independent Online
TWO big unit trust companies will be writing to thousands of investors over the next few weeks, informing them about changes to the charging structures on their funds.

The changes are being introduced in an effort to boost flagging income levels and follow a change to the rules that allows annual management charges to be taken out of the capital rather than income.

HSBC Asset Management, formerly James Capel, is planning to restructure its pounds 300m Income Fund to allow charges to be taken out of capital. It will write to 17,000 investors to inform them of the change, which will boost the gross income of 4.93 per cent to over 6 per cent.

Henderson also plans to change the charging structure on its four income-oriented funds. Dick Eats, managing director of Henderson Unit Trusts, said: 'We are writing to 22,000 unitholders in the European Income, Extra Income, High Income and Income & Growth funds to tell them about the change.'

Henderson and HSBC have recently had to cut yields. Henderson cut the yield on its income and growth fund by nearly a third to 3 per cent, while HSBC cut the income on its fund by 1 percentage point. Overall, the average yields on equity income funds have been falling for the past two years.

Mercury Asset Management is launching a new fund to take advantage of the change. The Mercury Income Portfolio fund will aim to pay 5.2 per cent gross initially and to achieve capital growth.

Barry Woolf, MAM investment director, said: 'Investors have been seeking income because of the huge fall in interest rates. The market has been flooded with all sorts of products designed to pay out income. We decided to try and launch something simple to understand.'

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