Last Word
Perspective
ARTICLE
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Fund Manager
VIDEO
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Square Mile
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Fund Buyer
REACTIONS
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strategy directly from the fund manager himself.
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research and market views together with an explanation of the
The fund has twin aims of paying out an annualised yield of 5%, on a monthly basis, as well as generating a target total return of 7-8%pa. It does so thanks to a diversified, global, unconstrained and actively managed multi-asset allocation strategy.
Axis analyses the fund from four perspectives to bring you insight,
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Review By Gary Corcoran
COMPANY_ Last Word
Of Kames Diversified Monthly Income, the same can be said of its income and its total return targets - not only does it aim to deliver an income of 5%pa, paid monthly, and a total return target of 7-8%pa, since launch it has succeeded in delivering both thanks to an unconstrained, multi-asset structure that invests globally.
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“There are plenty of funds and even indices that offer investors an annual income of 3.5-4% per year but here is a structure that delivers an extra 25% income for considerably less than 25% extra risk.”
JOB TITLE_ Director
YEARS IN INDUSTRY_ 25+
LOCATION_ London
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at Last Word
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GARY CORCORAN
allocation consistently delivers
an annual yield of 5-6%
A very broad multi-asset
To view Square Mile Investment Consulting and Research Ltd's disclosure on their involvement on this site, please click here.
COMPANY_ Square Mile Investment
JOB TITLE_ Managing Director
R_
“The managers of Kames Diversified Monthly Income aim to provide a high, smooth and regular income with the potential to grow this over time.”
The fund targets an annualised total return of between 7-8%. The target income level is 5% and so the remainder of the return will come in the form of capital accumulation. The managers aim to achieve their objectives while exposing investors to between half and two-thirds the volatility of the MSCI World index.
Scroll down to read more...
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RICHARD ROMER_
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RICHARD ROMER-L_
RICHARD ROMER-LE_
RICHARD ROMER-LEE_
RICHARD ROMER-LEE
Last Word
Perspective
Kames Diversified Monthly Income is a genuinely unconstrained, multi-asset, global proposition that has successfully delivered against its yield target since it was launched in February 2014.
Rather than trying to maximise the income they can generate, instead the main focus for the fund is what lead manager Vincent McEntegart describes as an “attractive” income target of 5% with these income payments made monthly.
To achieve this, he is able to invest in any listed security globally that provides an income. This, therefore, gives him a universe of listed property securities and alternative sources of income that includes infrastructure, aircraft leasing and renewable energy in the context of a broader asset allocation mix of equities, bonds and cash.
The fund typically holds anywhere between 200 and 300 securities and it is the multiple sources of income they represent that gives it the greatest chance to deliver on its twin targets as market conditions change.
He also describes this 5% yield as a “challenging” target but, as he has proven since outset, one that is eminently achievable and he is confident it will continue to be achievable moving forwards.
For the team, this fund is all about providing risk-adjusted returns and ensuring they do not eat into the capital to provide an income. Risk is mitigated and returns are generated at both an asset allocation and a stock selection level as one way to ensure that there is not too much emphasis placed on one or the other.
Right now, the combination of low interest rates and bond yields as well as the current and medium-term forecast for economic growth rates does make generating an annual income of 5%, as McEntegart admits, “challenging”. There are a number of funds available that seek to provide an income of 4%pa though he is happy to keep delivering with 5%pa as an income target while maintaining fund volatility of around 50% of equity market volatility.
An unconstrained, multi-asset approach delivering an attractive level of income
AUTHOR_ GARY CORCORAN
While the scope of the fund allows him to invest in securities that do not pay a dividend at all, key to the success of the underlying strategy is that each and every security the fund currently invests in is generating an income. They will not all generate an income of 5-6% but for McEntegart it is important for his investors’ income to maintain its purchasing power over time. To do this he needs the income to grow in absolute terms so the fund invests in securities that provide capital growth alongside a yield.
The fund, therefore, also targets growth on top of yield with a medium-term total return target of 7-8%. McEntegart is the Edinburgh-based lead manager, supported by Senior Investment Strategist, Jacob Vijverberg who works out of The Hague. McEntegart manages the top-down asset allocation decisions as well as the bottom-up stock-selection process and is able to leverage the wider expertise within Kames Capital and its range of multi-award-winning, highly regarded and rated funds across the various individual asset classes.
for B Inc Share class
Total return
target_
12 month
yield_
.
%
Income
target_
m
Number of
holdings_
Kames Diversified Monthly Income
pa paid monthly
Performance
since launch_
Size of
fund (£)_
-
annualised return
Source: Kames Capital; FE Analytics
Data correct as at 31.08.2017
Data for B Inc Share class
pa
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Kames Global Diversified Income Fund
Fund
Vincent McEntegart has been managing the Kames Global Diversified Income Fund for six years and is well-versed to the changeable financial climate. Curabitur blandit tempus porttitor. Aenean lacinia bibendum nulla sed consectetur.
Manager
Vincent McEntegart
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Since launch the fund has delivered an income that has been in line with its target, providing an annualised yield of between 5-6%. This is an impressive result, not only when you consider the low yields on offer from many traditional income-generating investments over the past few years, but also when you think that the fund has achieved its target with around half the volatility of the MSCI World index. We remain aware, as do the managers, that short-term realised volatility has been low and that this may change over time. The capital accumulation target of the fund has also been met since launch.
Investors should be aware that the fund’s 5% income target is a long-term target and that over shorter time periods the yield may vary. Should the managers be unable to find investments which generate an attractive level of income, then the yield of the fund may drop below 5%.
The fund is competitively priced compared to many other income products with a similar risk profile. The clean share class has a 0.61% ongoing charge figure (OCF) and the group is able to keep this low without compromising on quality or alpha generation, primarily through the use of internal managers. We think the fund offers good value for money, given the strong resources and the well-constructed asset allocation framework at Kames Capital.
AUTHOR_ RICHARD ROMER-LEE
“Building on some of the highly regarded teams at Kames Capital, this fund has an impressive, albeit fairly short, record of achieving its objectives and providing a relatively high level of income for investors while remaining diversified and not taking on undue risk. Kames Capital has a long history of managing mixed asset investments and has more recently brought this franchise to the forefront of the business.”
Asset allocation is a key driver of returns for the fund, but the team supplement their dynamic asset allocation approach with active security selection skills, drawing from the experienced Kames asset class teams. We think this dual focus on adding value and managing risk at an asset allocation and security selection level is fundamental to meeting both the income and risk target. The asset allocation framework is designed to benefit from a diverse range of macroeconomic environments rather than just one or two. We think this is a good framework and should provide an element of stability to the portfolio.
Where the team wants to access investments which the group do not manage, or they feel internally they do not have the necessary expertise, then they will outsource and make use of specialist managers. Having exposure to more specialist assets should also help provide diversification as well as manage the income requirement.
This fund has very clear and tangible objectives, bringing together some of the best resources within Kames Capital, including the multi-asset, equity and fixed income teams. As a group, Kames Capital is focused on promoting collaboration between the various investment teams and this fund sits at the heart of their efforts.
The fund was launched in 2014 and is managed by the well-resourced Kames multi-asset team, based in Edinburgh and the Hague. The team has a wealth of experience and specialisation and we like that each member has both portfolio management and research responsibilities. Their robust asset allocation process has been in place for many years.
The lead manager on the fund is Vincent McEntegart and he is supported by Senior Investment Strategist, Jacob Vijverberg. McEntegart joined Kames in 2013 and has over 25 years of industry experience. The less experienced Vijverberg, is based in the Hague. There is a high level of collaboration between the UK and Dutch teams, however having a representation on the fund from the Hague office, to provide additional colour and insights into areas of specialisation, for example listed property investments, is seen as beneficial.
A very broad multi-asset allocation consistently delivers an annual yield of 5-6%
Victoria Hasler, head of research, Square Mile Investment Consulting and Research
Square Mile
Perspective
Fund buyers' perspective
On a monthly basis, Kames Diversified Monthly Income pays out an attractive annualised yield of 5-6%.
Market Reaction
Next
Jonathan Plant_ independent financial adviser_ Warwickshire Independent Financial Services
×
“I like Kames Diversified Monthly Income. It does what it says on the tin. We started investing in it about two years ago and it makes up about 15% of our income portfolio. It manages risk well by picking less risky assets while still delivering a high monthly income.”
Paul Hookway_ senior fund analyst_ Kleinwort Hambros
“One of the key differentiators of Kames Diversified Monthly Income is its large exposure to property and specialist income funds such as infrastructure, renewable energy generation and aircraft leasing. However, the overall level of risk may rise to maintain the income target, which investors must be comfortable with.”
“Kames Diversified Monthly Income is a very well-diversified fund that provides stable income levels and the potential for good capital returns. More importantly, it invests in asset classes that we as an IFA cannot necessarily invest in directly given the moderate investment levels we deal with.”
James Lloyd-Jones_ chartered financial planner_ Cambrian
Simon Creeber_ independent financial adviser_ Vale
“Kames Diversified Monthly Income helps us get access to assets that are not otherwise easily accessible. One example is aircraft-leasing stocks. Similarly, the range of bonds is very broad, the fund uses bonds that don’t appear in more standard funds – Turkish government debt is one example. This helps us provide customers with diversity.”
Robert Shepherd_ Director_ Bright & Co.
We were on the lookout for something different and, let’s face it, 4% or lower is the norm in this environment. So this is attractive”
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Achievable, sustainable, reliable
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Fund
Manager
Perspective
Fund Buyer
Perspective
This demo version has been optimised for desktop, laptop and tablet. Smartphones, iPhones will be supported in the next version.
to bring you insight, research and market views
together with an explanation of the strategy
directly from the fund manager himself.
Axis analyses the fund from four perspectives
While the scope of the fund allows him to invest in securities that do not pay a dividend at all, key to the success of the underlying strategy is that each and every security the fund currently invests in is generating an income. They will not all generate an income of 5-6% but for McEntegart it is important for his investors’ income to maintain its purchasing power over time. To do this he needs the income to grow in absolute terms so the fund invests in securities that provide capital growth alongside a yield.
The fund, therefore, also targets growth on top of yield with a medium-term total return target of 7-8%. McEntegart is the Edinburgh-based lead manager, supported by Senior Investment Strategist, Jacob Vijverberg who works out of The Hague. McEntegart manages the top-down asset allocation decisions as well as the bottom-up stock-selection process and is able to leverage the wider expertise within Kames Capital and its range of multi-award-winning, highly regarded and rated funds across the various individual asset classes.
Kames Diversified Monthly Income is a genuinely unconstrained, multi-asset, global proposition that has successfully delivered against its yield target since it was launched in February 2014.
Rather than trying to maximise the income they can generate, instead the main focus for the fund is what lead manager Vincent McEntegart describes as an “attractive” income target of 5% with these income payments made monthly.
To achieve this, he is able to invest in any listed security globally that provides an income. This, therefore, gives him a universe of listed property securities and alternative sources of income that includes infrastructure, aircraft leasing and renewable energy in the context of a broader asset allocation mix of equities, bonds and cash.
The fund typically holds anywhere between 200 and 300 securities and it is the multiple sources of income they represent that gives it the greatest chance to deliver on its twin targets as market conditions change.
He also describes this 5% yield as a “challenging” target but, as he has proven since outset, one that is eminently achievable and he is confident it will continue to be achievable moving forwards.
Kames Diversified Monthly Income is a genuinely unconstrained, multi-asset, global proposition that has successfully delivered against its yield target since it was launched in February 2014.
Rather than trying to maximise the income they can generate, instead the main focus for the fund is what lead manager Vincent McEntegart describes as an “attractive” income target of 5% with these income payments made monthly.
To achieve this, he is able to invest in any listed security globally that provides an income. This, therefore, gives him a universe of listed property securities and alternative sources of income that includes infrastructure, aircraft leasing and renewable energy in the context of a broader asset allocation mix of equities, bonds and cash.
The fund typically holds anywhere between 200 and 300 securities and it is the multiple sources of income they represent that gives it the greatest chance to deliver on its twin targets as market conditions change.
He also describes this 5% yield as a “challenging” target but, as he has proven since outset, one that is eminently achievable and he is confident it will continue to be achievable moving forwards.
While the scope of the fund allows him to invest in securities that do not pay a dividend at all, key to the success of the underlying strategy is that each and every security the fund currently invests in is generating an income. They will not all generate an income of 5-6% but for McEntegart it is important for his investors’ income to maintain its purchasing power over time. To do this he needs the income to grow in absolute terms so the fund invests in securities that provide capital growth alongside a yield.
The fund, therefore, also targets growth on top of yield with a medium-term total return target of 7-8%. McEntegart is the Edinburgh-based lead manager, supported by Senior Investment Strategist, Jacob Vijverberg who works out of The Hague. McEntegart manages the top-down asset allocation decisions as well as the bottom-up stock-selection process and is able to leverage the wider expertise within Kames Capital and its range of multi-award-winning, highly regarded and rated funds across the various individual asset classes.
Size of
fund in £_
Launch date_25/02/2014
Performance
year to date_
Kames Diversified Monthly Income Fund
Total return
target_
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Vincent McEntegart has been managing this fund since its launch in 2014. Vincent has 4 years experience at Kames and 29 years in the industry.
Fund Manager, Kames Diversified Monthly Income Fund
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Fund Manager, Kames Diversified Monthly Income Fund.
consistently delivers an annual yield of 5-6%
“The managers of Kames Diversified Monthly Income aim to provide a high, smooth and regular income with the potential to grow this over time.”
A very broad multi-asset allocation
Victoria Hasler, head of research, Square Mile
Investment Consulting and Research
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Subtitle of introduction panel
Jonathan Plant_ independent financial adviser_
Warwickshire Independent Financial Services
“Kames Diversified Monthly Income is a very well-diversified fund that provides stable income levels and the potential for good capital returns. More importantly, it invests in asset classes that we as an IFA cannot necessarily invest in directly given the moderate investment levels we deal with. ”
“Many income seekers would probably prefer to get their income from cash, but they are being forced to take more risk given such low deposit rates. However, they want to keep this risk at a minimum and do not want 100% of their investment in the stock market. A multi-asset proposition gives the benefits of diversification of returns within a balanced risk profile.”
Simon Creeber_ independent financial adviser_ Vale
market viewpoints, together with the
to bring you incisive analysis, research and
Fund Manager’s own investment strategy.
Axis interrogates the fund from four perspectives
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Of Kames Diversified Monthly Income, the same can be said of its income and its total return targets - not only does it aim to deliver an income of 5%pa, paid monthly, and a total return target of 7-8%pa, since launch it has succeeded in delivering both thanks to an unconstrained, multi-asset structure that invests globally.
Review By Gary Corcoran at Last Word
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Vincent McEntegart has been managing this fund
since its launch in 2014. Vincent has 4 years experience at Kames and 29 years in the industry.
Vincent
McEntegart
The fund targets an annualised total return of between 7-8%. The target income level is 5% and so the remainder of the return will come in the form of capital accumulation. The managers aim to achieve their objectives while exposing investors to between half and two-thirds the volatility of the MSCI World index.
Disclaimer »
Jonathan Plant_ independent financial adviser_
Warwickshire Independent Financial Services
and market views together
Axis analyses the fund
strategy directly from the
from four perspectives to
bring you insight, research
fund manager himself.
with an explanation of the
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Asset allocation is a key driver of returns for the fund, but the team supplement their dynamic asset allocation approach with active security selection skills, drawing from the experienced Kames asset class teams. We think this dual focus on adding value and managing risk at an asset allocation and security selection level is fundamental to meeting both the income and risk target. The asset allocation framework is designed to benefit from a diverse range of macroeconomic environments rather than just one or two. We think this is a good framework and should provide an element of stability to the portfolio.
Where the team wants to access investments which the group do not manage, or they feel internally they do not have the necessary expertise, then they will outsource and make use of specialist managers. Having exposure to more specialist assets should also help provide diversification as well as manage the income requirement.
Jonathan Plant_ independent financial adviser_
Warwickshire Independent Financial Services
Paul Hookway_ senior fund analyst_ Kleinwort Hambros
James Lloyd-Jones_ chartered financial planner_
Cambrian
Simon Creeber_ independent financial adviser_ Vale
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Data correct using holdings as at 31.08.2017
Data for B Inc Share class
Delivering the target income yield
Source: Kames Capital
Source: FE Analytics
Data as at 31.08.2017
Kames Diversified Monthly Income dividend distribution
4
UK equity income
Bank credit
Emerging mkt debt
Listed real estate
High yield
6
High dividend equity
Bond hedge
Listed infrastructure
mREITs
1
0
Investment grade
Renewable energy
Cash
Currency carry
2
3
Global equity income
5
Government Debt
Aircraft leasing
Portfolio yield
Contribution portfolio yield (% p.a.)
5.52
Kames DMIF dividend distribution
Source: FE Analytics
Data as at 31.08.2017
Apr ‘14
60
Apr ‘16
30
20
Oct ‘14
40
Apr ‘17
70
Oct ‘15
10
Dividend distribution (pence)
80
50
Apr ‘15
Oct ‘16