See combines income and call options for 7% target

Thomas See discusses the design and running of the Schroder Income Maximiser

What is the basic premise of Schroder Income Maximiser? The fund aims to generate a 7% annual income as well as some capital growth using a two-step, equity-based investment approach. First, we invest in a portfolio of stocks based on the Schroder Income fund run by Ian Lance and Nick Purves. Then the income these stocks generate, which is currently about 3.5%, is topped up to reach our 7% target by selling three-month call options on the underlying holdings. Through selling these options, we agree to sacrifice some of the uncertain upside potential offered by the underlying stocks i...