Anyone who does not already hold Francis Brooke’s sector-leading fund has until 1 May to invest in it. After this date, its minimum investment will rise to £250,000 and an initial charge of 5 per cent will come into force. Existing investors will still be able to add to their positions for the same price. At the moment, Trojan Income’s minimum investment is £1,000 and it has a total expense ratio (TER) of 1.05 per cent.
While most fund houses soft-close a fund due to concerns over liquidity, a spokesperson for Troy says the decision has been taken to ensure FE Alpha Manager Brooke (pictured) has enough time and resources to run the fund efficiently.
"As the assets under management of the Trojan Income fund have grown, manager Francis Brooke has been required to spend an increasing amount of time meeting and updating investors," the spokesperson said.
"Francis sees his first priority as looking after existing investors and managing the assets already entrusted to him. As a result, the decision has been taken to soft-close the Trojan Income fund."
"This is consistent with the soft-closure of the Trojan fund, which took place in April 2011."
"We do not currently see any liquidity constraints on the manager’s investment process, so this will not affect any existing investors, who will be able to add to their holdings, under unchanged terms, should they so wish."
Although only existing investors have been able to add to their positions in Sebastian Lyon’s Trojan fund for almost two years, it has still been one of the best-selling portfolios in the IMA universe over this period.
According to FE Analytics inflows data, it has more than doubled in size to £2.4bn.
The soft-closure of Trojan Income will come as a blow to many advisers, who will now have to look elsewhere for their UK equity income exposure.
Performance of fund vs sector and index
| Name | 3yr returns (%) |
5yr returns (%) | Since launch |
|---|---|---|---|
| Trojan Income | 43.15 | 54.5 | 102.4 |
| FTSE All Share | 36.96 | 31.84 | 92.75 |
| IMA UK Equity Income | 36.9 | 29.83 | 77.11 |
Source: FE Analytics
The £1.02bn fund is a top-quartile performer in the highly competitive IMA UK Equity Income sector over three and five years, as well as since launch in September 2004.
As well as being a consistent performer in the total return tables, it has also been one of the least volatile, and has the lowest max drawdown of any fund in the sector over five years.
It had a particularly strong 2008, losing just 12.14 per cent – almost 20 percentage points less than its All Share benchmark.
Performance of fund vs sector and index since launch
Source: FE Analytics
It is currently yielding 4.22 per cent, which is around average for the sector.
This stellar performance has inevitably led to increased inflows; according to our data, assets under management (AUM) have grown from £462m to £1.02bn in the last 12 months. Brooke always maintained that he would look to soft-close the fund when it reached £1bn.
Trojan Income has a defensive bias, focusing on blue chip companies with strong balance sheets and good cash-flows.
He has an overweight position in utilities and tobacco, and includes British American Tobacco (BAT), Vodafone and Centrica in his top-10 holdings.
Rowan Dartington’s Tim Cockerill believes it is a good decision and says existing investors should be pleased that the group has their best interests at heart.
"It’s a bit of a double-edged sword really, but I think as a group Troy should be congratulated," he said.
"They are not just trying to gather assets blindly, even though the fund has done very well recently."
"Fundamentally, they have made this decision to maintain the size of the fund so that they can maintain their same investment style."
"This means that they are trying to protect their current investors, some of which would have supported them for some time."
"However, obviously if it was on you shopping list, it is a real blow."
Speaking about the 1 May deadline, Cockerill said: "Investors might want to buy it now to take the window of opportunity, but we wouldn’t keep it on our models."
Brooke also runs a UK equity income trust – the Troy Income & Growth IT – which could be seen as an alternative to the Trojan Income fund. It is currently on a premium of 1.81 per cent.