Boost your income with derivatives

A few equity income funds are targeting returns in excess of 4% or 5% a year using strategies originally developed in the world of options trading and structured products.

The idea of earning in excess of 4% or even 5% a year is understandably appealing to income investors during this time of record-low interest rates. A small sub-set of equity income funds from asset managers such as Schroders and Fidelity are targeting returns of this magnitude. They use strategies originally developed in the world of options trading and structured products.

Funds such as those in Schroders' Income Maximiser range target an income of 7% a year, while also investing in blue-chip UK equities. The managers behind the UK-focused Schroders Income Maximiser fund invest at least 80% of the fund in shares of UK companies that they see as offering good value. The boost to income comes from a second overlay, using around 20% of the fund.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.