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CF Seneca Diversified Income Fund

CF Seneca Diversified Income Fund

Multi-Asset Value Investing

The Seneca approach

For many personal investors, there is a real need for good income-generating investments. The CF Seneca Diversified Income Fund is a multi-asset portfolio aiming to deliver a high and growing income with the potential to preserve the real value of invested capital.

The fund has historically delivered a dividend yield of circa 5%*, with income now paid out on a monthly basis.

*Since July 2008. The historic yield reflects distributions declared over the past twelve months as a percentage of the period end unit price. It does not include any preliminary charge and investors may be subject to tax on their distributions. The fund’s expenses are charged to capital. This has the effect of increasing the distribution(s) for the year and constraining the fund’s capital performance to an equivalent extent. There is no guarantee that the investment aim will be achived or the historic yield will continue.


Multi asset experts

  • Investing in multi asset for more than 15 years
  • A value approach across multiple asset classes
  • Managing the need for income with the potential preservation of capital
  • Balancing risk and reward

Asset breakdown

As at 31.03.2017


Diversified sources of income

The world is changing. Tradtional income strategies that once worked may no longer deliver. Bond yields are extremely low by historic standards whilst many dividends on the FTSE 100 are no longer covered. At Seneca, we look more widely for income. The underlying yield on our portfolio is drawn from four different asset classes.

Source: Seneca IM Date 31.03.2017


Good overall returns

Actively managed wth a a good five year performance record, in addiion to delivering regular monthly income.

5 year performance chart

Source for all performance data: FE Analytics. Basis: Bid to bid, net income reinvested and net of fees in UK Sterling terms.  The information on this factsheet is as at 31.03.2017 and refers to the 'B' share class with the exception of performance prior to 26.03.2012 which is calculated using the 'A' share class, unadjusted for the lower fees of the 'B' share class. Past performance is not a guide to future returns. The value of investments and any income may fluctuate and investors may not get back the full amount invested.


Three and Five Years Morningstar RatingsTM as of 31.03.2017, copyright © 2017 Morningstar, all rights reserved, the information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely; neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. All rights reserved.


The views expressed are those of the fund manager at the time of writing, may change and are not intended as investment advice or a recommendation to invest. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content. This document is provided for the purpose of information only and if you are unsure of the suitability of this investment you should take independent advice. Before investing you must read the key investor information document (KIID) and Additional Investor Information Document (AIID) as they contain important information regarding the fund, including charges, tax and fund specific risk warnings and will form the basis of any investment. This fund may experience high volatility due to the composition of the portfolio or the portfolio management techniques used. The prospectus, KIID and application forms are available from Capita Financial Managers, the Authorised Corporate Director of the Fund (0345 608 1497). Seneca Investment Managers Limited, the Investment Manager of the Fund (0151 906 2450) is authorised and regulated by the Financial Conduct Authority and is registered in England No. 4325961 with its registered office at Tenth Floor, Horton House, Exchange Flags, Liverpool, L2 3YL.

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INVESTOR PROFILE

The CF Seneca Diversified Income Fund is marketable to all eligible investors provided they can meet the minimum age and subscription levels. The Sub-funds may be suitable for investors who see collective investment schemes as a convenient way of participating in investment markets. They may be suitable for investors wishing to seek to achieve defined investment objectives. Such investors must have experience with or understand products where the capital is at risk. Investors must be able to accept some risk to their capital, thus the fund may be suitable for investors who are looking to set aside capital for at least 5 years. If you are uncertain whether this product is suitable for you, please contact a financial adviser.

1. RISK FACTORS

Potential investors should consider the following risk factors before investing.

1.1  General

The investments of the fund are subject to normal market fluctuations and other risks inherent in investing in securities. There can be no assurance that any appreciation in the value of investments will occur. The value of investments and the income derived from them may fall as well as rise and investors may not recoup the original amount they invest in the fund. There is no certainty that the investment objective of the fund will actually be achieved and no warranty or representation is given to this effect. The level of any yield may be subject to fluctuations and is not guaranteed.

The entire market of a particular asset class or geographical sector may fall, having a more pronounced effect on funds heavily invested in that asset class or region.

1.2  Effect of Initial Charge or Redemption Charge

Where an initial charge or redemption charge is imposed, an investor who realises his Shares may not (even in the absence of a fall in the value of the relevant investments) realise the amount originally invested.

In particular, where a redemption charge is payable, investors should note that the percentage rate at which the redemption charge is calculated is based on the market value rather than the initial value of the Shares. If the market value of the Shares has increased the redemption charge will show a corresponding increase. Currently there is no redemption charge levied on Shares.

1.3  Dilution

The fund may suffer a reduction in the value of its Scheme Property due to dealing costs incurred when buying and selling investments. To offset this dilution effect the ACD may require the payment of a dilution levy in addition to the price of Shares when bought or as a deduction when sold.

1.4  Charges applied to Capital

Where charges are taken from the fund’s capital, this will increase the amount of income available for distribution; however, this will erode capital and may constrain capital growth.

1.5  Suspension of dealings in Shares

Investors are reminded that in certain circumstances their right to redeem Shares (including a redemption by way of switching) may be suspended.

1.6  Liabilities of the CF Seneca Investment Funds and the sub-funds

The CF Seneca Diversified Income Fund is a sub-fund of the CF Seneca Investment Funds open-ended investment company. It is a segregated portfolio of assets and those assets can only be used to meet the liabilities of, or claims against, that sub-fund. Whilst the provisions of the OEIC Regulations provide for segregated liability between sub-funds, the concept of segregated liability is relatively new. Accordingly, where claims are brought by local creditors in foreign courts or under foreign law contracts, it is not yet known whether a foreign court would give effect to the segregated liability and cross-investment provisions contained in the OEIC Regulations. Therefore, it is not possible to be certain that the assets of a sub-fund will always be completely insulated from the liabilities of another sub-fund in every circumstance.

1.7  Derivatives

The Investment Manager may employ derivatives for the purposes of Efficient Portfolio Management (including hedging) with the aim of reducing the risk profile of the fund, reducing costs or generating additional capital or income.

To the extent that derivative instruments are utilised for hedging purposes, the risk of loss to a fund may be increased where the value of the derivative instrument and the value of the security or position which it is hedging are insufficiently correlated.

For more information in relation to investment in derivatives please see paragraph 17 and 18 in Appendix III of the prospectus

1.8  Tax

Tax laws currently in place may change in the future which could affect the value of a Shareholder’s investments. See the section headed ‘Taxation’ in the prospectus for further details about taxation of the fund.

Currently, the fund relies extensively on tax treaties between the United Kingdom and other countries to reduce domestic rates of withholding tax being applied on income arising where a fund holds underlying assets in those countries. A risk exists that these treaties may change or that tax authorities may change their position on the application of a relevant tax treaty. As a consequence, any such change (i.e. the imposition of, or increase in, withholding tax in that foreign jurisdiction) may result in higher rates of tax being applied to income from underlying investments and this may have a negative effect on the returns to the fund and investors.

In addition, under some treaties the rate of withholding tax applied to a fund may be affected by the tax profiles of investors in the fund (or by the tax profiles of investors in other fund of the fund). This is because such treaties may require a majority of investors in the fund (or the other fund of the fund) to be resident in either the UK or another specified jurisdiction as a condition of relief. Failing to satisfy this test may also result in increased withholding tax and therefore a negative effect on the returns to the fund and investors.

1.9  Counterparty and settlement

The fund will be exposed to a credit risk on parties with whom it trades and will also bear the risk of settlement default.

1.10  Custody

There may be a risk of loss where the assets of the fund are held in custody that could result from the insolvency, negligence or fraudulent action of a custodian or sub-custodian.

1.11  Counterparty risk in OTC markets

The ACD on behalf of a fund may enter into transactions in over-the-counter markets, which will expose the fund to the credit of its counterparties and their ability to satisfy the terms for such contracts. For example, the ACD on behalf of the fund may enter into agreements or use other derivative techniques, each of which expose the fund to the risk that the counterparty may default on its obligations to perform under the relevant contract. In the event of a bankruptcy or insolvency of a counterparty, the fund could experience delays in liquidating the position and significant losses, including declines in the value of its investment during the period in which the fund seeks to enforce its rights, inability to realise any gains on its investments during such period and fees and expenses incurred in enforcing its rights. There is also a possibility that the above agreements and derivative techniques are terminated due, for instance, to bankruptcy, supervening illegality or change in the tax or accounting laws relative to those at the time the agreement was originated. In such circumstances, investors may be unable to cover any losses incurred.

1.12  Currency exchange rates

Funds investing in overseas securities are exposed to, and may hold, currencies other than pounds sterling (GBP). As a result, exchange rate movements may cause the GBP value of investments to decrease or increase.

1.13  Liquidity

Depending on the types of assets the fund invests in, there may be occasions where there is an increased risk that a position cannot be liquidated in a timely manner at a reasonable price.

1.14  Credit and fixed interest securities

Fixed interest securities are particularly affected by trends in interest rates and inflation. If interest rates go up, the value of capital may fall, and vice versa. Inflation will also decrease the real value of capital. The value of a fixed interest security will fall in the event of the default or reduced credit rating of the issuer. Generally, the higher the level of income (yield) receivable, the higher the perceived credit risk of the issuer. High yield bonds with lower credit ratings (also known as sub-investment grade bonds) are potentially more risky (higher credit risk) than investment grade bonds.

As a general rule, fixed interest securities with an above average yield tend to be less liquid than securities issued by issuers with a higher investment grade. Investment in fixed interest securities with a higher yield also generally brings an increased risk of default on repayment by the issuer which could affect the income and capital of the Fund. Furthermore, the solvency of issuers of such fixed interest securities may not be guaranteed in respect of either the principal amount or the interest payments and the possibility of such issuers becoming insolvent cannot be excluded. The value of a fixed interest security may fall in the event of the default or a downgrading of the credit rating of the issuer.

“Investment Grade” holdings are generally considered to be a rating of BBB- (or equivalent) and above by leading credit rating agencies (S&P, Moodys or Fitch). “Sub-investment Grade” is generally considered to be a rating below BBB- (or equivalent) by the leading rating agencies.

Holdings that have not been rated by the leading credit rating agencies will adopt the risk rating of the “parent fund” as an indicator of their credit risk or an unrated holding will be assessed using fundamental data to analyse the likelihood of the fund defaulting. An issuer with a rating of at least BBB- (or equivalent) is generally considered as having adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances may lead to a weakened capacity of the issuer to meet its commitments.

Where the fund invests in fixed income securities, the portfolio composition may change over time, this means the yield on the fund is not fixed and may go up or down.

1.15  Inflation and interest rates

The real value of any returns that an investor may receive from the fund could be affected by interest rates and inflation over time.

1.16  Property Funds

A fund may invest in other schemes investing in real property. The value of capital and income will fluctuate as property values and rental incomes rise and fall. These schemes may also invest in other property related securities. Whilst returns from these investments have the potential for attractive returns over the longer term, the short-term volatility of these returns can also be high.

1.17  Investment in regulated Collective Investment Schemes

A fund may invest in other regulated collective investment schemes. As an investor in another collective investment scheme, a fund will bear, along with the other investors, its portion of the expenses of the other collective investment scheme, including the management, performance and/or other fees. These fees will be in addition to the management fees and other expenses which a fund bears directly with its own operations.

1.18  Investment Trusts

A fund may invest in investment trusts. These are public limited companies quoted on the London Stock Exchange. The price of their shares depends on supply and demand and may not reflect the value of the underlying assets. It may be higher ‘at a premium’ or lower ‘at a discount’. The discount and premium varies continuously and represents an additional measure of risk and reward. Gearing – investment trusts can borrow money, which can then be used to make further investments. In a rising market, this ‘gearing’ can enhance returns to shareholders. However if the market falls, losses will also be multiplied. The level of gearing needs to be carefully judged and monitored to produce a benefit.

1.19  Unlisted investments

Unlisted investments are generally not publicly traded. As there may be no open market for a particular security it may be difficult to sell and cause liquidity issues. The lack of an open market may also restrict the establishment of a fair value for an unlisted investment when compared to an equivalent listed investment.

 

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