The Castlestone Management Equity High Yield and Premium Income Fund was soft-launched in December last year. It aims to provide smooth returns to investors by allocating to a portfolio of listed, exchange-traded equities.
Specifically, Castlestone said it will target “semi-monopolistic assets with inelastic demand, strong balance sheets, quality fundamentals and high dividend yield”.
Furthermore, the fund will aim to enhance returns by writing covered calls against its underlying equities. The fund collects a premium by writing the covered calls and retains all the benefits of owning the underlying stock, such as dividends and voting rights.
Company founder and chief executive Angus Murray said: “Despite the strong performance of developed world equity markets over the past few years, we still believe that in the long run, over a 20-year period, developed world equity markets will be flat.
“However, we have already proven that managing assets under this buy/write strategy, as I have been doing within my own single family office [Cupcake Partners], is very successful and has provided consistent returns from the high dividend yields generated from the stocks and premium income.
“The Equity High Yield & Premium Income Fund allows investors to participate in this strategy and allows them to benefit from the high dividend yield and premium income that many semi-monopolistic, stable, large capitalization companies offer today.”
Castlestone ran into difficulties in 2011 as a number of the products it offered had relatively high underlying leveraging, causing them to feel the force of the downturn significantly more than other players.
These difficulties led Castlestone to wind up a number of its funds in August 2011.
In addition, the British Virgin Islands Financial Services Commission issued a directive in respect of Castlestone Management and another related entity, Castlestone Funds, on 15 August, 2011. The directive was revoked in September 2013 with no further action having been taken.
Murry said the company has learned from the past and has adjusted to the new environment, “an environment where investors are looking for liquidity, transparency and no leverage”.
He added: “You have to adjust to the market and know what is required. What we are doing with this new product is being pragmatic, accepting we can’t always outperform and finding a way to deliver the best returns possible.”
