Monthly income explained: how VT Momentum Diversified Income fund delivers consistent dividends

Chris Salih (CS): Hello, I’m Chris Salih, investment research analyst at FundCalibre, and today, today I’m delighted to be joined by Richard Parfect, fund manager on the Elite Radar VT Momentum Diversified Income Fund. Richard, once again, thank you for joining us today.

Richard Parfect (RP): You’re welcome.

CS: I just wanted to sort of round it all together by focusing the last sort of minute or so on the, the fact that this pays income monthly and the smoothing that that sort of works through that. Could you maybe explain sort of the way you’ve sort of equalized it to make sort of an ideal payout for investors throughout the year? Just, just explain that to, to, to the viewers please.

RP: Yeah, sure. So the, the, the, essentially, obviously 12 months in a year, obviously 11 months, we aim to pay a flat dividend depending on what share class you’re in, but you know, a flat distribution for those limits. And then the 12th month is a balancing payment. It’s huge. 12Th month is, which is goes X in March, pays in April. That is you usually a higher slightly higher dividend for that month than, than the previous 11 months. Now there can, there can, so, so we, we smooth basically over, over the majority of the year. We can’t, we can’t roll over income from year one year to the next. We have to, it is not like an investment trust fund has to distribute everything in its accounting year. So but they come occasionally within a year be a hiccup whereby we can only distribute what’s been accrued Mm-hmm, <affirmative> so u up to that point.

So occasionally, once in, sometimes once in a year a month will be a bit less than what is to be expected on the smoothing. And that’s simply because some dividends haven’t gone x you know, in that month that we, and then we would expect ’em to be going X very, very quickly. And quite often, you know, on the first day of the following month, we’ve got, we would’ve, we would’ve had enough income to distribute the previous month. Very frustrating valley Track don’t let us sort of accrue distribute stuff that we know is coming but hasn’t gone ex dividend. So the way we manage that is if, if there has been a month that’s paid a little bit less, it’s not usually massively less, but a little bit less, we then make an adjustment the following month to pay a bit more to compensate. So across those two months, you, you, you’ve basically had what you would’ve had as if there hadn’t been any sort of hiccup. But yeah, that, that, that’s, that’s a timing issue that’s beyond our control. And there’s a, an accounting rule, but you basically, that’s that’s the way it plays out.

CS: Not too much upheaval at all. It’s just something…

RP: It’s just, it’s annoying. But we, we never have a month where there’s no income. Yeah, yeah. Sometimes it’s, yeah, sometimes a month. There’s maybe a, yeah, 10% less than what it, what it might otherwise be.

CS: Okay. On that now, Richard, thank you very much once again for joining us today.

RP: No thanks, Chris.