Principal Revamps Utility Fund

By Staff Writer

May 13, 2004 at 08:00 PM

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NU Online News Service, May 13, 2004, 12:59 p.m. EDT – The recent ups and downs in the utilities sector have forced Principal Financial Group Inc., Des Moines, Iowa, to change the name and investment strategy of its Principal Utilities Fund.[@@]

Principal now is calling the fund the Principal Equity Income Fund.

Instead of investing all assets in utilities, the fund will invest in a "highly diverse portfolio that includes value stocks in a variety of industries, preferred securities, real estate investment trusts and convertible securities," Principal says.

The objective of the fund will continue to be the production of high current income and long-term growth of income and capital, Principal says.

Older U.S. investors once thought of investing in utilities as a way to combine safety with high dividend yields. These days, pure utility funds may have a hard time delivering that combination of safety and income, according to Jim Sager, the director of Principal's retirement and investor services unit.

Value stocks account for about half of the Principal Equity Income Fund investment portfolio. The fund also has invested 30% of its assets in preferred securities, 15% in REITs and 5% in convertible securities, Principal says.

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