Get solid European income with BlackRock

It has a strong focus on absolute returns and secure, reliable income generation with below-average volatility, generated through a bottom-up approach and active management.

The fund is designed for investors aiming to protect money against inflation and bump-up (and if not, maintaining) their dividend payouts every year. It yields a healthy 4.63 per cent, well above its benchmark index (FTSE All-World ex UK Index), which produces a not-so exciting 2.52 per cent yield. And if co-manager Andreas Zoellinger's claims that he doesn't invest in companies where there's a risk of a dividend cut are true, this should continue.

It's a relatively new fund, which might put some investors off, but impressively it has also produced strong growth since its launch, having performed well so far with a 34.13 per cent return over one year, compared with just 26.33 per cent for its benchmark index. And, encouragingly, it's already a first-quartile performer in its IMA sector (Europe ex UK).

Robert Bowie, senior portfolio manager at Aberdeen Asset Management, puts the fund's recent success down to a good mix of high-yielding and dividend growth stocks within the portfolio. The managers look for undervalued stocks and have a stock selection bias to strong management, competitive position and financial discipline.

The heaviest allocations in the fund are in financial services (17.99 per cent), basic materials (11.21 per cent), and healthcare (12.49 per cent) - with moderate exposures to consumer cyclical and consumer defensive stocks.

Maintaining the healthy yield within the portfolio, one of the core holdings is Terna, the domestic infrastructure company that yields 6 per cent. And providing dividend growth are companies such as Sanofi, an undervalued defensive stock with a 3.6 per cent dividend yield that's increasing 5-10 per cent a year.

Mr Bowie describes the European equities team at BlackRock as "solid". Team leader Nigel Bolton has over 26 years' experience and a strong track record of managing successful teams, and although the actual fund managers - Andreas Zoellinger and Alice Gaskell - both have significantly less experience than Mr Bolton, they do have strong track records as fund managers, having spent 12 and 19 years at BlackRock respectively.

Mr Bowie sees the biggest upcoming opportunity for the fund will be if the European recovery mimics that of the US, where domestically orientated stocks gathered strength - boosting the economy - and lining investors' pockets. He says that so far, most of the European growth has come from companies that have benefited from global exposure, whereas most of the domestic stocks still have a long way to go. He says the likelihood of this not happening is significantly lower than it has been in the recent past, although there are no guarantees it will gather pace any time soon.

The fund has strong risk controls in place to reduce volatility, but with a TER of 1.7 per cent, investors have to be willing to pay a premium for it. But if you are, BlackRock's offering is a solid play for diversifying the income stream in your portfolio. Buy.

BLACKROCK CONTINENTAL EUROPEAN INCOME FUND (ISIN: GB00B3ZW3465)