Close Brothers is in the early to mid stages of launching an investment trust, which would have a po...
Close Brothers is in the early to mid stages of launching an investment trust, which would have a portfolio replicating the FTSE 100 index.
The Close UK Index Growth Fund, which will consist of only zero shares, will be run similarly to the Close FTSE 100 Income & Growth split capital investment trust, which was launched in 1999.
The zeros in Close UK Index Growth Fund will have a negative hurdle rate of -4.36%pa over a five-year fixed life paying a gross redemption yield of 8.25%pa.
This means the FTSE 100 could fall 20% over five years and the zeros will still pay out their full repayment value of 148.64p. That means if the trust was launched today, with the FTSE at around 5,000, the market could fall to 4,000 and the zeros would still pay out in full.
If the FTSE fell 30% over the five years the zeros would still payout around £1, but if the market fell 50% or more over the five years there would be no repayment of capital. When the Close FTSE 100 Income and Growth Zeros were launched in 1999 the FTSE 100 was at 6,659, and despite a fall of around 25% in the market, the shares are still worth 107p (issued at 100p).
The offer for the shares is likely to be through an institutional placing, with a very brief offer, which is likely to close in the first week of November.
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