M&G and JP Morgan Fleming are to launch split-cap investment trusts with conservative structures, in...
M&G and JP Morgan Fleming are to launch split-cap investment trusts with conservative structures, investing in an equity and fixed interest split.
Both trusts will be rollover options for existing split caps winding up later this year ' the M&G Recovery and Fleming Income & Capital trusts.
Such is the interest in the rollover option for the £273.4m M&G trust that the zeros on the existing trust are being aggressively bid up, with investors paying more for the zeros than the value they will be redeemed for at the 3 April wind-up date.
Final redemption on the zeros of M&G Recovery is £1.50 but investors are now buying them at a total cost of £1.51 as it is believed the new trust will be oversubscribed and difficult to buy into at launch.
M&G has yet to make details of the new trust available. However, it is understood it will be a similar vehicle to JP Morgan Fleming's plans for the Fleming Income & Capital split-cap trust.
When the trust winds up in March, shareholders can choose to realise investments for cash or roll into the successor vehicle ' the JP Morgan Fleming Income & Capital Investment Trust (JPMFIC).
Ordinary shareholders will have the choice of cash at residual NAV, or ordinary shares or units in JPMFIC. Zero holders have the option of receiving cash at the final capital entitlement of 85.2p per share or zeros in JPMFIC.
The new trust will have a six-year life to 29 February 2008 and the initial gross assets will consist of 20% bank debt, 36% zeros and 44% ordinary shares.
The zeros have an initial capital entitlement of 96p, rising to 154.15p at wind-up, representing a redemption yield of 7.5% per year. The initial cover on the zeros will be 1.31 times, with a hurdle rate of 3.3% per year.
Ordinary shares will pay quarterly dividends from July 2002 and be entitled to capital growth after prior charges. These are expected to yield 7% per year and have a hurdle rate of 4.3%.
Assets of the trust will be divided, with 67.5% in an equities portfolio yielding 3.3% and 32.5% in a fixed interest portfolio yielding 6.8%, split 72% in investment grade bonds and 28% in an existing bond fund managed by JP Morgan Fleming.
An EGM will take place on 20 February.
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