By Pascal Dowling Investec Asset Management launches its split cap European closed end fund this w...
By Pascal Dowling
Investec Asset Management launches its split cap European closed end fund this week.
The Guernsey domiciled company will be listed on the London Stock Exchange. Assets will be split between ordinary shares, offering an initial dividend yield of 8.5%pa, at 53%, with 7% in zeros dividend preference shares and 40% in bank debt.
The bank debt will be euro-dominated and is expected to be fixed at 6.6% and zeros will carry an estimated gross redemption yield of 9%.
The trust will be marketed primarily through institutional investors in which private investors may hold stock.
The underlying portfolio will consist of two pools of money. Some 55% will be in continental European equities run by Albert Morillo while the remaining 45% will be run Investec's inhouse fixed interest team.
Morillo, formerly manager of the frAA rated Scottish Widows European unit trust now works for BlackRock which has the contract to run Investec's European equity unit trust.
Philip Saunders, director of Investec Asset Management said: "The fund will combine some of the best available fund management expertise in both European equities and European bonds.
"The structure is designed to appeal in particular to income seeking investors who are positive about European prospects.
"Morillo has a good deal of experience dealing with concentrated portfolios. The structure of this fund is such that it allows Morillo to concentrate purely on his style.
"Essentially this means the investor is getting a high running yield on ordinary shares with a European equity kicker from the European sub portfolio."
Investec has been managing European bonds since 1984, its team was recently augmented by Paul Griffiths, previously head of global bonds at Invesco. It now manages in excess of $11bn in liquidity and fixed income assets.
The income portfolio will also invest in the income shares of split capital investment trusts, in which Investec has a strong presence.
At present it has the management contracts for seven investment trusts which aim to provide income, including Temple Bar.
The Investec GF European Portfolio unit trust now run by Morillo is ranked 14 out of 106 bid to bid over the last three months up 3.7%. Over the past 12 months it is ranked 55 out of 102, offer to bid, up 28.92%.
The Temple Bar investment trust, in the UK Income Growth sector has produced a share price return of 1.51% over the past three months ranking it 18 out of 19 trusts in the sector to 4 September.
Over one year it is ranked 14 out of 19, returning -0.59% and over three years it is six out of 19, up some 6.63%.
As of last week the discount to NAV on the investment trust was running at 7%.
Ceremony will take place 13 November
300 organisations signed charter
Tough year for the sector
Targeting annual yield of 4%