Jupiter Asset Management is to launch a unit trust investing solely in zero dividend preference shar...
Jupiter Asset Management is to launch a unit trust investing solely in zero dividend preference shares, writes Pascal Dowling.
The new trust, Jupiter Preference fund, offers initial commission for IFAs of 3% and renewal commission of 0.5% for Isas and Pep transfers.
The fund goes live on 21 March and will provide a rollover vehicle for zero dividend shareholders, estimated to make up 33% or £20m of the total shareholding, of the Jupiter International Green investment trust, which winds up on 31 March.
According to Steve Glynn, head of unit trust business at Jupiter, no specific target has been set for the size of the fund. He said: "We will take the same approach we adopted with the Monthly Income fund launched in February last year, aiming for performance rather than magnitude."
The fund is to be managed by Laurie Peter, manager of the Jupiter Monthly Income fund, which, according to Glynn, returned 15.5% in its first 11 months. Jupiter Preference fund will hold around 30 stocks with an aim to produce a portfolio yield of around 8% before expenses.
Zeros in the portfolio will have an average hurdle rate of 7.5%. Peter said the portfolio will not contain any zeros that have a lifetime shorter than three years and he aims to ensure that at least 75% of those held must have lifetimes in excess of four years.
He said: "This is a low risk vehicle aiming for security and reasonable returns, it offers a yield which is on average 2% higher than the equivalent gilts.
"This makes zeros a very attractive investment when you consider that they can fall 7% every year and still be able to reach their repayment commitments."
Peter said the minimum hurdle rate he would consider was 3% pa, although he stressed this would only be in exceptional circumstances.
The fund will not invest more than 2% into newly issued zeros. According to Peter, no single set of zeros will be allowed to make up more than 6% of the portfolio.
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