Zero Dividend Preference shares outperformed the FTSE All-Share Index during 2000, according to a re...
Zero Dividend Preference shares outperformed the FTSE All-Share Index during 2000, according to a report from Aberdeen Asset Management.
The study suggests that £1,000 invested on 31 December 1999 would be worth £1,082 for a zero investor, comparing favourably with the small decline a normal equity investor would have suffered on the All Share, producing £941.
According to Gary Marshall, sales and marketing director at Aberdeen, volatile economic conditions are making zeros attractive to investors. He said: "While over the long-term the FTSE All-Share has outperformed the zeros sector, zeros are a good way of balancing more volatile investments in a portfolio with investments producing a steady rate of growth.
"According to the figures from Lipper, £1,000 invested in zeros 10 years ago would have returned £3,064 as at 29 December 2000, compared to a return of £2,431 from an investment in gilts."
Nick Greenwood, head of investment trusts at Christows stockbrokers said it was important to consider the zero within the context of its portfolio and the economic environment.
He said: "In a situation where the recession is likely to become deeper, and interest rates are likely to fall further than has already been adjusted for, zeros will be a good investment.
"Interest rates are essential because if an investor takes out a zero before an interest rate falls, the yield it pays becomes relatively higher and the investment becomes more valuable as a result."
Greenwood also advised caution when considering the underlying support of the zero. He said: "It is important to check the position of the zero in relation to repayment. Find out what needs to be paid off before the zero can be redeemed bank debt for example."
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