By James Thorneley The income shares of Global Opportunities split capital closed-end fund, run by M...
By James Thorneley
The income shares of Global Opportunities split capital closed-end fund, run by Morley Fund Management, will yield over 9%. The equity portfolio is being run in a similar fashion and by the same managers as the CGU PPT Global Success unit trust.
Like the unit trust, the equity portfolio of the split cap will focus on four themes: communication technologies; healthcare and demography; environmental technology; and e-business. Jaco Ardoom and Ad Schellen, who manage the unit trust from CGU's Dutch subsidiary OHRA, will also run the equity portfolio.
The unit trust was launched in February and was the result of changing the remit of the CGU PPT Worldwide Growth fund. It was immediately given a frAA rating, partly due to the strong performance of the OHRA Aandelan fund, which has a similar portfolio to the unit trust.
According to Morley over the three years to 30 April, on a bid to bid basis, the Aandelan fund is ranked first out of 122 in the Global Growth sector. During the period it grew by 170.3% compared with a sector average of 60.7%.
Schellen said he had focused on four themes as he believes they are the main driving forces behind global equity markets. Schellen said he then looks for the main sector beneficiaries within the four themes, followed by stock selection focusing on "best in class".
The initial thematic split will be 35.1% in communication technology, 34.7% in healthcare and demography, 22% e-business and 7.7% environmental technology. Looking forward, Schellen expects environmental technology stocks to become an increasing part of the portfolio as markets and economies realise the importance of fuel cells and environmentally friendly power sources.
In this sector the Aandelan fund benefited from the share price performance of Vestas Wind System, a Danish company which manufactures wind turbines.
Over the year to 20 June the share price rose by 410% in krona terms. The portfolio will typically comprise 80 to 90 stocks with purchases being made on a three to five year time horizon, leading to a relatively low stock turnover. Schellen is not concerned with the portfolio's 65% weighting in North America. He said it was a consequence of investing in best of class companies that the portfolio would skewed towards the US market. The portfolio also has 32% in Europe and 3% Far East. The equity element will make up 57% of the split cap portfolio. The remaining 43% will consist of a bond portfolio run by Mark Gull.
The capital structure is 49.5% income shares, 5.5% capital shares and 45% in a euro denominated bank loan. The income shares will be issued at 90p with holders receiving 115p at the winding up of the fund in 10 years time if the fund grows by 5.2%pa. Until then holders will receive a yield of 9.1%.
The 15p capital shares will be entitled to the residual capital when the fund is wound up. For capital shareholders to receive back 15p per share the fund needs to grow by 5.6%pa for the 10 years. If it grew by 7.5%pa or 10%pa holders would receive back 56.4p and 130.9p, respectively.
Investors can also purchase 100p units, yielding 8.2%, in the fund which consist of one income share and one capital share. Unitholders will receive back 100p if the fund grows by 4.5%pa.
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