Friends Ivory & Sime is looking to raise £80m with the launch of a split cap investment trust on 19 ...
Friends Ivory & Sime is looking to raise £80m with the launch of a split cap investment trust on 19 December, writes Pascal Dowling.
Dealings in the Geared Opportunities Income Trust are due to start on 2 February 2001.
The trust, to be managed by John Stubbs, will have a total portfolio yield of 6.8%. Stubbs, also manager of the British Assets Trust, said Geared Opportunities would be run with a conservative approach as he believes the appetite for risk in the market is shrinking fast.
The portfolio will be split between the shares of 30-45 high yielding split capital investment trusts shares yielding around 9%. The remaining 33% will be invested in the shares of 10-15 conventional investment trusts with a yield of 2.2%.
The high income sub-portfolio will be invested in geared ordinary shares of other split caps, spread geographically and by sector.
The conventional investment trust sub-division will be primarily invested in blue chip stocks although a 19% sub-section will be devoted to "niche" investments.
Stubbs said: "The portfolio will be invested in larger international investment trusts such as Witan or Foreign & Colonial. We want to have an internationally diversified portfolio which we can rely on to have a low volatility."
The Geared Opportunities Trust structure consists of 56% in geared ordinary shares providing a yield of 9.25%, 12% in zero dividend preference shares with a seven year life and a redemption yield of 9%.
The remaining capital will be provided by a bank loan with a seven year life providing up to £32m, the interest payment on it is expected to be 7% pa.
The trust will be primarily aimed at institutional investors to begin with, however Stubbs said institutional buyers were likely to repackage the investment for retail buyers further down the line. According to Peter Arthur, director at Friends Ivory & Sime, the total cost of the launch will be capped at 2.25%.
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