Aberdeen Asset Managers is launching a further split cap investing in Europe and this time providing...
Aberdeen Asset Managers is launching a further split cap investing in Europe and this time providing an 8.8%pa yield on the ordinary shares, writes James Thorneley.
Some 40% of the underlying portfolio of the Guernsey-domiciled vehicle, called European Monthly Income, will be run by Adrian Fowler and mirror the holdings in the European Growth unit trust he manages. Over one, three and five year periods the open-ended fund has outperformed the FTSE European ex UK index on a bid to bid basis with net income reinvested.
During the five years to 29 February the fund rose by 173.5% compared to a 171.5% increase in the index.
The remaining 60% of the portfolio will be invested in European corporate bonds by Paul Reed.
The capital structure of the company will consist of 48% ordinary shares, 47.5% bank debt and 4.5% annuity shares.
The 100p annuity shares will provide a fixed dividend yield of 16% but holders on the wind up of the fund in April 2010 will only be entitled to 0.01p per share.
This means the 100p ordinary shares will have an initial NAV after expenses of 104.7p. For investors in the ordinary shares to receive back their 100p investments at wind up the underlying portfolio must grow by 2.8%pa for the 10 year life of the company.
The target market is primarily UK and European institutions with the shares offered via a placing that closes on 4 April. The minimum investment is £25,000.
Retail investors will be able to purchase the shares through the secondary market when dealing commences on 13 April. Gross assets of the trust when launched will be a maximum of £315m as the 10-year loan facility with the Royal of Scotland International Jersey is up to £150m.
European Monthly Income is viewed as a closed-end fund rather than an investment trust as it is domiciled in Guernsey for tax reasons. Despite payouts from the fund being equity dividends, rather than interest payments, distributions from splits based offshore are treated as unfranked in the hands of onshore recipients.
In January Aberdeen launched a similar vehicle based on its European Technology unit trust. The launch of European Monthly Income is aimed at diversifying the split capital market even further.
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From 1 March