ABN Amro is assisting clients that invest in zero dividend preference shares by suggesting character...
ABN Amro is assisting clients that invest in zero dividend preference shares by suggesting characteristics they should
look out for in the zeros market.
Having laid out parameters, ABN Amro has a quantitative ranking system for zeros, which provides a general feel for their characteristics. This has been running for three months and is sent out to specific clients.
David McFadyen, senior analyst, global investment funds, said that sound zero characteristics depend on the percentage of assets the zero has in other highly geared products, and the percentage of assets exposed to other split capital trusts.
Other factors managers should look at are how defensively the portfolio is structured, the hurdle rate, and whether or not there is a mismatch between the income requirement and the overriding capital return.
McFadyen said: 'This is what managers should be looking for if they want to make sound zero investments and the parameters that should be looked at.'
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