Fund launches hot up as Christmas approaches
Fund launches are hotting up again as we roll towards Christmas, with Invesco Perpetual announcing this week that it will launch a new split-capital investment trust later this month.
The Invesco Perpetual Dual Return Trust will invest predominantly in UK equities and be managed by Martin Walker, who currently manages assets of approximately £1.5 billion including the Invesco Perpetual Children’s fund and the Invesco Perpetual UK Growth fund.
After the launch, there is a possibility of a second tranche of shares in February/March 2010.
The trust will have a seven-year life, with a capital structure comprising an equal number of income shares and capital shares, with no bank debt.
"The Invesco Perpetual Dual Return Trust plc is reminiscent of the original days of split-capital investment trusts – the 1960s – and is designed to provide a simple, straightforward separation of returns between income and capital for shareholders with differing requirements and tax arrangements," explains Graeme Proudfoot, head of specialist funds at Invesco Perpetual.
"While self-invested personal pensions and ISAs are designed to protect against both income tax and capital gains tax (CGT), it may make sense to consider the inclusion of income shares only in one or both of these wrappers as all returns from these shares over the trust's seven-year life will be in the form of income," he adds.
The capital shares can then be held outside of the wrappers so that any capital gains accruing could be mitigated by an investor's annual CGT allowance (£10,100 for 2009/2010).
Meanwhile, ETF Securities has unveiled four new exchange traded commodities (ETCs), which completes its commodity platform. The arrival of ETFS Cocoa, ETFS Tin, ETFS Lead and ETFS Platinum (which all offer long exposure) brings the ETF provider’s commodity platform to 148, making it the world’s most comprehensive.
"ETFS Tin is Europe’s first long tin futures ETC, tracking the DJ-UBS Tin Total Return Index," says Nicholas Brooks, head of research and investment strategy at ETF Securities. "Tin has been a strong performer, with the index up 48% over the past 12 months and 271% over the past 10 years on the back of rapidly growing China demand for tin."
ETF Securities has also launched Europe’s first currency ETFs.
A spokeswoman for rival iShares says that it hasn't ruled out following suit into the currency ETF space, but has no firm plans at the moment. However, she reveals that the firm will launch further ETFs on the London Stock Exchange in the new year.
Back within the active fund space, Dalton Strategic Partnership has today launched a new fund: the Melchior Selected Trust: Global Conservative Fund. It is the third within the Melchior Selected Trust range.
Managed by Andrew Dalton and Rupert Caldecott, it will combine capital growth and capital preservation by investing in listed equities, government bonds, cash and hedge funds.
It is a cautious fund though as it has the flexibility to hold up to 100% of its assets in cash.
Finally, HIM Capital, a financials specialist, has launched the HIM Income fund, a financials income fund that is targeting a 6% yield.
It is currently invested 48% in global equities and 32% in fixed-income securities.
Nick Brind, the fund manager, says: "The financials sector offers excellent investment opportunities. We are seeing attractive valuations in the debt market as banks look to rebuild their balance sheets and scope for capital growth in the equity markets, particularly where the better quality companies have lagged the recent run up in share prices."
The minimum investment is £1,000; the fund can be bought through IFAs, discretionary managers and it is also available on the Hargreaves Lansdown platform.
A sophisticated absolute return fund that seeks to make money for its investors regardless of how global markets are performing. To that end, they invest in shares, bonds, currencies and commodities using a raft of investment techniques such as gearing, short selling, derivatives, futures, options and interest rate swaps. Most are based “offshore” and are not regulated by the financial authorities. Although ordinary investors can gain exposure to hedge funds through certain types of investment funds, direct investment is for the wealthy as most funds require potential investors to have liquid assets greater than £150,000m.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
A type of derivative often lumped together with options, but slightly different. The original derivative was a future used by farmers to set the price of their produce in advance before they sowed the seeds so that after the harvest, crops would be sold at the pre-agreed price no matter what the movements of the market. So a future is a contract to buy or sell a fixed quantity of a particular commodity, currency or security (share, bond) for delivery at a fixed date in the future for a fixed price. At the end of a futures contract, the holder is obliged to pay or receive the difference between the price set in the contract and the market price on the expiry date, which can generate massive profits or vast losses.
An Exchange traded fund is a security that tracks an index or commodity but is traded in the same way as a share on an exchange. ETFs allow investors the convenience of purchasing a broad basket of securities in a single transaction, essentially offering the convenience of a stock with the diversification offered by a pooled fund, such as a unit trust. Investors buying an ETF are basically investing in the performance of an underlying bundle of securities, usually those representing a particular index or sector. They have no front or back-end fees but, because they trade as shares, each ETF purchase will be charged a brokerage commission.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.