Invesco poised to unveil split capital investment trust
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Invesco Perpetual is to launch a split capital investment trust later this month, to be managed by Martin Walker, the manager of the group’sopen-ended UK growth and children’s funds.
The Invesco Perpetual dual return trust harks back to the early splits of the 1960s, with a capital structure comprising an equal number of income and capital shares.
It will contain no bank debt or zero dividend preference shares, as proved popular with those splits launched at the start of the decade, before the sector collapsed in 2002.
The trust will have a seven-year life and will be available at launch as an issue of units, comprising one income share and one capital share, for 200p.
After these initial units have been bought Invesco Perpetual says investors can separate them, for instance if they wanted to hold income shares within an Isa or Sipp and capital shares outside an Isa.
The income shares target a yield of 7 per cent per year, while the target yearly yield of the units is 3.5 per cent, after all management charges.
The trust is expected to begin dealing on December 14, while a second tranche of shares is poised to be issued in February or March next year.
Invesco Perpetual sales director of specialist funds Andrew Watkins says: “It is important that investors understand they can differentiate their returns from one portfolio, namely income growth and capital growth.
“When this structure was first introduced in the 1960s it was referred to as ‘split-capital’. It was not until the late 1990s and early 2000s when highly-geared structures started to fail. This is why we have intentionally constructed the trust to be reminiscent of the 1960s where funds set out what they wanted to achieve in a simple structure that was easy to understand and explain.”
Unicorn Mastertrust investment adviser Peter Walls says when it comes to splits the key for investors is to understand what the underlying investments are and the risks attached to them. “The concept of the original, old school splits was fine,” he says.
“It was the later funds with all their excesses and crossholdings which led to people not understanding what they were invested in, and is something that to this day investors are still recovering from.”
Walker took over the running of the IP UK growth fund in June last year, and he also runs the IP children’s fund.
The dual return trust will be similar to these two portfolios, but not identical. Investing predominantly in British equities, Walker will have no benchmark constraints but performance will be measured against the FTSE All Share. While the manager will be able to invest in fixed interest securities, he expects the trust will initially be 100 per cent invested in equities.
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