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Epic time for split-capital investment trusts

Epic Asset Management has introduced a split-capital investment trust based in the Isle of Man.

The equity partnership investment company aims to produce income at 10 per cent a year for investors who hold income shares and growth of at least 3 per cent above the LIBOR rate for capital shareholders.

It invests in the shares of quoted and unquoted companies, investment funds and bonds. The quoted shares in the portfolio are likely to be smaller companies listed on the FTSE 100 index. Epic Asset Management feels these companies may have good growth potential but are overshadowed by larger companies.

Bonds make up a quarter of the portfolio and these will be a mixture of investment grade bonds, high yielding bonds and fixed interest securities. The unquoted shares will be companies that have established business models and may be preparing for a stockmarket floatation.

Many investors are desperate for income in the current environment of low interest rates and long term gilts paying an average yield of 5 per cent a year. This investment trust offers double the income of gilts, but higher yields carry higher risks. The capital shares may provide good value as shares can be bought cheaply and may be worth much more when the trust winds up on July 31, 2011.

However, despite a television advertising campaign trying to raise public awareness of investment trusts, they are still a mystery to many investors and this one may attract sophisticated investors only.

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