Jupiter is planning to merge three split-capital investment trusts and relaunch them as a single taxefficient trust managed by Philip Gibbs.
Tony Nutt’s Second Enhanced Income Trust, Gibbs’s Second Split Trust and the Defined Capital Return fund, a passively managed, Jersey-domiciled vehicle, are the affected funds.
The combined assets will create a vehicle with more than £200m under management. It will be structured in a similar way to Gibbs’s existing trust and will have an absolute return objective.
To give the manager as much freedom as possible, the fund will not have a yield target.
Richard Pavry, the head of investment trusts at Jupiter, says: “Second Enhanced Income has been managed with a higher income requirement than we would expect from now on. Gibbs will aim to generate absolute returns, whether income or capital. By not constraining him to a given target yield we are giving him maximum flexibility.”
Nutt will continue to manage his Dividend & Growth Trust as well as his open-ended income funds.
Pavry says all three trusts will reach the end of their planned life on October 30 and in each case shareholders have the option to take cash or roll over into the new vehicle.
The 50% higher-rate income tax band, introduced in the last
Pre-Budget Report, will create a real incentive for investors to move to investments classed as capital rather than income and, therefore, attracting capital gains tax at only 18%, Pavry says.
To that end the new closed-ended fund will offer both zero dividend preference shares and geared ordinary shares. There will also be a third share class called a packaged unit, allowing investors to own both one zero and one ordinary share in a single unit.
“While a zero dividend preference share pays a yield of perhaps 6%, it is paid as capital rather than income, which could make it quite attractive from an adviser point of view,” Pavry adds.
The proposals are still being finalised, but if approved by shareholders and the regulator, the merger should go ahead towards the end of the year.
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