Isis, the retail arm of Friends Ivory & Sime's retail brand, has introduced its fourth fund.
The Isis progressive growth fund joins the existing Oeics in the Isis range: UK dynamic, UK smaller markets and Aim growth fund. It aims to produce long-term growth by investing in a broad portfolio of zero-dividend preference shares. The portfolio will consist of 20-30 zeros of split-capital investment trusts that comprise of mainly blue-chip companies. Examples of selected zeros include Dresdner RCM income growth, Fleming worldwide income and Henderson high income.
The portfolio will have limited exposure to the zeros of split-capital investment trusts that invest in other investment trusts in an attempt to minimise risk. The initial target yield will be 7.5 per cent and although some gearing will be used, it will not be as highly geared as some funds.
Zeros have a reputation as a reliable form of investment because they pay a pre-determined level of growth on a specific date. However, some zeros are riskier than others, especially if they invest in the highly geared shares of other investment trusts.
This fund aims to avoid high risks through active management and this is why the yield is lower than some funds. It is likely to appeal to sophisticated investors who want to take advantage of undervalued zeros in the present economic climate without going in at the riskier end of the market despite the higher returns on offer.
According to Standard & Poor's, the Isis UK dynamic fund is ranked 281 out of 302 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over one month to November 9, 2001.