Investment trust specialist BFS Investments has introduced a split capital investment trust that invests mainly in commercial property.
BFS managed properties aims for capital growth and a high level of income. A property portfolio makes up 65 per cent of the fund and invests in commercial properties rented out to Government departments, banks, building societies and major companies. The rest of the fund goes towards an income portfolio, which invests in other investments trusts.
There are two share classes. The zero dividend preference shares have a planned life of 10 years and are expected to provide growth at 9 per cent a year. The ordinary shares have an initial target yield of 9.5 per cent a year.
BC Asset Management has recently introduced a split capital investment trust which also invests in commercial property and aims for similar yields, so the BFS trust is not a unique concept.
However, commercial property is something that investors may see as a good prospect, particularly if their existing investments have been hit by high volatility and mediocre stockmarket performance.
Property tends to increase in value over the long term and rental income is produced. This makes it a suitable area for split-capital investments that aim for both income and growth.
According to Standard and Poor's, the income shares and zero dividend preference shares of the income and growth trust are bottom quartile and the ordinary shares are top quartile based on £1,000 invested a mid to mid basis with net income reinvested over three years to June 20, 2001.