Schroders has unveiled a split-capital investment trust that will be offered as a rollover trust to shareholders of the Schroder split fund when it winds up in January.
Ian McVeigh, who is currently responsible for the Schroder split fund, Schroder income growth fund and Schroder income, will manage the new trust on similar lines to the existing trust.
The objective of the new trust is to deliver income and capital growth by investing 75 per cent in a portfolio of stocks listed on the FTSE 350 index. The remaining 25 per cent of the overall portfolio will go into portfolio of fixed interest securities through the Schroder monthly high income and Schroder corporate bond unit trusts.
As a split-capital trust, the Schroder split investment fund will consist of zero-dividend preference shares for investors seeking growth and ordinary shares for people requiring income. It will not invest in other split-capital investment trusts and has a relatively low level of gearing at 15 per cent, so it is not as risky as some split-capital trusts.
Split-capital trusts have attracted criticism in recent months because those that are heavily geared and that invest in other split-capital trusts have found it difficult to cope with falling interest rates and stockmarket volatility. This trust may benefit from these conditions as stocks can be picked up cheaply, but it is likely to suit sophisticated investors rather than those with limited investment experience.
According to Standard & Poor's, the Schroder split fund (capital shares) is ranked 6 out of 17 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over three years to November 19, 2001.