An investment trust for growth?

bowlhead99

stringer_bell wrote: »

looks decent, on the off topic, I noticed on HL

16:35 - 28/01
Buy 156641 250.50p £392,385.71

Who would buy such an exact amount like that?

16:35 is after the daily market close. So could just be a market maker balancing their books. Or it's a late reported large trade from earlier in the day, someone who had just sold out of some other asset and that's how much money he had available after transaction costs and taxes. Any number of reasons.

FWIW Scottish mortgage has been a great investment for years, it has a highly concentrated portfolio, recently been quite tech heavy. But you have to agree with the investment philosophy and believe in their investment managers, not just like the look of it because it has a nice chart.

[Deleted User]

Hi,

melbury wrote: »

Is the link to trustnet working? I end up at a completely different site.

try this one, that other one takes me to a travel co.

coyrls

briley wrote: »

As OP thanks for all the comments - yes, I do not want income, just growth and yes, I am using my ISA allowance - or will be. I have a low income (enough for my needs) but a high percentage of income from dividends. Never saw the point of a stocks and shares ISA since the dividend was tax free (sort of) and I never generated enough capital gains. With the new tax on dividends all has changed.

I like investment trusts as they can have a very low management charge so that is something I look at early on. What I really want is an investment trust that automatically re-invests dividends they receive and does not pay it to me, something that generates income tax!

Trustnet does not enable one to specify growth - lots of other options but not that one. Incidentally the link is faulty, it is trustnet.co.uk

J P Morgan does give growth trusts, but their charges look a little on the high side, up to 1.6%. However something to look at.

F&C is a fund of funds, they charge around 0.65%, not bad but then you have to pay the management charges on the funds they 'invest' in so not so good.

City of London again stresses, to quote them "recognise the importance of dividend income". Not what I want.

From the comments it is clear almost everyone looks for income - maybe I am going to be disappointed and will have to help the government out a more in the future that I want to.

[FONT=&quot]Why don’t you rebalance your investments so that say 50% is in growth oriented low dividend trusts and 50% in income oriented high dividend trusts? You will then lower your dividend income and you can also sell annually to use some or all of your CGT allowance. You seem to be imposing an artificial restriction that could result in an unbalanced portfolio by insisting on finding a zero dividend trust. [/FONT]

briley

Coryls - that is actually what I am trying to do. I currently have income oriented investments but am now trying to get growth stuff due to the changes in income tax rules.

coyrls

briley wrote: »

Coryls - that is actually what I am trying to do. I currently have income oriented investments but am now trying to get growth stuff due to the changes in income tax rules.

Sure, I understand that but you asked for zero dividend trusts but this shouldn't be necessary if you just change the mix to include low dividend trusts.

Thrugelmir

What you should be looking for is split capital investment trusts. Not as popular as they once were. Though still a few around. On the AIC website down all the funds into Excel then filter by share class.

Capital or ZDP will give you a few options. Found these 2 very quickly.

JPMorgan Income & Growth
M&G High Income

bowlhead99

Thrugelmir wrote: »

What you should be looking for is split capital investment trusts. Not as popular as they once were. Though still a few around. On the AIC website down all the funds into Excel then filter by share class.

Capital or ZDP will give you a few options. Found these 2 very quickly.

JPMorgan Income & Growth
M&G High Income

In most cases though, because of the way they are designed, ZDP shares (zero dividend preference shares) effectively function like a bond that has zero interest payments over their life, and then capital plus all interest returned at the end _except_ that the interest component is taxable as a capital gain for UK taxpayers and not as interest.

The structure of them is to give you a known return on a known future date which you buy into now at one price and redeem (or sell to someone else in the market if you don't want to wait 'til redemption) at a bigger price later.

But what you are getting from that type of share class is not the type of "capital growth and dividend income" which you'd get from being a holder of ordinary shares or units in a normal investment trust or oeic. Instead, it's a return that's very like a bond but with income tax advantages. Income tax advantages are a good thing. But the size and nature of the return is obviously lower than the return you would get over the long term from a true "equity" investment.

Your yield to maturity is simply whatever the market is paying for bonds with that level of risk and there's no real potential for long term upside, because you're just buying a known return. If it's a bond in a decent investment trust with good assets, it will be pretty safe, but will also be a pittance, relatively speaking.

So while the equity shares might pay 3% divs with a load of long term capital growth as a nice bonus, the ZDP will just be 3% capital growth, full stop. And though less risky than the equities, there is still obviously some risk. The headline original coupon rate of the ZDPs would have been much higher back in the day, when they were first issued, but with market interest rates on the floor now, you have to pay a premium to buy in, and so the effective rate you get on anything maturing in next couple of years will be pretty boring.

Couple of examples.

Aberforth Geared Investment Trust (mentioned on another thread yesterday) has a ZDP class maturing June 2017. At maturity the ZDPs get redeemed at 159.7p. Today they cost 153p. So that's a compound return of 0.25% a month for 17 months or 3% a year

JP Morgan Private Equity Limited(JPEL) has a ZDP class maturing October 2017. At maturity the ZDPs get redeemed at 107p. Today the ask price was 101.5p. So that's a compounding return of 0.25% a month for 21 months or 3% a year.

If you don't mind taking the "higher risk than bank account" to get 3% fixed return structured as a capital gain and potentially tax free, then ZDPs maturing in next few years could be worth looking into. However, if you are really just looking to restructure existing equity income funds into a lower tax variant of the same sort of thing, and so you want an equity-like return with proper growth potential instead of a fixed payout, they are probably not for you. It's a bond alternative not an equity alternative and bond returns are not exactly super high, at least, at the moment.

stringer_bell

Thrugelmir wrote: »

What you should be looking for is split capital investment trusts. Not as popular as they once were. Though still a few around. On the AIC website down all the funds into Excel then filter by share class.

Capital or ZDP will give you a few options. Found these 2 very quickly.

JPMorgan Income & Growth
M&G High Income

M&G High Income has a yield of 14.43%, surely that can't be right? or sustainable?

briley

To resurrect an older thread I started I have heard elsewhere that an investment trust fund must distribute most of its dividend income to the fund holders. Hence there is no possibility of a pure growth IT fund as such where the fund simply re-invests any dividends received.

A shame as in the past I have used growth funds (normally offshore) to generate growth and hence convert income into capital gains and enable utilisation of my capital gains allowance each year. Now I will have to pay the 8% dividend tax plus the tax to re-invest in the funds each year.

What are the two things you can not avoid?

bigadaj

briley wrote: »

To resurrect an older thread I started I have heard elsewhere that an investment trust fund must distribute most of its dividend income to the fund holders. Hence there is no possibility of a pure growth IT fund as such where the fund simply re-invests any dividends received.

A shame as in the past I have used growth funds (normally offshore) to generate growth and hence convert income into capital gains and enable utilisation of my capital gains allowance each year. Now I will have to pay the 8% dividend tax plus the tax to re-invest in the funds each year.

What are the two things you can not avoid?

There's no absolute requirement for an IT to pay out, it's down to discretion of management and the aims of the trust.

Historically split caps would have fulfilled your requirements but these took a hammering in teh last decade due to poor management, they are still available but are fairly niche and limited now.