Jupiter is offering 9 per cent interest tax free on its latest fund, but is there a catch?
Commuters in London will have had difficulty in ignoring the omnipresent posters advertising Jupiter Asset Management's latest fund launch. The Jupiter Dividend and Growth Trust is a split investment trust which offers a 9 per cent yield tax free if invested via a Jupiter ISA.

The launch follows Jupiter's success with its Enhanced Income Trust last year which raised pounds 114m, making it the second biggest launch of all investment trusts in 1998.

The fund closes to new investors next Thursday, so it's time to decide whether to go for its projected yield of 9 per cent for the ordinary income shares and/or the 8.6 per cent of capital growth in the zero dividend shares which involve a fixed rate bank loan. The Trust will have a six year life.

There are now more than 75 split funds, but few offer as much as 9 per cent to the income seeker. The structure of split capital investment trusts means they can offer higher than average yields without hair-raising risk. Split funds have been around for 30 years, offering bigger and more secure returns than equities or other forms of investment, and their structure can't be copied by any other investment vehicle. What is the sting in the tail to this yield? In a word, risk.

Philip Butt, a director at Jupiter admits: "The assets of a split fund could be vulnerable. If the stock market fell steeply then the value of these assets or shares would fall too, but everyone else (other investors) would suffer as well. The other thing to bear in mind is that the structure of the split fund means that the ordinary shares are highly geared, making them sensitive to a fall in equity values."

But investors wanting capital growth should take heart from the portion of the fund which consists of zero-rated preference shares (which don't pay a dividend), as these are a safe way of accumulating capital. There hasn't been a zero-rated share that has failed to pay out yet - though there is always a first time.

Mr Butt told me he'd not been quizzed so vigorously on the downside of a 9 per cent yield by anyone. With other equity-based products like ISA- linked mortgages growing in popularity, investors need to remind themselves that there is nothing guaranteed about the stock market. As the old saying goes, shares can go down as well as up.

For information on investment trusts, contact the Association of Investment Trust Companies (AITC) 0171 431 5222