Are you ready to take a risk for a higher yield?

Jupiter is offering 9 per cent interest tax free on its latest fund, but is there a catch? By Hilaire Gomer

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.

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 £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

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
    'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

    'Queer saint' who bankrolled artworld giants

    British culture owes a huge debt to Peter Watson, says Michael Prodger
    Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

    Pushkin Prizes brings countries together

    Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
    14 best kids' hoodies

    14 best kids' hoodies

    Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk