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

Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
Finacial products from our partners
Property search
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: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'