Europe stars as a late entry

Best and worst Personal Equity Plan Survey
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The Independent Online
Personal Equity Plans have been with us for more than seven years and, despite the recent gloomy feel of equity markets, all but a handful have produced returns well ahead of the rates offered by building societies.

The best performing unit trusts over the past seven years that now qualify for inclusion in a Pep are mostly European trusts that at the outset did not qualify for inclusion in Peps. It was not until January 1992 that European stocks could be included ina Pep. Even over the subsequent three years the European trusts have done rather well. Old Mutual, which used to be called Providence Capitol, has been the top performer, delivering the equivalent of 32 per cent a year over the three years, compared with its 20.5 per cent a year over the last seven. Henderson's European trust is ranked fifth over three years, with returns of 26.8 per cent a year.

The top performer over the seven years among unit trusts that could have been sheltered within a Pep was Pembroke Growth, with returns equivalent to 16.9 per cent a year.

Next was Newton Income at 16.88 per cent a year. This income fund has suffered as a result of the increasing difficulty of chasing good quality income, but Pep investors like to pick income funds so that they are maximising the available tax shelter - freedom from income tax on the dividends as well as protection against demands for capital gains tax.

Over the past year, the Newton Income fund is down by four per cent and is placed at 142 in the rankings.

At the lower end of the table are those designed for the optimists who believed that smaller companies and "recovery' stocks would make a comeback. The annual return equivalents from these trusts ranged between 6.18 and minus-1.16 per cent.

Perpetual has been one of the most successful Pep managers with three trusts in the top ten over five years, according to the Chase de Vere figures. Its UK Growth fund is ranked 17th over seven years, with a return of £2,712.60 (15.32 per cent per year);its income fund was 71st at £2,280 (12.49 per cent a year) and its European Growth trust at 13 on £2,808.25 (15.89 per cent a year).

Among the non-qualifying unit trusts, which can make up to a quarter of a Pep portfolio, the top performer over seven years is Abtrust's Far East Emerging Economies, which has grown to £6,623.71, an annualised growth rate of just over 30 per cent. But Abtrust also has the bottom performer - its Japanese trust, which showed growth to £1,309.81, for an annualised rate of nearly 4 per cent.

Another firm of Pep watchers, the Allenbridge Group, has also been analysing Pep performance, looking at consistency and volatility as well as sheer performance. - although performance will usually remain the single most important factor when choosing a Pep.

``Higher returns are generally associated with higher risks, and our purpose is to evaluate the fund's return relative to its risk," said an Allenbridge spokesman. Using these ratings, they have come up with a list of recommendations : For all investors,Perpetual High Income, Morgan Grenfell Equity Income and Newton Income; for cautious investors, Pembroke Growth, Perpetual Pep Growth and Newton General ; and for more experienced investors, Morgan Grenfell European Growth and Perpetual Far Eastern Growth.

Up to £6,000 a year (£500 a month) can be invested in a Pep. When they began in January 1987, they were based on a calendar year, but that was changed to a fiscal year in 1989.

The Government's aim was to encourage investment in the shares of British companies, so initially the amount allowed to be placed in collective investments - unit trusts and investment trusts - was limited to £3,000. That restriction was abandoned in 1992 and the full £6,000 can now be put into unit or investment trusts.

The limits on the proportion held in cash have also been removed, as long as the cash is awaiting investment and is eventually invested.

The Chase de Vere Pep Guide is available by telephoning 0800 526 091; priced £12.95. Allenbridge is offering its Pep guide free. Call freephone 0800 339 999.

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