Trusting in new ideas

Nigel Sidebottom eyes investment launches with winning looks

Investment management groups have no shortage of ideas for new investment trusts. But responses from potential investors have been mixed. A number of new issues have been pulled and others only managed to raise the minimum required to make the new trust viable.

The most successful of the current range of new issues is likely to be Schroder Asia Pacific Fund. With excellent recent performance across all of their funds and a strong and justified reputation for expertise in the Far East, this new issue always looked like being a success. The pre-placing raised just over pounds l00m and the issue has been capped at pounds l40m. The public offer closes on 9 November. The annual management charge is 1 per cent and initial expenses have been capped at 4.5 per cent.

The fund will have a structure of ordinary shares plus warrants on a one for five basis. The investment approach will be orientated towards stock picking rather than asset allocation, although the fund will initially be focused towards the faster- growing markets, such as Korea and Taiwan, in preference to Hong Kong and Malaysia. Schroder's ability to provide an ongoing market in the shares, combined with the fact that most quality investment trusts in this area command premiums to net asset value, suggests a healthy aftermarket to the issue.

With the majority of Japanese specialist trusts consistently trading at close to net asset value it is no surprise to see new issues targeting this area. Flemings has just completed a money-raising exercise via a 'C' share issue for its Japanese Investment Trust.

Martin Currie Japan Investment Trust will be managed by Michael Thomas, who has been running its successful Japanese Unit Trust for around 10 years. The structure and costs are similar to those of the Schroder Fund. A full Open Offer closes on 17 November.

The world-wide boom in technology stocks over the past year has tempted a number of management groups to consider launching new technology funds. HTR and Prolific, which both manage technology unit trusts, considered launching new investment trusts. HTR decided at an early stage not to proceed and an apparent lack of institutional support has led Prolific to withdraw.

The remaining issue, which appears to be going ahead, is Finsbury Technology Trust, to be run by Michael Bourne, who managed technology funds at TR and Prolific before the joint venture with Finsbury Asset Management.

The trust will focus on smaller and medium-sized companies in the US. Despite the strong performance from technology stocks in recent months, the rapid growth in personal computing, multi-media, communications and biotechnology will provide many exciting investment opportunities.

Finsbury's trust is an ideal vehicle for investors wanting to ride the technology boom but they should be prepared for volatility and a possible period of consolidation in the short term.

The offer for subscription is expected to open on 10 November and close on 24 November. Finsbury expect to raise between pounds 20m and pounds 50m. Initial costs should not exceed 3.5 per cent and the annual management fee is 1 per cent plus a performance- related element.

Capital Trust Financial Management is promoting Emerald Investment Trust, which will concentrate on investment in Northern Ireland and the Republic of Ireland.

The Irish stock market has been one of the best- performing in the EU during the past three years, supported by above-average economic growth and the expectation of strong inward investment. Up to 20 per cent of the portfolio may be invested in unquoted companies.

The trust will be fully PEP-qualifying, and will have a structure of ordinaries plus warrants on a one for five basis.

There are few precedents by which to judge the Emerald Investment Trust, although it is possible to buy existing funds investing in Ireland on discounts to net asset value. This might prove a hurdle to the rating of the new trust in the aftermarket, notwithstanding its longer- term attractions.

The offer for subscription is expected to close on 17 November. Initial costs will be less than 3.5 per cent and the annual management charge 1 per cent.

Jupiter Asset Management is believed to be planning a new split-level trust, which will be managed by William Littlewood, who has established an excellent track record with the Jupiter Income Trust.

The various classes of shares being offered may prove highly attractive to investors with specific requirements.

Holders of Jupiter's existing flagship split capital trust, River Plate and General, should note the company has received an approach from its managers, which may lead to an offer for the company. It looks probable that the new Jupiter split trust will be used as a roll-over vehicle for River Plate, which is due to wind up no later than October 1996.

Nigel Sidebottom is managing director of GVG Asset Management.