Hewitt: 'Tortoise' investments beat the equity 'hare'

15 June 2006
The manager of the F&C Progressive Growth Fund, Peter Hewitt, has told a conference in London that zero dividend preference shares have a better risk/return profile than either UK equities or government bonds.

Mr Hewitt described zero dividend shares as a 'widely misunderstood' class of asset for investment, which should be looked into more closely as, over the long-term, they can provide a more stable, reliable and ultimately more profitable venture.

"In the F&C Progressive Growth Fund I target 'high quality' zeros linked to trusts which have little or no gearing, without significant cross-holdings in other trusts and generally where the assets of the underlying portfolio are already more than sufficient to pay out the zero holders," he commented.

"This latter measure is known as asset cover," he continued. "A zero with a high level of asset cover gives you some comfort that in the event of a bear market, providing markets don't fall more than the level of asset cover, the zero holders will still get paid out."

Mr Hewitt concluded by saying that tumultuous stock markets can turn moderately risky investments into big risks, so investors should always look to balance their portfolios.

"After the equity market turmoil we saw in May, investors really should have quality zeros on their radar," he concluded.

"Sometimes it makes sense to have a few steady 'tortoise' investments in your portfolio, and not to put all your money on equity 'hares'."

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