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Portfolio investment |
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Portfolio investmentThe acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.Similar MatchesMultilateral Investment Guarantee Agency (MIGA)Multilateral Investment Guarantee Agency (MIGA)Agency established by the World Bank that offers various forms of political risk insurance to corporations. Short term investment servicesShort term investment servicesServices that assist firms in making short-term investments. Registered investment companyRegistered investment companyAn investment firm which is registered with the SEC and complies with certain stated legal requirements. Trade-related investment measureTrade-related investment measureAny policy applied to foreign direct investment that has an impact on international trade, such as an export requirement. The Uruguay Round included negotiations on TRIMs. Split capital investment trustSplit capital investment trustAn investment trust with a limited life, in which the equity capital is divided into two classes - income shares and capital shares.Holders of income shares receive the majority of the trust's income throughout its life and a specified capital amount on liquidationHolders of capital shares receive virtually no income during the trust's life but on liquidation receive all the assets after repayment of capital to holders of income shares. In other words they get the benefit of most of the capital growth.The raison d'etre of split capital investment trusts is that a single trust can accommodate the requirements of two types of investor in one fund, and provide better performance for both than they would be able to achieve if they invested in separate funds.It works like this:Ian Illingworth has £10,000 to invest and wants to get maximum income from it. He buys 'Income Shares' in the Split.Colin Casey has £10,000 to invest and wants to get maximum capital growth from it. He buys 'Capital Growth Shares' in the Split.The Split invests their pooled money and during the lifetime of the trust pays out all the income to Ian. At the end of the Split's life, when the capital value of the fund has risen to, say, £60,000, it pays Ian back his £10,000, and pays £50,000 to Colin.How have Ian and Colin benefited?Ian has benefited because for 7 years he has received the income on £20,000 even though he only invested £10,000.Colin has benefited because he has received the capital growth on £20,000 even though he only invested £10,000 and, being a higher-rate taxpayer, it has suited him very well not to have received any income on his £10,000 in that time.Basically, it is as if Ian said to Colin 'You have the capital growth on my £10,000' and Colin said to Ian 'Fine, I'll give you the income on my £10,000 in return.'There are many other classes of share within splits, and the thinking behind them gets progressively more complex. It is also important to note that Splits are geared investments (they can borrow money) which, depending on performance, can either be beneficial or detrimental to investors. If you are interested in what they have to offer it is essential to get specialist advice. Further SuggestionsBrown field investmentinvestment bond Alternative investments Investment Company Act of 1940 Reinvestment risk Investment management Investment Company Institute (ICI) Foreign direct investment (FDI) Direct Foreign Investment Investment Advisers Act Investment advisory service Foreign portfolio investment Investment investment grade Unit investment trust Leveraged investment company Reinvestment rate Ethical Investment Research Service Mutually exclusive investment decisions Finite Life Real Estate Investment Trust (FREIT) Target investment mix Trade and investment Investment history Zero investment portfolio investment company |
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