Data as at: 27/03/2024

Gearing

Gearing policy

The Board is responsible for the Company’s gearing strategy and sets parameters within which the Investment Manager operates. Borrowings are not normally expected to exceed 20% of the total assets of the relevant Portfolio

Borrowing limits

Borrowings are not normally expected to exceed 20% of the total assets of the relevant Portfolio. Under the Company’s Articles of Association, the maximum borrowing limit is 50% of the total assets of the relevant Portfolio.

Ways in which investment companies can magnify income and capital returns, but which can also magnify losses.

At its simplest, gearing means borrowing money to buy more assets in the hope the company makes enough profit to pay back the debt and interest and leave something extra for shareholders.

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how gearing works table

However, if the investment portfolio doesn’t perform well, gearing can increase losses. The more an investment company gears, the higher the risk.

Investment companies can usually borrow at lower rates of interest than you’d get as an individual. They also have flexible ways to borrow – for example they might get an ordinary bank loan or, for split capital investment companies, issue different classes of share.

Not all investment companies use gearing, and most use relatively low levels of gearing.

An indication of the maximum and minimum levels that the company would expect to be geared in normal market conditions.

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