Data as at: 23/05/2024


Gearing policy

Borrowings are invested in securities when it is considered that investment opportunities merit the Company taking a geared position. The Company is also permitted to be less than fully invested. Cash and equity gearing levels, and the extent of gearing, are discussed by the Board and Managers at every Board meeting.

Borrowing limits

The Company has a maximum approved equity gearing level of 50% of shareholders’ funds but, in the absence of exceptional market conditions, equity gearing is typically less than 25% of shareholders’ funds

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.

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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