All this talk of raising capital gains tax is ominous news for zeros.
By ‘zeros’ I mean of course zero dividend preference shares – that class of investment trust shares that lost investors millions back in 2002 and were responsible for the biggest scandal to hit the industry.
The zeros have recently been experiencing something of a comeback – despite their dodgy history – thanks to the fact they are taxed as capital gains not income. A lot of the zero shares launched in the past year have been in response to private client wealth managers, who in turn were responding to pressure from their investors.
Now, it looks like the brief resurgence could be already thwarted. Analysts at Numis Securities said today a rise in CGT ‘appears negative’ for zero dividend preference shares – a view that was also expressed by analysts at Oriel last week.
Of course, there has to be an investment case for the zeros too – with some, such as those from Ecofin, attached to attractive, stable companies. It is early days – but it will be interesting to see how strong the demand for zeros is after the emergency Budget on 22 June.