Distribution Bonds

updated: January 21, 2010

A Distribution Bond is an extremely useful form of investment for clients who want a moderate, but tax efficient and rising income, without exposing their capital to a high risk of loss.

A Distribution Bond is at the lower risk end of the investment spectrum. The bond invests in a wide range of assets including UK company shares (normally between 20% to 50%), gilts and other fixed interest securities (normally between 20% to 50%), index-linked stocks (normally between 0% to 30%) and commercial property (normally between 0% and 30%).

Gilts and fixed interest securities will play a major part in producing the income of the fund. Property will provide a stable rising income if rents rise over time. Although the main aim of the property investments will be to produce income, property also offers the potential for capital growth. Equities (ie stocks and shares) will provide most of the growth in the fund. The shares will normally be high yielding shares and will generally but not always be blue chip companies.

Distribution Funds will also invest in index-linked stocks as appropriate. The actual investment mix at any time will depend upon the fund manager’s views as to which assets will give the best prospects of maximising income and capital growth within an acceptable level of risk.

To obtain further information please click here for our pdf Guide to Distribution Bonds.