Aurora Funds Management is seeking subscriptions through an initial public offer (IPO) for a listed buy-write income trust.
The investment vehicle aims to generate income plus franking credits and medium term capital growth via an active strategy of selling exchange traded call options over a geared portfolio of shares selected from the S&P/ASX 100.
Aurora Funds Management director Hugh Latimer said buy-write strategies were particularly suited to flattening markets.
“They are used to generate additional portfolio income, while also providing some protection against an unexpected fall in the market,” he said.
Latimer said the Aurora Buy-Write Income Trust would appeal to self-managed superannuation fund investors, investors who wanted the flexibility of an Australian Stock Exchange (ASX) listing, and investors who lacked the scale or systems to manage an active portfolio investment strategy.
“This is an attractive retail investment offer which will appeal to ‘time poor’ investors seeking access to a comprehensive portfolio approach to a sophisticated buy-write strategy through one listed investment trust.”
Latimer said a unique feature of the trust was that investors could either sell their units on the ASX at the prevailing market price or redeem them monthly direct with Aurora off-market at the net asset value per unit.
“This feature should help to alleviate any trading discount occurring in the listed unit price of the offer relative to the net asset value per unit,” he said.
CommSec will act as broker to the offer while Merrill Lynch Investment Managers has been appointed to develop and implement the strategy for the trust and put in place risk management processes.
Gearing within the trust will be to a maximum Loan to Value (LVR) ratio of 65 per cent, although this is expected to remain at or around 50 per cent.
The offer will open for retail subscription on Monday April 24, 2006, and is expected to close on Friday June 2, 2006. Units are expected to commence trading in the trust on Monday June 19, 2006.
The issue is seeking to raise subscriptions of up to 15 million units at $10 each or $150 million, with a minimum subscription of $2,000.
