This is the ability of the Company to borrow money to magnify the potential returns on its portfolio, and relies on the fact that stock market returns have exceeded the cost of borrowing over the longer term. The Company currently has a 5.5% debenture stock 2021 in issue for £38m together with a 4.05% private placement note for £50m, for repayment in September 2028 and a 2.99% private placement loan for £25m, for repayment in October 2047.
Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company’s gearing range may fluctuate between 0% and 30%, based on the current balance sheet structure, with an absolute limit of 50%.
Please note that while the Company can borrow additional money to invest, known as leverage, this increases the exposure of the Company to markets above and beyond its total Net Asset Value. This can help to increase the rate of growth of the fund but also cause losses to be magnified.