Analysts back rollover option for F&C UK Select

Analysts at JP Morgan Cazenove have described the chance for holders of F&C UK Select to roll over their holding into the F&C UK Opportunities OEIC when the trust is wound up (subject to shareholder approval) as ‘a good alternative'.

F&C UK Select is winding up after it failed to achieve a performance hurdle, put in place in December 2007, of beating the FTSE All-Share total return over the following two years. The trust suffered badly in the market meltdown of 2008, and even a stellar total return of 52.5% in 2009 was insufficient to produce an overall outperformance of the index over the two-year period.

Investors can choose to receive cash in return for their shares at close to net asset value, or to roll over their holding into F&C UK Opportunities, which is managed in very similar fashion to F&C UK Select by the trust's manager, Phil Doel. Both funds invest in a concentrated portfolio of around 25 stocks - more than 20 of which they hold in common - with roughly equal weightings, which are rebalanced regularly to maintain the shape of the portfolio.

The rollover option will allow investors to stick with Doel - who has produced a return on F&C UK Opportunities of 49.0% in the 12 months to 31 March, and 6.6% year-to-date - in a tax-efficient manner, without triggering a disposal for capital gains tax purposes. The rollover option also allows them to continue to invest in the unquoted Caithness Petroleum, which contributed to the outperformance of F&C UK Select in 2009.

A note from JP Morgan Cazenove, released in response to the restructuring proposals last week, said F&C UK Opportunities represented "a good alternative given that it closely mimics the trust".

The Board of F&C UK Select has scheduled two general meetings in June to discuss and vote on the wind-up proposals.