BES faces university challenge: Balliol, Magdalen and King's among those offering high returns. Neasa MacErlean reports

SEVERAL Business Expansion Scheme companies are offering rates of return that industry specialists do not expect to see bettered before the BES regime comes to an end in December.

The market is dominated by university schemes, which all have to be in place before the start of the next academic year in five weeks' time. Anthony Yadgaroff of Allenbridge Group, the BES advisers, says: 'Once the university schemes are out of the way the returns will come down. The building societies and the house-builders will come in and they'll be a lot more commercial.'

At least four schemes are guaranteeing a return over the five-year investment period of pounds 1.20 or more for each pounds 1 gross invested. Taking into account the 40 per cent tax relief for a higher-rate taxpayer, this equates to an annualised return of 13.9 per cent.

In a scheme to be launched next week, Glamorgan University is expected to offer the highest return on the market - pounds 1.22 back after five years, equal to 14.1 per cent a year. The Balliol and Magdalen BES and the Save & Prosper Bessa Oxbridge both offer pounds 1.21 back after five years. A Cambridge University scheme, Accumulus King's, offers pounds 1.20.

Investors who can afford to take a risk can consider the new FT-SE- linked schemes. As an alternative to its fixed return of pounds 1.21, the Balliol and Magdalen BES offers an FT-SE option.

Investors who choose this route will be given a fixed return of 60p after five years. On top of this they will earn a geared variable return of 1.6p for every 1 per cent increase in the FT-SE 100 index. If the stock market grows by 25 per cent or 50 per cent during the period, investors will be able to protect themselves against future fluctuations by locking into those gains.

Close Brothers, a BES sponsor, has launched two similar schemes. The Save & Prosper Bessa Oxbridge has an FT-SE option that guarantees a fixed return of 60p per pounds 1 invested gross. On top of this, investors will receive 1.54p for every 1 per cent rise in the stock exchange. The gain will be locked in when the return reaches pounds 1.20 per pounds 1 invested.

The similarly-named Bessa Oxford has no lock-in facility but offers a return of 1.81p for each 1 per cent rise in the FT-SE on top of the 60p fixed return.

Johnson Fry, another BES sponsor, expects that at least another pounds 400m will be raised by the time the BES regime comes to a close at the end of the year. Two-thirds of the investors in Johnson Fry 'loan-back' schemes that were launched in the spring have decided to take advantage of the six- month loan option rather than leaving their funds in for longer.

The spring schemes were offering annualised returns of about 12 per cent. By taking their money out, investors are now free to invest in the new schemes on the market, which are offering significantly better returns. However, the new schemes all run for five years, whereas several of the spring schemes gave investors the option to call in their capital after one, two or three years.

A free booklet, Myth Versus Reality - A simple guide to Assured Tenancy BES Investment, is available from Johnson Fry on 071-321 0220.

Further details from the Allenbridge Group 071-409 1111, Neill Clerk (sponsor of the Glamorgan University scheme) on 041-332 2055, Hodgson Martin (sponsor of Balliol and Magdalen) on 031-226 5596, Save & Prosper Bessa Oxbridge on freephone 0800 282101, Terrace Hill Capital (sponsor of Accumulus King's) on 071-734 4440 and the Bessa Oxford line on 0707 398555.

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