Demutualisation shares set a high standard

FOR the two million UK Standard Life policyholders awaiting news of demutualisation windfalls, the big question is not only how much they could benefit from the potential flotation, but also how their shares could fare afterwards.

If a report released yesterday is anything to go by, the answer is very well indeed.

Investors who have landed shares due to a string of demutualisations since the 1990s or actively bought equities in the boom privatisation era of the 1980s are quids in, according to the Investors Chronicle.

The research, commissioned by Hargreaves Lansdown Stockbrokers, found that 100-worth of windfall shares from the flotation of each of six banks, building societies and life assurers - Alliance & Leicester (A&L), Aviva-owned Norwich Union, Bradford & Bingley, Friends Provident, Halifax and Northern Rock - would be worth 858 today.

And, with yields currently between 3.4 per cent with Northern Rock to 5.6 per cent at A&L, the power of reinvesting dividends is considerable.

Meanwhile, 100 invested in each of the 18 major privatised companies when they came to market would amount to 10,798 today. The report also investigated how such investments were performing today and whether shareholders should sell, buy or hold.

"Holding windfall or demutualisation shares tends to be a different ball game ... because of the circumstances under which people have come into ownership," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

"Some people will have actively bought shares at privatisation, but for the most part, we're talking about people who have become shareholders in a more passive way.

"The tendency is for people to simply lock these away ... but this isn't always the most sensible option."

For a free copy of Your Guide to Privatisation and Windfall Shares call 0800 1380456.