Aim: Growth by investing globally in the equities of smaller companies
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 100% in global equities
Isa eligible: Yes
Charges: Initial 4%, annual 1.7%
Commission: Initial 4%, renewal 0.5%
Tel: 0845 279 3003
This fund invests globally in the equities of smaller companies, with smaller companies specialist Harry Nimmo at the helm alongside co-manager Alan Rowsell.
Discussing how the fund could be useful for IFAs and their clients, Chelsea Financial Services managing director Darius McDermott says: “This is an interesting new fund from Standard Life Investments and a logical addition to its smaller companies range, particularly now that its UK smaller companies fund is soft-closed due to capacity issues.”
McDermott observes that the fund managers have a wealth of experience between them, particularly Harry Nimmo who runs the small cap team. McDermott notes that Nimmo has an excellent track record on the UK Smaller Companies fund. “The co-manager, Alan Rowsell, is less well known but ran a US equity fund for Standard Life Investments from their Boston office,” says McDermott.
He adds that the global remit of the fund will give investors the benefit of diversification. “With a universe of more than 6,500 companies world-wide, the proven investment process the small cap team uses will be invaluable in creating a manageable list of companies from which to choose from.”
To select the 40 to 80 companies in which to invest, McDermott says the managers will use the Matrix: a quant-based screening tool which tracks a group of factors which the Standard Life Investments quantitative analysis team has identified as signalling added value over time Stocks are then assessed according to their scores and weightings and a final rating given to allow a short-list to be created. “The managers will then have company meetings to cross-check their investment rationale, and importantly, to assess the strength and repeatability of the company’s business model. This could lead to investments from high quality Indian regional banks to tech-savvy companies which successfully harness the internet within their business and, as Harry Nimmo says, to identify tomorrow’s larger companies today,” says McDermott.
Smaller companies tend to be less correlated to global growth trends but McDermott points out that they are generally much more volatile in nature than medium or larger companies. “This means the fund is at the higher end of the risk scale,” he says.
Turning to the potential drawbacks of the fund, McDermott says: “The charges are on the expensive side with an annual management charge of 1.7 per cent. The adviser remuneration is average with trail commission at 0.5 per cent.”
McDermott says although the fund has a global remit, the benchmark weightings mean it is very skewed towards developed markets. He thinks this is a shame as it not making the most of emerging market opportunities. “What this does mean however, is that around 50 per cent of the fund is invested in the US, obviously playing to Alan Rowsell’s skills and experience and 25 per cent in favourite UK and European companies – the former being Harry Nimmo’s speciality – and therefore should stand the fund in good stead.”
Competition is expected to come from Invesco Perpetual global smaller companies and Rathbone global opportunities, which McDermott says is a bit more flexible with a small and mid-cap bias.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good