NORTH AMERICAN GROWTH FUND
Type: Unit trust.
Aim: Growth by investing in North American companies.
Minimum investment: Lump sum £1,000, monthly £50.
Investment split: Pharmaceuticals 13.3 per cent, cash 10.5 per cent, insurance 8.2 per cent, beverages 7.4 per cent, household products 6.5 per cent, communications equipment 5.8 per cent, IT consultancy and services 4.6 per cent, biotechnology 4.5 per cent, healthcare equipment and supplies 4.1 per cent, diversified financials 3.9 per cent, media 3.5 per cent, others 27.7 per cent.
Isa link: Yes.
Pep transfer: Yes.
Charges: Initial 5 per cent, annual 1.5 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 0800 092 2090.
Suitability to market 7.8
Investment strategy 6.8
Past performance 5.8
Company's reputation 7.8
Product literature 8.0
The panel: Derry Fleming, Sole trader, J Derry Flemming Insurance Consultants,
Barry Laymond, Senior practitioner, Barry Laymond Financial Services,
Martin Dilke-Wing, Director, Morgans Independent Advisers,
Neil Franklin, Partner, Franklins Financial Services.
The ABN Amro North American growth fund is a unit trust that aims for growth by investing in US large caps. It is managed by Montag & Caldwell, an Atlanta-based subsidiary of ABN Amro.
Discussing how the fund fits in to the market Dilke-Wing says: “There are currently 100 funds in the North American onshore sector. With such a wealth of choice, there needs to be a pretty compulsive reason to recommend a newcomer. Having said that, the ABN Amro story is strong and worth more than a second look.” Flemming says: “A steady growth should be maintained by virtue of stock selection.”
Laymond says: “A very useful and somewhat unique investment tool for those private clients who value UK funds as the main core of their portfolio, but who wish to build 10 per cent from the American market.” Franklin says: “It fits in well. It has a concentrated portfolio of large cap equities are least common.”
Identifying the type of client the fund would suit Flemming says: “For those wishing to invest in America for the first time, this fund has very core stock domination, with all companies being major players.” Dilke-Wing says: “The product is suitable for any client looking to diversify into the US if it is not already represented in his portfolio. If there is a US representation, it may be an effective switch receiver of underperforming investments. Particularly where the client favours large cap funds with an overweight bias towards healthcare and consumer staples.”
Laymond says: “Those who have significant holdings and who want to diversify from general funds.” Franklin says: “Those wishing to have North American exposure without taking too much risk. The concentration should achieve the higher return required without the default risk associated with some other funds.”
Discussing the marketing opportunities the fund may provide, Franklin sees opportunities for portfolio rebalancing and Isas for the 2001/2002 tax year. Dilke-Wing says: “The fund may not in itself provide obvious marketing opportunities. But, in an investment environment where added value may only be demonstrated by relatively small improvements on the benchmark, it may be well-positioned to take money from funds that conspicuously fail to achieve this.”
Laymond says: “It provides loads of opportunities to attract new investors and those seeking to diversify in a more stable fund.” Flemming says: “It should provide a base investment to America due to stock selection. Therefore, in my mind, it provides marketing opportunities for the more cautious investor.”
Highlighting the main useful features and strong points of the fund Dilke-Wing says: “The main useful features and strong points are the fact that ABN Amro has elected to recognise the proven performance and analytical skills of Montag Caldwell by buying the company. This commitment gives a strong indication of its belief. It is a lot easier for a fund manager to shout down a company.”
Laymond goes for the Montag & Caldwell investment style and Flemming pinpoints the stock selection, combined with well-known names. Franklin says: “ABN Amro has a good and growing reputation, the literature is clear, it is a good story and it is focussed.”
Examining the investment strategy Franklin and Flemming both agree it is excellent. Laymond says: “It is excellent and its benchmark is the S&P 500 index of large cap growth stocks.”
Pointing out the drawbacks of the fund Laymond says: “There are none unless you do not want to invest in the States.” Franklin mentions the focus on large caps, the fact that it is a new fund and concerns over the North American market recovery.
Dilke-Wing says: “There are no evident disadvantages beyond the fact that the philosophy is large cap and if not totally gung-ho, at least prepared to take some sector bets. If it gets the wrong size companies and the wrong sectors it will not look good against its peer group.”
Assessing ABN Amro's reputation Franklin says: “It is growing but it is too focused on two people.” Flemming thinks its reputation is excellent. Dilke-Wing says: “ABN Amro has developed a strong reputation in the UK retail market over the last five years as a result of its performance in the UK growth and income sectors. The fact that it has chosen to outsource, after a fashion, its US equity side reflects strength rather than weakening in today's increasingly multi-manager orientated market.” Laymond says: “It is a well-established Dutch company which entered the UK four years ago when ABN Amro Fund Managers launched.”
Examining the company's past performance record Laymond says: “Above sector average for UK funds and its funds under management have grown from £60m to £1.25bn to date.” Franklin says: “It is perceived as being limited to two successful funds. Can it manage the money flooding in?”
Flemming thinks its past performance record is excellent. Dilke-Wing says: “Because the management of the fund is contracted out to Montag & Caldwell, the important factor is the performance of the Atlanta-based managers. This appears to be strong, beating the S&P 500 in eight out of the last 10 years.”
Nominating the likely competitors the fund might face Dilke-Wing says: “The main competition will be the other strong American funds, notably those managed by Aberdeen, Credit Suisse, Fidelity, GAM, Gartmore and Threadneedle. Soc Gen's relatively new US fund may also prove interesting.” Laymond backs up Dilke-Wing by going for Fidelity and, more specifically, the Threadneedle American select growth and Credit Suisse Trans-Atlantic funds. Flemming can see competition coming from UK fund launches, both in UK and Europe.
The panel agree the charges are standard for this type of product. They also agree that commission is normal.
Looking at the product literature Flemming simply says: “Really good.” Dilke-Wing says: “The product literature is very good. It is clear, concise and comprehensive. The investment philosophy is well documented and the case for investing with ABN Amro is put convincingly.” Franklin says: “It is consistent with its house style. I like all the various application forms in one booklet. Jupiter and others could do with a lesson here.” Laymond is less enthusiastic. He says: “It is much easier to read the most, but the green colours are not easiest for those with poor eyesight and it is not easy to photocopy.”
Summing up Laymond says: “The Montag & Caldwell experience will benefit investors over time and that proven investment process is now available for the first time in the UK.” Dilke-Wing says: “It will be interesting to monitor the fund's performance. The story is good and I would have no hesitation in recommending this fund to the right client.” Franklin concludes: “It is likely to be recommended by us.”