Type: Unit trust
Aim: Growth by investing mainly in companies in, or related to, the energy sector including oil and gas, with exposure to other assets as appropriate
Minimum investment: Lump sun £1,000, monthly £50
Investment split: 100% globally in companies in, or related to, the energy sector and other assets
Isa link: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%
Tel: 0800 092 2090
This global energy fund is the 12th unit trust in the Artemis range. It aims for growth by investing in a concentrated portfolio of around 30 stocks in the global energy sector.
Chadney Bulgin partner Bruce Bulgin thinks this fund will form part of many self-invested personal pension and Isa portfolios. He says: “The new fund concentrates on the energy sector and in the main will invest in the oil and gas sectors, including energy transmission, generation and renewable energy. The fund may also invest in private companies with clear plans for an initial public offering.” He feels that the range of underlying holdings will be wide even though the initial number of securities will total around 30 out of a possible universe of 2,000 stocks.
“On this basis the fund manager, John Dodd, will have a detailed knowledge of what he is buying. The main aim of the fund is to provide capital appreciation and the fund is benchmarked against the MSCI All Countries Energy index. It is a truly global fund with the greatest exposure in Europe and Russia at 63 per cent. Unlike the benchmark, the weighting in the US will be lower,” says Bulgin.
In Bulgin’s view, the new fund’s manager – John Dodd – has a first class track record. “He is a partner and co-founder of Artemis, which is a specialist retail manager. Since being established in 1997, Artemis now manages around £11.4bn, mainly for retail clients.”
Bulgin feels it is important to note that Dodd has specialised in the energy sector throughout his career and has previously worked at Gartmore and Ivory & Sime.
“Understandably, the manager is positive about the energy sector and believes that there is unlikely to be a decline in demand for energy across the world. He believes that energy demand is becoming insensitive to price.”
Bulgin feels that the Artemis policy of fund managers investing in their own funds concentrates the mind in that the managers’ interests are directly aligned with those of the retail investors who buy the funds.
“Based on track record, with Dodd’s expertise and experience, there is a great deal of expectation that investors will be richly rewarded. It is very much a case of conviction investing coupled with old-fashioned stock picking. Providing Dodd’s claims turn out to be correct then the energy sector should form part of most investors’ portfolios.”
Discussing the potential drawbacks of the fund, Bulgin says: “If the manager’s thinking turns out to be incorrect and the fund tanks then investors will have a poor investment experience. It is also to be wondered whether such a small number of holdings against such a big universe is a sound strategy.”
Bulgin wonders if it would make sense to have greater diversification in the portfolio, even if the fund becomes more of a closet tracker.
“Concentration in one sector is always risky and many advisers will only use this fund as a small proportion of a client’s portfolio. On this basis, investing in the fund will only be appropriate for advisers who believe in active management or in particular, specialist active management.”
Bulgin adds that as with most active funds, charges are on the high side with a total expense ratio of around 1.75 per cent and an initial charge of up to 5.25 per cent. “However, many advisers will use platforms to buy and hold the fund, which should reduce initial charges and charges if there is subsequent fund switching, ” he says.
Bulgin feels that the fund manager’s wide remit for this fund, which is common in actively managed funds, almost provides a ’get out of jail free’ approach to investing.
Identifying funds that could provide the main competition Bulgin says: “There have been other funds such as M&G global basics which concentrate on one sector and these can perform well in certain market conditions. But it is difficult to pigeonhole this fund as it is something of a one off’.”
Summing up, Bulgin says: ” Artemis is highly regarded and has won a hatful of awards over the years. It has excellent track record so the new global energy fund should sell well. Coupled with this is John Dodd’s own standing in the fund management industry.
“However, the choice of funds is vast and one wonders whether there is the space and indeed the necessity for another fund. If the fund attracts a healthy inflow of money and markets are kind, then investors are likely to reap handsome returns. But volatility is likely to be above average and the fund should be considered a long- term hold. “
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average