Type: Unit trust
Aim: Growth and income by investing in equities, bonds, cash, investment funds and derivatives
Minimum investment; Lump sum £1,000, monthly £50
Investment split: 100% in equities, bonds, cash, investment funds and derivatives
Isa link: Yes
Pep transfers: Yes
Charges: Initial 3.25%, annual 1.25%
Commission: Initial 3%, renewal 0.5%
Tel: 08457 405 405
This fund from Blackrock Merrill Lynch aims to provide a return in excess of cash by investing in a range of asset classes.
Michael Philips proprietor Michael Both says: “The stated aims of the fund are to provide consistent positive returns in excess of UK Base Rate over the medium term, in all market conditions. I have never met any client who didn’t implicitly expect that, whenever they choose not to leave money on deposit,” he says.
He also notes that the prospectus clearly states that the aims are not guaranteed. “In fact it goes on to give almost every risk warning a diligent compliance officer could wish for,” he says.
In Both’s view, the fund seems to be a global managed fund in the traditional sense. “Blackrock Merrill Lynch will weight bond and equity assets wherever it sees fit with few constraints geographically. Currency risk may be hedged, but not necessarily. Perhaps surprisingly, the fund may invest in emerging markets and low-grade debt, although we are not given any clue as to whether this is likely to comprise more than a tiny proportion of the fund,” says Both.
On the positive side Both draws attention to the low minimum investment, which makes the fund easy to include even within quite modest portfolios. “Charges are also low, so if the fund does achieve its aims it should prove good value for money. It also qualifies for Pep transfers and Isas,” says Both.
Turning his attention to the less appealing features of the fund Both says: “For a fund which is targeting low risk balanced growth, it is surprising that there doesn’t appear any intention to include either property or commodities as asset classes – although that may be to maintain ISA qualifying status.
“One can certainly conceive of conditions, such as rising interest rates, where both bonds and equities fall and it is unclear how the fund would seek to overcome this problem.”
The Fidelity wealthbuilder target funds, Investec cautious managed, Merrill Lynch absolute alpha, Thames River warrior fund and perhaps New Star tri-star are funds that Both sees as potential competitors.
“There are umpteen long/short hedge funds aiming for absolute returns and Black Rock Merrill Lynch – wisely not called Lynch Rock – hasn’t given any particularly compelling reason why the target return fund might be preferable for investors wanting slightly better returns than a deposit account,” he says.
Both concludes: “With such an imprecise investment strategy and a target only of beating deposit rates in the medium term, it is difficult to be sure whether investors will be willing to put their faith in the fund, even though BlackRock and Merrill Lynch have such impeccable reputations. Outside of an Isa, investors might be more tempted by a structured product with explicit guarantees or a combination of funds blended to their own recipe.”
Suitability to market: Good
Investment strategy: Average
Adviser remuneration: Good