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Bumpy ride in theme park

CGU Financial Management has introduced the Global Suc^_cess unit trust,

which will invest globally in companies involved in connectivity,

demo^_-graphy, e-business and environmental technology.

Commenting on the suitability of the product to the market, Smith says:

“Recent turmoil in the technology, media and telecoms markets may have

dissuaded investors from committing large sums to this sector, in which

case there may be some reluctance to commit funds to new products in this

sector.”

Hulbert says: “This is ano^_ther &#39me too&#39 product and is
not really as

innovative as
it claims as thematic funds
have been available from

the early 1980s.”

But Scott says: “The product is a new fund investing predominantly in the

highly fav^_oured technology, media and telecoms sectors. It will give

investors who do not wish to buy individual shares an opportunity to access

this sector.”

Eke says: “It fits in quite well. It offers something different from the

normal types of thematic investments.”

French says: “This fund fits into the market for the more sophisticated

investor or one who is willing to take a gamble. It is not for the

faint-hearted.”

Looking at the types of cli^_ent for whom the fund is suitable, Hulbert

says: “It is for any client willing to use a riskier than average

collective equity investment scheme. It is most suitable for those

cli^_ents who already have a portfolio of more conventional inv^_estments

and who want to spice up their inv^_estments. It is not really suitable for

cautious investors or for more than 10 per cent of the average client&#39s

investments.”

Eke says: “This is a high-risk product and therefore only suitable for the

speculative investor. Even then, it should be used to complement an

existing portfolio of lower-risk investments.”

Smith says: “It is for those who are prepared to accept higher risks in

return for grea^_ter returns but do not want to invest fully in a pure tech

fund.”

French says: “This is a fund that should be borne in mind when looking at

an overall portfolio strategy for a client as, by the nature of the

underlying investments, it is speculative. Not only do you have the higher

volatility of the investments themselves but also the exposure to

currencies other than sterling.”

The panel are lukewarm on the marketing opportunities provided by the

fund. Scott and Hulbert cannot identify any, while Smith says: “There are

very few marketing opportunities as there are more high-profile funds and

providers in this market sector.”

But Eke says: “The product is not the normal type of thematic investment

and can be easily marketed. However, the benefits would need to be

exp-lained carefully to invest^_ors. In the final analysis, the potential

performance is what counts.”

Turning to the main useful features of the fund, Hul^_bert says: “It has

been my view for more than 20 years that inv^_esting on a geographical

basis does not make particular sense and that the more thematic choices

available, the better.
I have long regarded the world as a single

market since sentiment has instantly been transferable from one

geographical stock market to another.”

Scott says: “If CGU can successfully predict future growth themes and

select the best stocks in these areas, fund performance could be

excellent.”

French says: “Probably the major strong point is having Ad Schellen as

portfolio manager, with his 10 years exp^_erience in global theme funds.

Also, offering a global investment approach helps to reduce risk even for a

speculative fund such as this. Many clients are too UK-focused and global

div^_ersification has its attractions.”

Eke says: “The product aims to invest in four areas which are rightly

identified as growth areas. The investment risk is reduced because it will

not invest primarily in one geographical area.”

Looking at the fund&#39s disadvantages, the panel focus on different areas.

Hulbert cannot identify any but Scott says: “The fund man^_ager
may not

be able to react quic^_kly to changing themes. Also, there is no track

record.”

Smith says: “One drawback is a lack of big name awareness. Another is the

relatively high initial charge.”

Eke says: “With 72 per cent of the investments in tech^_nology, it could

be argued that this is just another global technology fund. There is also

no past performance on which to base any recommendations.”

Turning to the investment strategy, Smith says: “The fund is looking to

invest in a fairly focused number of themes but the success of this

strategy will obviously depend on selecting the correct themes and I am not

totally convinced that CGU has achieved this.”

Scott says: “CGU has sel^_ec^_ted four major growth the^_mes and I would

expect the fund to be split fairly equally between these areas. But

environmental technology will only account for 4 per cent of the fund. Why

bother including such a small exposure?”

Eke says: “The investment strategy is sound in theory. However, it is more

important to see how it is implemented. If the investments become

loc^_al^_ised in one geographical area, then one of the strong points of

the product will be lost.”

Looking at CGU&#39s reputation, the panel think it is good. Eke says: “CGU

has a very good reputation in the industry. It has wor^_ked hard over the

last few years to improve its image. The mer^_gers with General Acci^_dent

and Nor-
wich Union give it the res^_ources to offer better and more

competitive products.”

But Smith is more lukewarm. “In general, its reputation is not too bad but

it is not particularly well reg^_ar^_ded for equity fund perform^_ance and

does not stand com^_pari^_son with dedicated fund management groups,” he

says.

The panel think the commission is fair but the charges are high. Eke says:

“The char^_ges are at the higher end of the market and as a result there

are plenty of products with lower charges than this.”

Looking at the product literature, Scott says: “The information is clearly

presented and makes it easy for clients to understand the concept.”

Hulbert says the literature is attractive but not outstanding.

French says: “The product literature is user-friendly and sets out the

fund strategy quite simply. The application form is one of the simplest

I have seen to date.”

Smith says: “While it is nice to have a lightweight and A5-sized brochure,

CGU has crammed too much in, resulting in very small print. Not enough

emphasis is made of the companies it will be investing in, nor of the

longer-term track record of these sectors.”

Eke says: “There are too many bits which fall out when you pick up the

pack and the print is too small to read, as well as being sket^_chy on

detail. Two documents, a more comprehensive key features document and an

application form would be preferable.”

Scott sums up: “I think IFAs who are recommending theme funds may continue

to favour existing providers instead of this product until CGU can

establish a track record.”

Eke says: “The product is sound in theory but it would have been more

useful if the four themes were available as funds, allowing the client to

determine the investment combination. I also feel this product would have

been better as an Oeic.”

Broker Panel

Chamberlain Eke l Consultant, Ashley Law,

Beverley Scott l Pension investment consultant, Burke Ford Financial

Consultants,

Stuart Smith l Director, RJ Hurst & Partners,

Jeremy Hulbert l Proprietor, Hulbert Financial Services,

Keith French l Managing director, French & Associates

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