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Classic trust from Downing

Marsh feels that the inclusion of fixed interests makes very good sense. Wright says: “It seems broader based than some VCTs which often concentrate on say ethical, internet or other themes.”

Both adds that the fact that technology shares are currently out of fashion should lead to more realistic prices for investors. Gilbey adds that the strategy is much in line with the current batch of offerings on the market.

Looking at the product&#39s disadvantages, Gilbey says: “This has all the hallmarks of a &#39me too&#39 product.”

Marsh and Hosking agree that the high risk nature of the investment philosophy is the main factor.

Both looks at exits from the product, saying: “As with most VCT&#39s, exits are less certain than most investment trusts, with the market often small and illiquid, making it difficult to sell except at winding up, which is not planned to happen for at least 10 years, if at all.”

Wright adds: “It is being run by a relatively small company and lacks the comfort factor often felt when using a large institution.”

The panel has a difference of opinion when it comes to Downing&#39s reputation. Marsh simply calls it good. Hosking says: “A solid reputation in this market place, and some past performance to consider.”

Gilbey is more positive: “Very good among the trade,” but Both is less enthusiastic: “Downing is one of the smaller VCT managers, thus it is likely to miss some of the best opportunities which tend to come to larger managers.”

Assessing Downing&#39s past performance record, the majority of the panel are in agreement.

Wright says: “What you would expect from a VCT, but very impressive in view of the UK markets performance in 2000.”

Marsh calls the past performance good, while Hosking calls it strong. Gilbey adds: “In general the previous Downing VCT&#39s have achieved good past performance.”

Both, however, says: “Not very impressive, especially when Penine VCT&#39s are taken into consideration. This is probably largely symptomatic of the small size of the fund, low profile of the manager and relatively low deal flow.”

Considering the main competition for the trust, the panel pick up on Quester, Baronsmead, Close Brothers, Aberdeen Murray Johnstone, Artemis, Harvest, BWD Rensburg, and Matrix securities.

On the subject of whether the charges are fair and reasonable, Marsh says: “While they are typical of the sector, the annual management charge of 2 to 3.6 per cent a year serves to emphasise the selectivity that has to be exercised in client selection for a fairly expensive and risky product.”

Hosking feels that the charges are: “Standard, and investors are likely to be able to secure commission discounts for larger investments.”

Wright and Both feel that the charges are on the high side, but Wright does not see this as a problem as long as consistently high performance is achieved.

Gilbey adds: “High in the context of CAT marking, but in context of VCTs and active managed funds they are fair and reasonable.”

Gilbey, Both, Marsh and Hosking agree that the commission is fair and reasonable, with Both adding that it is probably a little on the lower end of the market.

Wright classifies his opinion: “If this investment is considered to be an equity, then it is very good commission. If, however, it is judged against a unit trust etc, then it is a little low. Overall, it is okay.”

Looking at the product literature, Hosking calls it: “Informative and straightforward.”

Marsh and Both say that the literature is good and clear, while Wright has more to add: “The only literature I have seen is the offer for subscription, which is first class as such – not really a selling tool however.”

Gilbey, feels that prospectus&#39 for VCTs are largely standardised.

Summing up, Both says: “The fact that Downing is struggling to sell out a relatively small VCT, having launched in mid-November 2000, confirms that it is not as popular as most of its competitors, most of which were snapped up.”


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