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DWS builds block of 25 stocks



Type: Oeic

Aim: Growth by investing in UK equities

Minimum investment: Lump sum £1,000, monthly £25

Investment split: 100% in UK equities

Isa link: Yes

Pep transfers: Yes

Charges: Initial 4.25%, annual 1.5%

Commission: Initial up to 3%

Tel: 0800 917 0005

The panel: David Flowers, director, Ronald Blue & Co,
John Holian, certified financial planner, Maunby Investment Management, Peter Ruddy, director, Peter Ruddy & Partners

Suitability to market 8.0
Investment strategy 7.4
Past performance 6.0
Company&#39 s reputation 6.7
Charges 5.7
Commission 5.7
Product literature 5.7

The DWS UK opportunities fund is an Oeic that aims for capital growth by investing in a concentrated portfolio of 25 UK stocks.

Looking at how the fund fits into the market Holian says: “In current markets, a more active approach is required and this fund suits that. The freedom to leave out stocks entirely can help the manager avoid following the market down and concentrate on stocks he feels will still make money. The fund may outperform the market and even better, produce a positive return.”

Ruddy says: “It competes with other high-risk growth funds, coming late to the party.” Flowers says: “There are plenty of funds of this type around, but the fact that it is so niche and timed when the markets are at a low point gives this fund a certain uniqueness.”

Identifying the type of client the fund could suit, the panel are broadly in agreement. Ruddy suggests those with larger portfolios and higher risk profiles. Flowers says: “The above-average risk investor who takes the view that the bottom has been reached in market falls in the UK and Europe.” Holian says: “In the main, those with a core portfolio looking for some additional expertise to enhance returns. Younger savers and investors may prefer it as a higher risk and more adventurous fund to aim for better returns.”

Highlighting the potential marketing opportunities for the fund Flowers says: “For those who sell investments and try to time the markets, this will prove a useful tool.” Holian thinks there are none in particular, while Ruddy says: “In the present market, it is another opportunity to approach clients to discuss funds with smaller portfolios of stocks.”

Drawing attention to the fund&#39s main useful features and strong points Holian says: It has a small concentrated portfolio and is not restricted by benchmarking.” Ruddy says: “Because it is small and concentrated, the fund manager should be able to outperform in the current difficult market.” Flowers says: “Notwithstanding the old Morgan Grenfell European fund disaster, DWS Investments brings a strong pedigree to investment management. As a stockpicking house, launching a 25-stock holding fund should be right up its street.”

Examining the fund&#39s investment strategy, Ruddy complains that it offers nothing new. Holian says: “It is quite essential. Arguably there are plenty, if not too many, benchmarked funds available. Therefore, a fund with some freedom to leave out stocks and go for simply good ideas, should appeal to investors.” Flowers says: “It is good timing. Offering a small number of shares as an aggressive portfolio at the bottom of the market fall -if it is the bottom &#45 could pay off in a big way.”

Focusing on the drawbacks of the fund Flowers says: “The track record of these sorts of funds is usually poor over the long term.” Holian says: “There is no trail commission on the Oeic, which is important to the investment-focused IFA this type of fund is aimed at. Unfortunately, the lack of the 5 per cent trail is not even reflected in a lower annual management charge.” Ruddy points out that it is higher risk due to its concentration on a small portfolio of stocks.

Assessing the company&#39s reputation Ruddy says: “It is perfectly good, although it may hold the record for name changes.” Holian says: “It gives some reassurance with its size and also, being European-based, it has some wider knowledge of European markets too. This should help the launch of the sister DWS European opportunities fund.” Flowers says: “I. DWS will position itself as the big, safe, serious fund manager. The motoring equivalent would be Mercedes.”

Discussing the company&#39s past performance, Holian says: “In the UK equity sector, it seems to have had its moments, although I have never used it.” Ruddy says: “Some of its funds have performed well.” Flowers says: “The UK growth and Japan funds are great, but the rest are strictly average. It is not in the same league as, say, Fidelity.”

The panel consider the competition the fund will face. Holian says: “All other focus funds and concentrated funds, such as BWD aggressive growth, Schroder&#39s new alpha fund and Gartmore UK opportunities.” Ruddy goes for Gartmore focus, the BWD aggressive fund and similar funds. Flowers says: “New higher-risk funds launched to try and catch the bottom of the market.”
Assessing the charges, the panel offer different views. Ruddy thinks they are bog-standard, while Holian feels the initial charge is slightly lower than other funds. Flowers says: “They are fairly standard, although the annual management charge of 1.5 per cent is not cheap.”

Moving onto the commission offered Holian says: “It is standard, but again the lack of trail commission on the Oeic is not reasonable.” Flowers thinks the commission is standard and Ruddy thinks it is reasonable.
Looking at the product literature, Ruddy labels it boring and unimaginative. Holian thinks the literature is quite straightforward. Flowers says: “Very good, easy to read and to understand. It doesn&#39t say much, but it does say it again and again.”

Summing up, Holian says: “Time will tell if the strategy works or not. I see it as a team approach with the strength coming from the analysts behind the fund, so I would not be concerned about any future fund manager moves.”


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