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Dynamic fund for Merrill

Gaffney says: “It is actively managed, rated AAA by Standard & Poor&#39s and has a flexible investment approach. It is able to take a defensive stance at times of anticipated market decline. It can also take an opposite course of action and position the fund aggressively at times of anticipated market strength.”

Flowers says: “Not being held to one particular style of investing. This should enable Merrill Lynch to avoid having to detail an art of fashion investment style from time to time.”

Moving onto the investment strategy, Gaffney says: “In theory, the ability to take different investment stances dependent on the fund manager&#39s market view is attractive. however, market movements are far from being predictable and there is still the risk the market position adopted may not be the appropriate one. Furthermore, the underlying costs of stock sales or purchases are likely to be significant and may well impact on performance.”

Flowers says: “It is a good theory. the question is whether or not it can work in practice. Can an investment team switch from one style to another just like that?

Highlighting the disadvantages of the fund, MacLeod says: “This type of product has the main disadvantage of all these types of investment where the provider is promising great returns in the event of a number of different stocks not falling, It is about time some of these companies put their money where their mouths are and guaranteed full capital return.”

Gaffney says: “Investment is to be made principally in quoted UK securities and ignores the current trend towards globalisation. The fund is narrowly invested in 40-60 stocks which in regard to certain growth stocks such as technology, media and telecommunications companies could be a higher risk strategy.”

Flowers says: “It is not suitable for those who wish to select a particular investment style. Merrill Lynch is not a household name. Charges are expensive and therefore the general investor will find it easier to go to a household name with lower charges.”

Assessing Merrill Lynch&#39s reputation, Gaffney says: “Merrill Lynch, formerly Mercury, has a good all-round reputation although name awareness under the new banner has some way to go with the general public.”

Flowers says: “A good reputation but not very well known in the retail unit trust market.” MacLeod says: “IT was unknown to me in the past, it&#39s marketing is poor.”

Considering the company&#39s past performance record, Flowers says: “It has a generally good performance across a wide range of funds. Most funds have performed fairly close to the average over the last five years.”

Gaffney says: “Overall, its past performance is quite acceptable and the group manage some large corporate funds. Individually, fund performance is mixed, although the fund managers to be utilised for this new fund has an excellent track record.”

When asked which companies are likely to provide the main competition for the fund, MacLeod suggests Scottish Widows and Scottish Life.

Gaffney says: “Competition for any new fund is intense, particularly from existing funds with track records such as ABN Amro UK growth. New global fund launches will also take much of the limelight, allowing a much wider spread – for example, Schroders new style collection, Threadneedle global select growth etc.”

Flowers says: “Specialist funds that can be bought or sold to achieve the same effect. For example, buying a value stocks unit trust and then switching to a growth stocks alternative. also, for the larger amounts, a fund of fund unit trust should deliver the same balance more effectively.”

Discussing whether the charges are fair and reasonable, Gaffney says: “The charges are basically average. It is a pity that the 2 per cent discount on initial charges only runs until December 31 2000 and is not ongoing with the same fund manager.”

MacLeod thinks the charges are fair and reasonable, but Flowers thinks they are too expensive.


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