NEW STAR ASSET MANAGEMENT
EUROPEAN GROWTH FUND
Aim: Growth by investing in European companies.
Minimum investment: Lump sum £1,000, monthly £100.
Investment split: 100 per cent in European equities excluding UK.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 5.25 per cent, annual 1.5 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 0845 6088702.
Suitability to market 8.3
Investment strategy 7.5
Past performance 10.0
Product literature 8.0
The panel: Redvers Evans, Partner, John Sutton Partnership,
John Cornelius, Director, Fraser Anderson & Partners,
Ian Bird, Account executive, Adams Tingle Financial Services,
Chris Boylan, Principal, Chris Boylan IFA.
New Star Asset Management's European growth fund is an open-ended investment company aiming for capital growth by investing in Europe excluding the UK.
Assessing the market suitability of the fund Evans says: “This is a broad based European fund. I feel this is very opportune at present. It is not just a Euro blue chip or Euro smaller companies fund, it is a fund with a very experienced manager, pitched squarely at the European market. It has full width flexibility, no significant limitations, just medium to longer-term growth.”
Cornelius says: “This is a new fund from a new group, launched with about as much publicity as can be imagined. It appears to be designed to appeal to existing investors in other European funds where recent returns have been rather disappointing.”
Bird says: “It is nothing new, it is one of many. But being a new small fund will make it popular with many brokers and investors.” Boylan thinks it is a gung-ho offering in a crowded market.
Identifying the kind of investor the fund could attract Cornelius says: “A client who likes to see a reference to his manager in his newspaper every day. Probably a more experienced investor as the managers are dedicated stock pickers and will not be afraid to take very over or underweight positions.”
Bird goes for medium-risk investors looking for capital growth and those wishing to diversify from existing UK bias portfolios. Boylan suggests: “A punter who has faith in personalities.”
Evans says: “It is probably not for the faint-hearted, but not just for the adventurous investor either. It has a very experienced fund manager at the helm and no baggage in the way of IT or telecoms stocks that have taken a big hit, so it should show reasonable returns in the shorter term. It could have broad appeal to anyone looking for a balanced portfolio. The newness of the company makes the fund less of a liability and more appealing than Europe might otherwise be to the cautious, middling investor.”
Turning to potential marketing opportunities Bird says: “For those IFAs who are very sales-orientated, this will provide an excuse to do much marketing. However, the fund is nothing different. For me, it creates no new opportunities.” Boylan says: “It is a useful punt for an Isa to balance a UK-based defensive portfolio.” Cornelius thinks the fund offers investors a ground-floor opportunity.
Evans says: “There are many investors with European funds that are well down at present. In my opinion, a move to a new fund such as this is likely to show a quicker return than waiting for their existing holdings to recover. This fund should be looked at for clients with certain European funds.”
Discussing the strengths of the fund, the managers are top of the panel's list. Boylan says: “The pedigree and background of the fund managers are the strong points.” and Evans agrees. Cornelius says: “The manager is Richard Pease who established a first-class reputation at Jupiter. By adopting the same management style, he hopes to repeat his success. Richard is a stock-picker and many commentators believe we are currently in an ideal stock-picker's market.”
Analysing the investment strategy Evans says: “It is the ideal investment strategy for the current climate. No point in being niche and restricting oneself. The broad base is set to utilise the successful manager's reading of the market”
Cornelius says: “It is higher risk, but potentially very rewarding. Success or failure is highly dependent on the manager's continuing stock-picking success, especially as the portfolio construction is unlikely to closely follow any benchmarking disciplines.”
Bird says: “Again it is nothing new. All managers try to achieve the holy grail of strategies - to spot tomorrow's successful companies to invest in and, more importantly, to guess the timing of the market correctly.”
Boylan says: “The fund managers are simply going for broke, relying on their own skill, experience and knowledge. Interesting.”
Moving to the drawbacks of the fund, Boylan says: “The nervous investor will be concerned about the lack of controls, restrictions and benchmarks, but this is not a fund for widows and orphans.” Bird says: “It is a very crowded sector, investors are wising up to the fact that high fliers fall eventually.”
Cornelius goes further. He says: “Only the higher risk approach to stock-picking. If the market does not favour a stock-picking strategy, this fund could be very exposed.” Evans thinks the main worry will be European political intervention, particularly over the value of the euro.
Assessing the company's reputation Cornelius says: “This must be one of the highest profile launches for years. John Duffield is New Star's founder and has a reputation for surrounding himself with the highest quality fund managers and giving them few restraints in managing their funds. Their reputation is aggressive and brash, relying on the fund managers to achieve leading results in their sector.”
Evans says: “This is probably the most experienced and consistently successful group of managers ever to launch a new company. John Duffield has a point to prove, good fund managers do not become bad overnight. Admittedly, reputations aren't everything, but they are a good indicator.” Bird says: “It is relying on its manager's reputations which is fair enough. After all, these are important people.”
Turning to past performance, Boylan says: “The individuals all have their own fine records.” Evans says: “With no past performance record of its own, investors can only judge it on the past performance of the individual managers in their previous employment. All are experienced, all have worked in the top echelon, many have managed sector-leading funds and all have faith in their own ability to put their money where their mouths are.” But Bird points out that nobody has a crystal ball.
Identifying the likely competition Boylan says: “There are plenty of funds in the Europe excluding the UK sector. The established sector leaders will be watching and ready to pounce on any weakness in the maverick style of New Star.” Evans and Bird mention Artemis, but Bird also suggests Invesco Perpetual and Jupiter. Cornelius cites Jupiter European, Fidelity European and HSBC European growth.
Bird and Boylan think the charges are reasonable. Evans points out there are cheaper funds, but feels investors get what they pay for. Cornelius is pleased to see the annual management charge is taken from the income of the fund.
Boylan and Cornelius think the commission is fair. Bird suggests higher fund-based renewal at 0.75 per cent a year and lower initial commission would be nice.
Looking at the literature, Boylan says: “The literature sets out its stall with absolute clarity. There is little information but then there is little else to tell.” Evans says: “It is crisp, clear, refreshingly straightforward with good easy to follow applications. Even the key features document is readable.”
Bird says: “The design is very striking, but it has large blocks of text which look tedious to read. Compliance issues are typically in small print, but overall it is very good.” Cornelius says: “It is very brief, but concise. Any client who takes a close interest in the management of his or her money might find many questions unanswered from the literature alone.”
Summing up Bird says: “This product will undoubtedly sell well due to the reputation of the fund managers and the striking literature.”