Aim: Income and growth by investing in UK equities, fixed interest, property and money market securities mainly through collective investment schemes
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 40% UK equity income, 40% bonds, 20% property
Isa link: Yes
Pep transfers: Yes
Charges: Initial 3.5%, annual 1%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 414181
The Fidelity multi-manager distribution fund provides diversification in terms of asset class and underlying manager. It aims for income and capital growth through access to a range of asset classes including equities, bonds and property.
Chadney Bulgin partner Bruce Bulgin thinks that as ever with Fidelity, the proposition is well presented and detailed. “There are a number of distribution funds on the market and as Fidelity says, they have in many ways replaced with-profits funds with the underlying asset mix resembling a traditional with profits fund.”
Bulgin regards the Fidelity fund as different in that it has a multi-manager approach, which gives access to other managers in the marketplace.
Charges appear low at first sight to Bulgin, but the total expense ratio is up to 2 per cent, whereas Fidelity’s base cost is 1 per cent and 3.5 per cent up front. “The higher TER reflects the external management costs, but is not out of line with other unfettered fund of funds,” says Bulgin.
Adviser remuneration is average in Bulgin’s view, with 3 per cent initial and 0.5 per cent renewal. “ In addition to FundsNetwork, the fund can be accessed through other platforms and is also available through Fidelity’s life bond proposition,” he adds.
The projected income yield of 4 per cent is attractive to Bulgin and it is possible to set up regular withdrawals, which Bulgin considers a valuable feature for investors seeking a regular income. “Over the long term, the fund should deliver the classic combination of growth and a rising income stream,” he says.
When asked what he dislikes about the fund, Bulgin reinterates his earlier concern that the total level of costs at up to 2 per cent is on the high side. “Advisers using asset allocation modeling would put together their own client portfolios, which would include the various asset classes and would take account of client objectives and attitudes to investment risk,” says Bulgin.
He also notes that this fund encompasses a range of sectors in proportions which are not expected to vary greatly. “As with any fund of funds the adviser has no ultimate control over the funds in which the client’s investments are held – though in reality Fidelity has an excellent track record in fund and stock selection,” he says.
Major competition will come from other distribution funds and some cautious managed funds that have a similar asset mix ranging from such long established distribution funds. Bulgin mentions those offered by Axa and L&G, as well as more recent arrivals such as New Star’s managed distribution fund, and other high income funds.
Bulgin concludes: “With the rising popularity of commercial property and the ability to hold it as an asset class within collective investments there has been an increase in the number of funds of this type. However, Fidelity’s offering is somewhat different with its multi manager approach and the flexibility and choice of tax wrapper as well as the regular withdrawal option from the unwrapped collective.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good