Fleming Asset Management – German Opportunities Fund
Type: Euro-denominated Sicav.
Aim: Growth by investing mainly in German securities.
Minimum investment: $5,000.
Place of registration: Luxemburg.
Investment split: 25.1 per cent electrical, 18.1 per cent utilities, 16.1 per cent insurance, 9.2 per cent retail, 8.3 per cent banks, 7.2 per cent chemicals, 5.7 per cent telecommunications, 3.9 per cent automobiles, 3.8 per cent paper, 1 per cent steel, 1.6 per cent others.
Charges: Initial 5 per cent, annual 1.5 per cent.
Commission: Initial 3.5 per cent.
Tel: 0800 727770.
Lee Coates – Director, Ethical Investors Group
Donald Martin – Partner, MacLeod Independent Financial Adviser
Stuart Smith – Director, R J Hurst & Partners
Robert Briggs – Principal, Robert Briggs, sole trader
Broker Ratings (ave. marks out of 10):-
Company's reputation: 8.0
Product literature: 7.3
Fleming Asset Management's German Opportunities Fund is a Luxemburg-based Sicav which aims to provide growth by investing mainly in Germany.
Commenting on the product's suitability to the market, Coates says: “Fleming seems to have identified a gap in the market which coincides neatly with increased interest in Europe as a whole.”
Martin says: “With the European sector appearing to be the place to invest, where better to focus one's investment than in Germany.”
Smith presumes the fund is aimed at the more sophisticated end of the market – in particular at discretionary fund managers. He thinks it was introduced to fill a gap as there are very few country-specific funds concentrating on Germany.
Assessing which type of client the product is suitable for, Briggs and Coates both identify sophisticated investors. Briggs says: “The general fund profile would suggest the more sophisticated client seeking a country-specific investment fund.” Coates says: “It would not be suitable for a first-time investor, but it seems an ideal fund for anyone wishing to gain a targeted exposure to this rapidly growing European market.”
Martin thinks it is suitable for clients who have already invested in a general European fund who want a more specialised fund. Smith suggests it could be suitable for those who have an adequate spread of UK, European and US assets and who may be looking to add specialist funds.
The majority of the panel feel that the product offers little in the way of marketing opportunities. Smith says: “There are very few opportunities as most of our clients are looking for more general European funds to complement existing holdings.”
Coates says: “It will provide none at all for us because it does not incorporate any social or environmental criteria.” Briggs also says it would provide no marketing opportunities for him.
Martin says: “Rather than focusing on just telecommunications, technology or chemicals with the associated risk, it also offers the stability of blue-chips within the same product.”
After considering the useful features and strong points of the product, Briggs says: “It has a structural approach to underlying investments in mixing large-cap companies with smaller emerging companies. There is a good portfolio mix without concentrating in any one sector.”
Smith says: “It gives access to the biggest market in continental Europe and also one of the most vibrant. The fund has been launched at a time when the German economy is just recovering. It offers opportunities for excellent growth in the short to medium term.”
Coates thinks the strong point of the fund is that it is targeted at a specific economy. He adds that this allows serious investment IFAs to build a broad portfolio of investments for clients. Martin says: “The Germans have a canny knack in building strong economies that can be sustained.”
Pointing out the disadvantages of the fund, Coates says: “For us, the lack of social or environmental criteria is a pity as Germany is one of the leaders in social and environmental policy. But Fleming seems to have missed this. Adopting social and environmental criteria would be a significant bonus, without necessarily being in any way restricting on the investment options.”
Smith says: “As an offshore fund, it does not have an Isa link, plus many clients are still put off by the offshore tag. With the weakness of the Euro, currency fluctuations could cause a drag on the fund in the short term.”
On the whole, the panel are impressed with Fleming's reputation. Martin says: “It has a fine reputation and a strong name.” Coates thinks its reputation is excellent and that Fleming is a good investment house.
Smith says: “Fleming has an excellent reputation, particularly in respect of offshore funds. Its Save & Prosper subsidiary is also performing well now after a long spell in the doldrums.”
Briggs is less enthusiastic. He says: “It has a reasonable reputation. Fleming runs a number of country-specific funds already and has achieved reasonable results in Europe.”
On the issue of past performance, Coates says: “Broadly speaking, its record is sound and consistently strong owing to onshore support for a new fund such as this.”
Martin says: “The fund manager could do with having a leading European flag ship product and this may just be the one to do it.”
Smith says: “While its UK track record is very good, Fleming operates a number of European funds, offshore and onshore, most of which are very pedestrian. The best performer is the European smaller companies sector.”
Briggs says: “It is variable but it is difficult to be objective when many country-specific sectors are occupied by so few funds.”
When asked to suggest which products are likely to provide the main competition, Martin says: “The usual suspects of Invesco, Gartmore and the leading European technology stocks will prove hard to shift.” Briggs goes for Henderson and Invesco.
Smith says: “Baring German growth is a reasonably good performer but the main competition will probably be from general European funds such as Invesco's two unit trusts and Gartmore's selected European opportunities fund.”
Coates says: “Given the specific investment objective of the fund, I see little competition unless investors wish to have broader European exposure.”
Briggs and Smith think the charges are average. Coates thinks the initial charge is high and Martin supports this view.
Moving on to whether the commission is fair and reasonable, the panel think the commission is standard on the whole, but the lack of renewal commission does not go down well. Briggs says: “Renewal commission would be nice, but it is not unusual to find no renewal commission on this type of fund.”
Coates says: “The initial commission is standard, but with no renewal commission, the annual management charge looks high.
“Most IFAs are looking at renewal commission, so its omission from the product could affect support. Our firm would prefer to see initial commission reduced in fav-our of an ongoing fund-based commission.”
The panel are split when looking at the product literature. Briggs thinks the general layout looks okay and Coates feels it is well thought out. Smith says: “It is clearly laid out, but I am not sure that it makes the case for Germany strongly enough.”
Martin offers a dissenting opinion. He says: “It features a picture of people in a blurred image. Either they are moving quickly from job to job or the world is passing them by. I am not too impressed with it.”
Summing up, Briggs says: “The German economy is likely to provide good returns over the long-term. The Dax is up six per cent since the start of the year.”