Johnson Fry is one of the latest companies to launch into the international unit-trust sector of the UK market with its global growth unit trust.
The trust aims to benefit from growth in the emerging markets without having direct exposure to them. It is designed to achieve this through a safety-first strategy, which invests in companies that are international market leaders.
The panel compare the trust with two of its international sector competitors, the Save & Prosper and Morgan Grenfell growth unit trusts. They begin by discussing the trust's suitability compared with the other two trusts.
Riach says: "The Johnson Fry trust is an ideal investment vehicle for the first-time and professional investors who require international diversification. This type of investment is ideal for the client who wants somebody else to make their investment decisions for them and to deal with the day-to-day administration and decisions of a diversified portfolio of international shares."
Anglesea says: "Johnson Fry has designed its product to appeal to the more conservative blue-chip investor and the more adventurous emerging market speculator. The other two appear rather ordinary, straightforward international growth funds within a range of unit trusts."
Spencer says: "The geographic location of the large unquoted companies is increasingly academic as their earnings come from all over the world. Thus, a country-specific fund which contains these large global players can be misleading as their prospects are geared to the countries and markets in which they are selling. A global growth fund, therefore, makes a lot of sense."
Riach is sceptical about the potential marketing opportunities for the Johnson Fry trust. He says: "I do not believe the trust will present me with any marketing opportunities but I will give this fund consideration with new clients or when reviewing an existing client's portfolio."
Looking in greater detail at the investment principles behind the three funds, the panel are in general agreement that the Johnson Fry fund has a much more focused investment philosophy.
Bawtree says: "Johnson Fry is the only company to state in its literature that it is concentrating on the world's largest companies."
Anglesea says: "In practice, there may be very little difference in the overall investment strategy between the three funds. However, Johnson Fry's fund appears to be much more focused and, even better, it is easily understood."
Spencer says: "In general, I favour the more focused approach from Johnson Fry because you have a good idea of the process by which stock- picking takes place. The trouble with the Save & Prosper and Morgan Grenfell approach is that the investment objective is so wide that everything is included and nothing is excluded worldwide."
Riach highlights further benefits of the Johnson Fry philosophy. He says: "It will invest in shares of well-known multinational companies whose business activities are spread globally and are primarily quoted on liquid and well-regulated stockmarkets. Many of these companies will have sound financial strength and brand awareness. This method of exposure to emerging markets should reduce the level of risk for its fund."
Spencer and Anglesea suggest that Johnson Fry's investment philosophy is the trust's strongest feature.
Anglesea says: "The emphasis of the growth potential of blue-chip stocks gives Johnson Fry's trust a more solid feel."
Spencer says: "I would take considerable comfort in periods of worldwide stockmarket volatility, in the knowledge that I was invested in a fund that was concentrating its holdings in market leaders in their fields which have a strong global presence."
Riach reckons Johnson Fry does not score any points over the other two. He says: "I did not notice any major strong points for Johnson Fry compared with Save & Prosper and Morgan Grenfell other than Johnson Fry is paying renewal commission to financial advisers. Save & Prosper offer a useful feature, in that it will automatically switch the maximum allowance into a Save & Prosper Pep each year."
Turning to the Johnson Fry trust's disadvantages, Anglesea and Spencer say that, as a new fund, the company lacks a track record.
Spencer says: "Although the investment philosophy is clear, we have no idea what investments the fund is going to make, nor its geographical split. The other consideration, which is the most important aspect of any investment, is timing. Two of the companies identified, Coca Cola and Gillette, have had a tremendous run in their share prices along with the US market in general. As a result, their price/earnings ratio is now extremely high and future earnings are likely to disappoint rather than support current valuations."
Bawtree says: "The stated aim of investing in the largest companies in the world may hold back the performance under some circumstances."
Disadvantages identified by Riach are the omission of a regular savings facility and the lack of name awareness for Johnson Fry among the general public.
Anglesea says: "Johnson Fry is relatively unknown outside of financial circles. But it is gaining a reputation with IFAs for innovative products. Morgan Grenfell is still associated with the Peter Young affair. Although, in my opinion, this was blown out of proportion by the press, the fact remains that the public remains sceptical about its products. Save & Prosper's sports sponsorship has undoubtedly helped boost its public awareness but it still seems ambivalent about the IFA market."
Spencer also thinks that Johnson Fry has a market reputation as an innovator.
However, he says: "The company seems to be moving more into the mainstream of investment funds with a successful collaboration with Mark Slater for the Johnson Fry Slater growth fund. But it has not demonstrated any particular skills in managing international funds."
Turning to the trust charges, the panel express differing opinions.
Riach says: "The charges are fair for all three companies, who make an annual management charge of 1.5 per cent, which is reasonable for this type of fund."
Anglesea says: "Johnson Fry's fund has the highest charges of the three. These are 5 per cent initial with a total spread estimated at 6 per cent, plus 1.5 per cent annual management charge, estimated at 2.3 per cent, including trustee and auditor expenses.
"Over 10 years, the reduction in yield comes out at 3.1 per cent a year. Morgan Grenfell's charges are slightly lower at 5.25 per cent initial, 5.91 per cent spread plus 1.5 per cent a year, giving a 10-year reduction in yield of 2.6 per cent a year. Save & Prosper has no initial charge and a similar annual charge to Morgan Grenfell, resulting in a 10-year reduction in yield of just 1.7 per cent a year."
Likewise, Spencer calculates the Johnson Fry trust to be more expensive than the other two trusts.
Opinions vary on the performance of the trusts.
Riach describes all three companies as having satisfactory performance.
Anglesea says: "Johnson Fry has done well with its three UK trusts. Morgan Grenfell's trust has had an unspectac ular record, hovering around average.
"Save & Prosper shows top- decile performance over one, three and five years.
The panel express a difference of opinion regarding the companies' product literature.
Bawtree says: "Morgan Grenfell's literature includes performance data, a geographical breakdown and details of top 10 holdings. It is far more user-friendly than the other two."
Riach, Spencer and Anglesea praise the Johnson Fry literature.
Spencer describes it as well set out with clear relevant points. He says: "Overall, the literature is attractive and, being fund-specific, it is easy to follow."
Riach says: "The Johnson Fry literature is very clear and of good quality. The application forms are brief and in an understandable format. The literature has been produced in an ideal size for mailing.
"Save & Prosper's key features booklet details all its unit- trust funds rather than having a separate booklet for each individual fund.
"Morgan Grenfell's key features booklet details all its funds. However, it does include individual factsheets for each fund with the applicat ion form.
"The booklet has been printed on good-quality media but no thought has been given to the cost of posting this heavy booklet to clients."