Friends Ivory and Sime has introduced its ISIS Ecotec fund, an Oeic which invests in environmental technology companies.
Looking at how the fund fits into the market, Both says: “The share class is deliberately aiming for a very narrow market niche, global investment in environmental technology and service companies. It does not have many rivals with the same brief.”
Barton feels it is an unusual market placement combining the green effect with modern technology. He says: “While ethical and green funds have been around for some years, none have targeted ecotechnology and with most world powers trying to meet targets sooner rather than later, this fund should benefit.”
French says: “This fund offers something different. It is a specialist growth fund, environmentally friendly but not screened, so no impact on performance. This could be the next big theme.”
Sully says: “I can see that this fund would certainly be useful within some client portfolios as a small portion of the total invested. There are some very valid reasons why this might be a strong performer. However, there are strong links with the tech sector and we all know the story there.”
Identifying the type of client the fund is suitable for, Moseley says: “More speculative investors looking for ethical or environmental type funds.”
Sully thinks it is most suitable for the experienced investor who is able to accept the higher risk associated with this sector.
French says: “Suitable for most, although it should only form a small percentage of a portfolio as it is very speculative. This fund is investing in the future of our environment. The difficulty will be persuading clients to invest now.”
Both says: “While many green funds are really something of a cop-out, stretching the definition to include weightings in bank and oil companies, this fund claims to be aiming for technologies which should benefit from the political will to improve the environment.”
Barton thinks it will be suitable for green clients who still want to invest in technology.
Turning to the marketing opportunities the fund will provide, Barton points to the ever-increasing ethical market across all age groups.
Sully feels the product has been introduced at the wrong time. He says: “There is still a lot of unease within the market place and where I can see that the timing will probably benefit the longer term investor, as far as marketing the product is concerned we still need to see investor confidence increase.”
Both says: “While emotionally the fund has everything a politically correct investor could want, as an IFA who is not keen on testing the generosity of my professional indemnity insurer, I would need to make very sure that any would-be investor is under no illusions as to just how volatile this fund could be.”
French says: “This fund provides something new to talk about. This is not an investment area that can be judged on past performance, it does not come with any baggage.”
Analysing the main useful features and strong points of the product, French says: “Many countries are committing vast sums to invest in the future of our environment so investment funds that ride on this should produce good growth. Although a specialist area, the expertise is there.
Both points out that the fund has a clear focus and the experience of Friends Provident plus the Oeic structure, which should help keep costs down a little.
Barton lists the history of Friends Provident being in the green market, low minimum contributions and the availability for Pep.
Sully says: “The product has flexible investment options and is well placed to take advantage of the growing green lobby and governments committed to finding solutions to the world energy problems.”
Discussing the investment strategy, Moseley thinks it is consistent with the funds objectives but very few companies fit into the required criteria, making the fund a high risk.
Sully is pleased to see that Friends Ivory and Sime targets only companies whose growth potential is based on fact and that the fund offers genuine, sustainable growth. However he would like further information on how the fund managers pick these companies.
Turning to the fund's disadvantages, French points to its specialist nature. He says: “It is not a fund that will be bought, it will have to be sold. Most clients will not know the underlying companies.”
Moseley highlights the limited number of companies to invest in. Both says: “It has a very narrow focus and the lead managers' experience may not be good enough – 40 per cent of the fund will be in the US and neither is flagged as having worked there.”
Sully says: “With the intervention of the governments pushing these investments forward you could see some element of government control or even profit capping.” Barton says its scope of investment limits it to a niche market.
Looking at the company's reputation, Both says: “As an ethical group, extremely good, especially in the socially responsible investment sector where this is aimed. As an investment for making clients richer, I am not sure.”
Barton says: “Friends is well established in the ethical market and Ivory & Sime is seen as a specialist investment house. The combination of both can only be better for portfolio management.”
French says: “Not a household name, a specialist player with a good small-cap and VCT record.” Moseley says: “Investment management seems to be limited to two unit trusts, one above and one below average over three years. The company also runs four investment trusts. It seems above average.”
The panel agree that the investment past performance record is reasonable.
Discussing the fund's main competition, Sully thinks environmentally-friendly green funds and some specific technology funds. French feels that there may be some competition from closed-ended funds, such as Merrill Lynch's environmental tech.
Both says: “AMP has a couple of global green funds, neither of which should be a worry. Green investors would probably also consider funds with a medical bias.”
French and Sully feel that the charges are fair and reasonable for a specialist fund. Both thinks the charges are above par. Commenting on the commission, the panel agree that it is fair and reasonable.
Analysing the product literature, Sully says: “Very good. Gives you a feel for the product almost immediately and precisely outlines the arguments for investment.”
Both feels that it is fairly uninformative. Moseley says: “All right, if a bit dull.” French and Barton think the literature is clear and easy to read.
Summing up, Moseley says: “An interesting product for the environmentally aware investor who puts conscience before returns.”
Michael Both, proprietor, Michael Philips,
Steve Barton, proprietor, Steven Barton Financial Services,
Keith French, managing director, French & Associates,
Miles Moseley, managing director, MM Financial Management
Paul Sully, associate, Pinwood Investments