Fidelity Investments – Healthcare Fund
Aim: Growth by investing in pharmaceuticals, biotechnology, healthcare services and medical equipment.
Minimum investment: £1,000 lump sum, £50 a month.
Investment split: North America 65 per cent, Europe 15.5 per cent, UK 12.3 per cent, Japan 7 per cent, Pacific 0.2 per cent.
Place of registration: Luxemburg.
Charges: Initial 5.25 per cent, 1.25 per cent for online investment, annual 1.5 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent on Isas.
Tel: 0800 414181.
Michael Both – Partner, Michael Philips
Howard Horne – Proprietor, Howard Horne Associates
David Divers – Principal, Sandringham Investments
Broker Ratings (ave. marks out of 10):-
Suitability to market: 8.7
Investment strategy: 8.0
Company's reputation: 8.7
Product literature: 8.3
The healthcare fund from Fidelity is a Luxemburgbased Sicav aiming for capital growth by investing in biotechnology, pharmaceuticals, health care services and medical equipment.
Assessing how the product fits into the market, the panel agree it is a new concept. Both says: “It adds a new tool for the sophisticated IFA or client who requires a globally diversified, but industry-specific theme within their portfolio.”
Horne says: “Fidelity, as it often does, is breaking new ground with this. A sector approach is new in some areas although we do have technology funds and some others, but in very limited numbers and scope. So this product is setting out to fill a new niche in the market.”
Divers says: “It is a whole new marketplace and, as you would expect, Fidelity is among the first to exploit it. Sector funds have been confined to technology but this broadens the range and their success in the US bodes wells for Fidelity in Britain. This fund opens the door to Europe as well.”
Identifying the type of client the product is suitable for, Divers says: “All clients who take their investment seri ously. In other words, those who take independent financial advice and can see the opportunities that thematic investment provides. After all, we have been waiting long enough for it to happen. Well done Fidelity for getting the ball rolling.”
Both identifies very sophisticated investors. Horne says: “It is suitable for the more sophisticated investor who probably already has a fairly substantial investment portfolio. It is lik ely to be the upper end of the client bank.”
Moving on to the type of marketing opportunities the product is likely to provide, the panel are split. Horne says: “This could be a winner for advisers who are active in marketing new opportunities to their clients.”
Both feels opportunities will be limited because of the exceptional risks but Divers thinks there are endless marketing opportunities. He says: “Portfolios have been stuck with income, growth and smaller companies funds. We can now be specific and invest where the prospects are.”
Assessing the main useful features and strong points of the product, Both says it enables clients to jump on the healthcare bandwagon if they wish. Divers is pleased with the fund's structure, which he feels is modern. He adds that it complements Fidelity's current range and as it is a global fund, it makes effective use of the whole market place.
Horne says: It can be recognised as moving into a market where there is an accepted need for the end product. This type of product is undoubtedly growing worldwide simply because of demographics and improving health.”
Considering the drawbacks of the product, Divers says: “There is a lack of competition from the other major players. Perhaps the Invesco/Perpetual merger might propel a rival in coming mon ths but, in some respects, Fidelity could do with a rival that keeps pushing it.”
Both says: “The method ology for inclusion is not explained at all in the literature. The investor is thus not aware whether a sector index tracker is being purchased or a managed sector fund. This could prove a problem.”
Horne thinks it is difficult to find any drawbacks for the target investor.
Moving on to the flexibility of the product, Both says: “The Oeic structure should mean that switching costs are not too high. This is essential since it is extremely likely that clients will want to change weightings far more than in a conventional managed type of fund. By launching a range in one go, Fidelity is making this more practical.” Horne thinks it has plenty of flexibility.
Divers says: “Fidelity always does things right, crossing the t's and dotting the i's. It is not really one product, it is a range of funds that dovetail into the current family, increasing the flexibility and opportunities that investors have been looking for. Let's hope they continue to explore other thematic sectors, perhaps even breaking down technology, industrials and other sectors even further.”
Considering Fidelity's reputation, Horne says: “It is a well known worldwide player, no problem here.”
Both says: “It is generally very good. Fidelity is renowned for its innovative approach and frequently reliable technology but it will only maintain a fund if it is sufficiently popular. I suspect that this new range will not be around for long. It has a good reputation for stockpicking, which should be a real benefit for this type of fund.”
Divers says: “Fidelity is head and shoulders above the competition. There can hardly be an investor anywhere in the world who has not heard of them, presumably none who have not got a Fidelity fund in their portfolio somewhere. They always do it right and do it right first time.”
Assessing Fidelity's past performance, Both says: “With such a huge range of funds, it is difficult to be consistent but it has superb research and some excellent funds. Mistakes tend to be buried and soon forgotten.”
Divers says: “Is there an award that Fidelity has not won? It has the most consistent performance around. While it may not be top dog every year it is about consistent excellence, not occasional brilliance, and putting the fun back in fundamental.”
When asked which com panies are likely to provide the main competition for the Fidelity product, Horne says: “Fidelity is a well known name and a worldwide player so I do not think they will have any problem here.”
Divers suggests Henderson and Aberdeen and adds that it would be nice to see new players like SocGen enter the market. Both cites Framlington Health and Finsbury worldwide pharmaceutical.
The panel agree that the commission is fair and reasonable.
Looking at the product literature, the panel offer mixed opinions. Divers is the most enthusiastic panel member. He says: “Once again, Fidelity's strong corporate image and branding is instantly recognisable. The literature is on good quality paper. It contains good information, convincing arguments and sound statistical analysis that fits Fidelity's top of the tree image.”
Both disagrees and says it is insufficiently detailed for the sophisticated investor at whom this product is aimed.
Horne says: “It is a good, high-quality brochure. However, as with practically all of our industry's literature, clients will still regard it as too jargonfilled.”
Summing up, Both says: “This strikes me as a niche fund. I wonder how long Fid elity will keep it in its stable. Govett used to offer a range of very specialist funds, which it closed due to lack of interest. I suspect the Fidelity fund could suffer the same fate.”
Divers says: “It is another winner from an investment house with winning ways. For decades, Fidelity has been the market leader and this keeps it at the leading edge of financial services development. Fidelity is its name and it lives up to it.”