Newton's global innovation fund aims to provide long-term capital growth
by investing in companies involved in global technology,
telecommunications, e-business and the media.
The panel agree the fund is most suitable for investors who are not afraid
to take risks with their money. Race identifies typical investors as
“clients with a risk rating of medium to high looking for long-term capital
Hooper thinks the fund will appeal to “clients who are interested in
technology and who are prepared to take a higher risk”.
Gilbey suggests that even high-risk investors should exercise some
caution. “This fund is most suitable for a client with an adventurous risk
profile and a significant portfolio and even so, for no more than the top
5-10 per cent of the portfolio,” he says.
Assessing how the fund will fit into the market, Gilbey sees it as a niche
product. He says: “The niche market in this case is the top end ofthe risk
profile, including thedotcom companies at the cutting edge of the market.
The investment area is both topical and exciting.”
Race's response is cooler. He thinks the fund is simply”an addition to a
number ofsimilar new global tech funds that have been launched by various
fund management groups”.
Woodward says: “There is a demand for technology funds and I feel that
later entrants like this are trying to put some spin on it to try to
discriminate from the big money takers in this sector.”
Even so, Woodward feels the marketing opportunities will not be as great
as they were a year ago. He says: “The recent sell-off of Nasdaq stocks has
educated retail investors as to how much volatility there is in this
Gilbey makes the distinction between marketing opportunities for fee-based
and commission-based advisers. He says: “As a fee-based adviser, products
take a passive role in marketing and are there primarily to meet a need or
fill a gap. The gap or need that this product fills is the need for
diversification and to gear up the potential returns on a bigger investment
portfolio of £100,000-plus.
“For commission-based advisers, it may be attractive as a mailer for an
unashamed proposal to invest in to the technology, media and
telecommunications markets using a pooled fund.”
Hooper would target the fund towards the “younger and more aware investor
who will be looking to the future development in technologies”.
But Race is quite dismissive of the scope for marketing, describing it as
“another global tech fund”.
The majority of the panel feel the fund follows a similar investment
strategy to other global technology funds. Gilbey comments: “The bigger
fund managers are back-pedalling to distance themselves from the most
volatile sectors in an attempt to calm nerves and retain funds. They have a
vested interest in this strategy. A new fund has no such problems and could
steal an edge by changing its strategy to embrace unashamedly the dotcom
and most volatile sectors.”
When asked to state which funds are likely to provide the main competition
for the global innovation fund, Gilbey and Woodward both opt for Aberdeen
and Henderson's technology funds.
Race cites CGU's global success fund and Jupiter's global technology fund
while Hooper chooses Invesco's global dynamic theme fund.
Newton's reputation as a fund manager is assessed as good by Race,
Woodward and Gilbey. Race believes it is a “consistent performer over the
medium to long term with a reputation for producing top-quartile returns”.
Woodward highlights Newton's “good balanced record” but says it is not
widely known in the retail market other than for its income fund.
Gilbey says: “Newton's reputation is excellent among the trade and
sufficiently non-descript for clients not to have a negative opinion.”
Hooper says: “Newton is a company which to date I have not used and have
not had any contact with.” He also feels unable to comment on Newton's past
performance although the other three panel members say its past performance
record is good.
When it comes to assessing the strengths and useful features of the fund,
Race and Gilbey both refer to the Newton name and track record. Gilbey
thinks the Oeic structure is good because it is easier to present to
clients than traditional unit trusts.
Hooper shares Race's view that the Isa and Pep transfer facility is a plus.
Woodward is more critical of the fund than the other panel members. He
says: “Perhaps it is slightly different to a straight tech fund but the
competition is tough in this sector, with the major funds having a long
Turning to the fund's disadvantages, Gilbey says: “This has all the
hallmarks of a me-too product, whether by design or by other
longer-established products repositioning themselves.”
Race mentions the product's higher risk, while Hooper cites its volatility.
Most of the panel feel the product literature contains all the relevant
information but find it unappealing. Woodward says: “If the four-sided
leaflet is the only literature, then it is hardly inspiring.”
But Hooper disagrees, saying: “It is short, sharp and to the point.”
The panel agree that the charges are fair and reasonable. Woodward feels
they are probably lower than most in the sector. The panel also agree that
the commission is fair and reasonable, too.
Summing up, Hooper is enthusiastic. He says: “I am surprised more
companies have not gone down this route. I have personally invested in the
Invesco fund, which is similar and has done well.”
Woodward believes the fund is probably a good fit with Newton's range of
funds but feels that recent investors in to the technology sector will not
have the same appetite after recent falls.
Gilbey rounds off with an idea for Newton's sales pitch. He says: “The
marketing managers at Newton should consider repositioning their product in
the space left by the bigger, longer established funds that appear to be
vacating the really sharp end of the market. This would be a bold and
Michael Gilbey, Managing director, Atlantean Financial Management,
Eric Woodward, Managing director, EP Ward (Investment Services),
Steve Race, Managing director, Findlay & Co Financial Services,
Malcolm Hooper, Partner, Independent Financial Advisory Services