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Indicators or hazard warning lights?

Newton&#39s 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

growth”.

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&#39s 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

market.”

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&#39s technology funds.

Race cites CGU&#39s global success fund and Jupiter&#39s global technology fund

while Hooper chooses Invesco&#39s global dynamic theme fund.

Newton&#39s 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&#39s “good balanced record” but says it is not

widely known in the retail market other than for its income fund.

Gilbey says: “Newton&#39s 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&#39s 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&#39s 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

record.”

Turning to the fund&#39s 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&#39s 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&#39s 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&#39s 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

attractive proposition.”

Broker Panel

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

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