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Is Fleming value fund the means to a trend?

The launch of Fleming&#39s new value investing fund has sparked a debate

about the entire structure of the UK fund market.

Although the move has been interpreted by many as a simple reaction to

last month&#39s fallout in tech stocks, there is an emerging school of thought

which suggests it may be the start of a whole new direction for UK funds.

It is not uncommon for investment companies to launch funds on the back of

current trends in the market but UK funds have tended to concentrate on

keeping a balanced portfolio rather than providing a comprehensive range of

sector and style-based funds as in the US.

Hargreaves Lansdown UK equities director Alan Durrant believes Fleming&#39s

latest fund will be the first in a series of UK funds which are based on a

top-down as opposed to a bottom-up strategy.

He says: “I think that Fleming&#39s move is a follow-on from the attitude in

the US.

“In the UK, funds have just been launched on a reaction basis. For

example, if tech stocks performed well, a tech fund was launched. It is a

good way of making money but it does not give the investor much stability.

“In the US, they have all these types of funds already set up and you have

the choice to move around the different sectors.

“It surprises me that someone in the UK has not gone out and just launched

20 funds in one go – tech, value, telecoms, etc. The central way for a fund

management group to grow is to have a whole range of funds. Some of them

will stay as sleepers for several months or maybe a couple of years. Then

they will come back into favour and the others will be left on the

sidelines for a while.

“I think Fleming is being very cunning and that this is the way UK funds

will go.”

Others are less convinced that Fleming&#39s move is anything but a reaction.

Last month&#39s tremors in the tech sector have left many invest- ors leaping

from the technology, media and telecoms bandwagon.

Chase de Vere investment marketing manager Ian Millward believes value

stocks are becoming the latest trend to compensate for the waning

popularity of technology, media and telecoms.

He says: “We seem to have gone full circle. Three or four years ago,

everyone was saying value stocks were dead in the water and now they are

suddenly worthwhile again. There is never one sure- fire guarantee for

success so I always try and avoid jumping on the latest bandwagon. They all

have their merits and at some point they all go wrong.

“For a while, all the money was flying into tech stocks and TMT became the

most popular place to invest.

“But the nine companies that left the FTSE were much stronger than the

nine that took their place and now people are moving back to value.

“I believe the only stable portfolio is a balanced portfolio. I would not

recommend clients to reinvest on the back of the latest value trend.”

But despite the mixed opinions of IFAs, there is little doubt in the minds

of investment firms that value is the way forward.

Perpetual is one of the few companies to have favoured value stocks

throughout the tech rally. Neil Woodford, manager of the company&#39s income

and high-income funds, believes the current surge is well founded.

He says: “My funds are not value funds as such but valuation is definitely

one of the most important factors in making my investment decision. I agree

that starting a value fund at the moment would make a lot of sense although

in time I am sure it will be an area which will get overgrazed.”

But Perpetual remains unlikely to go as far as start- ing a purely value

fund in the near future. Woodford says: “We have not got a habit of

jumping on the back of trends but it is something that we will look at.”

It remains unclear whe- ther Fleming is leading a UK investment revolution

or merely switching horses.

The Fleming fund will capitalise on cheaper stocks through a value

investing strategy and will consist of 70 stocks from the FTSE 100 and 70

from the FTSE 250.

Joint fund manager Chris Complin says: “If you look at the UK in the past

25 years, cheap stocks have outperformed expensive stocks.

“We have had a period with the tech rally where value stocks have been

neglected. However, we are now at a time where a lot of these cheaper

stocks are once again giving you a good opportunity to outperform the


“Our new fund is about providing people with purity. It just does exactly

what it says on the tin. We have launched a number of new funds recently

and we are focusing on giving a broader choice to the investor. I think the

future will be about providing choice.”

Fleming&#39s fund is by no means the only value fund on the UK market but it

is one of the first to provide such purity within the value sector.

It it succeeds, it could, according to Durrant, bring much greater choice

to UK investors.


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