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iShares bring in new US-style fund

Rutter adds: “Effectively this is an index tracker and we have seen these prove very popular with both the experienced and the first-time investor. There are also low charges, daily dealing and the fact that the product is available as an Isa.”

Examining the drawbacks that the product provides, French says: “As with any other tracker fund, it will track down as well as up. It will also miss out on the performance of funds outside the Ftse 350 index.”

Hosking thinks: “Being a new vehicle there may be a slow uptake as there is little understanding of exchange traded funds in the UK at present,” while Woodward says: “The main disadvantage is that if it has to be bought via a stockbroker, then if it isn’t one of the discount stockbrokers then commission of 1.25 per cent purchase and sale could quickly negate the cost advantage over an index tracking unit trust.”

Examining the investment strategy, the panel disagree. French says: “It is high risk – 75 per cent of the companies making up the fund are in the Ftse 100, but will provide the tech investor with a degree of protection rather than holding the tech stocks direct.”

Hosking says: “The investment strategy is at the higher end of the risk profile, tempered by being an index tracker across a broad range of companies in the UK.”

Rutter is lukewarm He says: “The new Ftse TMT is largely untested. It remains to be seen whether this strategy works better than the more selective approach of a unit trust manager.”

Woodward says: “As an index tracking vehicle it does not have an investment strategy as such. It will be interesting to see how many other different component index trackers are offered in due course.”

Moving on to the reputation of iShares, Hosking says: “iShares is the market leader in this type of product and has secured the services of Barclays Global Investors (BGI) to manage the investments.”

Rutter says: “The backing of BGI, which has clearly learnt from its established time in exchange traded funds in the US, bodes well. However, how many members of the public know of iShares?”

Woodward adds: “iShares does not have wide recognition, yet amongst retail clients and so on, with a tight cost base, there can’t be much scope for marketing the Barclays name, which would be more recognised. I am not sure how much reliance there will be amongst Barclays branches to promote this name to retail customers.”

Looking at some of the funds that provide competition to the product, French says: “As this is the first exchange traded fund in the UK, the competition is scarce. I suppose investment houses offering tech funds may compete as well as other tracker funds.”

Rutter says: “Competition is likely to come from one or two of the major unit trusts in this field, e.g. those from Aberdeen, SocGen and Investec.”

Examining the charges, Hosking says: “This is the big selling point. Annual charges here are extremely low at 0.5 per cent.” Rutter agrees. He says: “The charges are very fair and reasonable and compare well with unit trusts, Oeics and other tracker funds.”

Moving on to the product literature, the panel is cool. French says: “There is not enough of it – more information is needed. I know that you can get more information over the telephone, but I feel that coming from a new investment vehicle the brochure could have told me more.”

Woodward regards it as being functional but not very sales orientated, while Rutter says: “The appearance is good, but its content is geared more to stockbrokers and advisers than to investors.” Hosking thinks that it is professional and very clear.”

Summing up, Rutter says: “iShares has the expertise through BGI to do well, but this not an immediately appealing product, other than to an experienced investor. However there is no reason to suggest that exchange traded funds will not be the norm in years to come.”


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