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iShares bring in new US-style fund

iShares – IFTSE Tmt

Type: Exchange traded fund.

Aim: Growth by investing in technology, media and telecoms companies.

Minimum investment: Negotiable with stockbrokers.

Maximum investment: None.

Investment split: Media 35 per cent, telecoms 25 per cent, IT 26 per cent, software and computer services 14 per cent.

Place of registration: Dublin.

Isa link: Yes.

Pep transfers: Yes.

Charges: Annual 0.5 per cent.

Commission: None.

Tel: 020 7668 8007.

Broker Panel:-

Eric Woodward, managing director, EP Ward Group

Roy Rutter, principal, Aptitude Financial Planning

Andrew Hosking, managing director, Eggar Forrester

Keith French, managing director, French & Associates.

Suitability to market 6.0

Investment strategy 6.3

Past performance 5.2

Company&#39s reputation 7.0

Charges 8.0

Commission 3.6

Product literature 5.5

iShares has introduced the iFtse TMT fund, an exchange traded fund that invests in the technology, media and telecoms (TMT) sector by tracking the Ftse TMT index.

Looking at how the fund fits into the market, Rutter says: “The TMT sector is at best overcrowded and although iShares are a different concept to unit trusts and open-ended investment companies (Oeics), the underlying sectors and investment policies are similar. Is this trying to be a theme fund but restricted to the UK?”

Woodward says: “This is a relatively new breed of fund offered in the UK, although they are pretty popular in the USA. Although different, exchange traded funds will inevitably be compared with index tracking vehicles offered by unit trust and investment trust groups.”

French adds: “The iFtse TMT fund is a new boy in town. Exchange traded funds are popular in America and the iFtse TMT fund will no doubt make its mark, although at the end of the day, this is just another tracker fund.”

Turning to the type of client that the fund is suitable for, Hosking says: “This is for the relatively sophisticated investor who has an understanding of the risks involved in the TMT sector as well as the fundamentals of exchange traded funds.”

French says: “There are a wide variety of investors here, from long term savers to short term speculators. An exchange traded fund could be an alternative to an index tracking unit trust for an everyday saver investing for the longer term, but it is also a way for a more sophisticated investor to take a punt on the whole stockmarket or to hedge on an existing portfolio.”

Woodward says: “The fund will have its main use as core holdings in portfolio construction or as a cost effective way into a specialist area of the index market, so pension fund clients could use it.”

Rutter says: “This is for the more sophisticated investor who is taking on an active approach to their portfolio. It may also appeal to the Pep transfer market or to clients reviewing or consolidating holdings in individual shares”

Moving on to the products strengths, Hosking says: “The product is extremely flexible in terms of trading and accessibility via stockbrokers,” while Woodward feels that the obvious strong point is cost, along with continuous live pricing, a simple charging structure and no stamp duty.

French says: “Exchange traded funds are a cheap way to gain exposure to an entire index. The broking fees to buy and sell are nominal and they do not attract stamp duty, unless underlying securities are UK shares. The annual management fee is only 0.5 per cent which makes them cheaper then Oeics, unit trusts and most investment trusts.”


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