FRIENDS IVORY & SIME
ISIS PROGRESSIVE GROWTH TRUST
Aim: Growth by investing in zero-dividend preference shares.
Minimum investment: Lump sum £1,000, monthly £50.
Investment split: 100 per cent in zero-dividend preference shares.
Yield: 7.5 per cent.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 4.75 per cent, annual 1 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 08457 992299.
The panel: Anton Robinson, Director, City Asset Management,
Barry Greening, Proprietor, Greenridge Life Pensions & Mortgage Consultants, Dawn Slater, Principal, Dawn Slater Associates.
Suitability to market 7.0
Investment strategy 6.7
Past performance 7.4
Company's reputation 8.0
Product literature 6.4
The Isis progressive growth fund aims to produce long-term growth by investing in a broad portfolio of zero-dividend preference shares. The portfolio will consist of 20 to 30 zeros of split-capital investment trusts that comprise of mainly blue-chip companies.
Considering how the fund fits into the market the panel are not overly impressed. Robinson says: “There are other funds out there doing the same thing. It is an alternative to a with-profits fund.” Greening says: “There is a fairly limited market for zero-dividend preference shares, in particular, with blue chip companies which the fund is geared towards.”
Slater views it as another choice within the zeros fund of funds market.
Highlighting the type of investor the fund could suit Slater says: “Anyone with a low-risk approach or as part of a balanced portfolio. It is particularly good for tax planning for assets held outside an Isa and for targeting specific needs like school fees.”
Greening points out that unusually for zeros, clients can obtain income on a monthly basis within this fund. He also mentions it is tax free and that it could be attractive to income tax payers not utilising their capital gains tax allowance. Finally, he suggests cautious investors who want to avoid stockmarket volatility. Robinson says: “It is good for an investor who does not use his full capital gains tax annual exemptions and higher-rate taxpayers.”
Assessing the marketing potential for the fund Greening thinks it could provide tax planning opportunities for higher-rate taxpayers. He also suggests trusts, self-invested personal pensions (Sipps) and small self-administered schemes (SSAS).
Robinson says: “It may appeal to investors who want a higher return than deposit accounts, gilts or fixed-interest investments, but who are not prepared to invest in equities at this moment in time.” Slater says: “”It is being launched at the right time, making specific comment to investing in better quality zeros.”
Drawing out the strong points of the fund Robinson mentions the experienced fund management team. He also thinks solid zeros have been oversold in the recent bear market and offer good value. He adds: “It is safer than investing in one or two zeros yourself.” Slater says: “The strong points are investing in low-risk zeros that avoid the incestuous relationship of investing in other splits. It is also good for tax planning outside an Isa.” Greening says: “The company has a good track record of investment trusts. The fund is low risk and income is obtainable via capital encashment. It offers low risk in a volatile market.”
Discussing the investment strategy Greening says: “It is aimed at the lower-risk zero-dividend preference market.” Slater says: “It looks fine, but are there 25 to 30 zeros to buy in the current climate?” Robinson is unimpressed by the investment strategy and labels it as fairly bog standard.
Pinpointing the drawbacks of the fund Slater says: “Its performance may tail off against some of the other zeros funds that are holding higher risk zeros. But clearly, this is not a problem if the clients understand the low-risk strategy.” Taking up Slater's earlier point about whether there are enough zeros around for this fund to invest in Greening says: “There is a limited market of good quality zero-dividend preference shares.” Robinson thinks the introduction of the fund is badly timed, with the recent bad press on zeros and other split-capital investment trusts.
Discussing the company's reputation the panel broadly agree. Slater says: “It has always been good but the name is now more widely known, so its reputation will now come to the attention of more investors.” Robinson says: “It has a good reputation, but mainly in the area of venture capital and smaller companies.” Greening thinks its reputation is good.
Looking at the company's investment past performance record Robinson says: “It is a cut above the average.” Slater thinks it has always been reasonable, while Greening says: ” Friends Ivory & Sime has an excellent track record in the investment trust market.”
When asked for their opinions on the possible competition the fund could face, Investec and Exeter crop up more than once. Slater says: “Investec's zeros fund adopts a low-risk approach and this will be the main competitor. The other zeros fund of funds are higher risk and higher priced.” Robinson says: “Ordinary zeros in the marketplace such as Investec and Exeter.” Greening goes for Exeter equity growth and income, but also mentions Framlington and Jupiter.
The panel offer mixed views on whether the charges are fair and reasonable. Slater thinks they are, but Robinson thinks the initial charge is too high for this type of product. Greening says: “The annual management charge is very reasonable at 1 per cent which includes 0.5 per cent renewal commission. The initial charge at 4.75 per cent is high in this market.”
Slater thinks the commission is also fair and reasonable, but Robinson again disagrees. He thinks it is too much for a fund of zeros. Greening says: “It is of a relatively high level in the current market conditions. The 3 per cent initial and 0.5 per cent renewal commission is good, but the initial charge is high.”
Looking at the product literature Greening says: “It is clear and concise, but not at all glossy. It explains the concept of zero-dividend preference shares very well.” Robinson thinks the literature is okay and Slater says: “It is clearly written and easy to follow.”
Summing up, Robinson feels the company has not pointed out the risk factors with zeros strongly enough.