View more on these topics

Isis zero worships

FRIENDS IVORY & SIME

ISIS PROGRESSIVE GROWTH TRUST

Type: Oeic.

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&#39s reputation 8.0

Charges 6.0

Commission 6.4

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&#39s 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&#39s 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&#39s 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&#39s 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.

Recommended

Genesis Home Loans 2-year fixed

Genesis Home Loans, fixed mortgageFixed term: two yearsFixed rate: 4.99%Minimum loan: £40,000Maximum loan: £250,000Income multiples: 3.25 + 1, 2.75 x jointArrangement fee: £325Redemption fee: 6 months interest at SVR until 3/3/05Conditions: no MIG, maximum LTV 102% first time buyersIntroducer&#39s fee: refer to packagerTel: 01832 275 044

&#39Business as usual for discount brokers&#39

Discount brokers say it will be business as usual in the post-polarisation era despite the FSA&#39s proposals to ban IFAs from using direct-offer financial promotions.Hargreaves Lansdown head of research Mark Dampier says under the new rules, discount brokers will simply need to change their status to “distributor”, form ties with every provider and carry on […]

NDF Administration – Higher Income & Growth Plan

Monday, January 14, 2002.Type: Guaranteed equity bond.Aim: Income and growth by investing in blue-chip stocks.Minimum-maximum investment: £7,000-£1m.Term: Five years.Guarantee: Capital returned in full provided none of the stocks aremore than 20 per cent below their initial level.Return: Capital returned in full along with 0.7 per cent a month, 9 percent a year or 50 per […]

Halifax in good position for regulatory change

Halifax says it is not concerned about the FSA&#39s proposals to make major changes to financial advice, including the removal of polarisation.Halifax spokesman Jason Clarke says: “We&#39re going to need to give this a bit of consideration before making a full response. But given our range of brands and products we will be well placed […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com