MERRILL LYNCH INVESTMENT MANAGERS
EUROPEAN DYNAMIC FUND
Type: Unit trust
Aim: Growth by investing in quote continental European securities excluding the UK
Minimum investment: Lump sum £1,000, monthly £50
Investment split: France 23%, Germany 17%, UK 17%, Eire 12%, Sweden 9%, cash 7%, Spain 5%, Denmark 4%, others 3%, Switzerland 2%, Netherlands 1%
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 08457 405405
Suitability to market 5.4
Investment strategy 6.4
Past performance 6.5
Company's reputation 6.4
Product literature 5.0
The panel: Nigel Walker, Investment executive, Gee & Co,
John Wright, Proprietor, Investment Management Services,
Neil Franklin, Partner, Franklin's Financial Services
Merrill Lynch Investment Managers' European dynamic fund is a unit trust that invests in around 60 stocks within Europe excluding the UK. It has no constraints in terms of company size, management style or sector weightings.
Discussing how the fund fits into the market Walker says: “The UK focus type fund is becoming well represented. For example, Merrill Lynch's UK dynamic fund and Gartmore's UK focus fund. This fund develops the principle for Europe. Wright sees it as another European fund, while Franklin says: “It builds on the success of Merrill Lynch's UK dynamic fund.”
Identifying the types of clients the fund could attract Wright says: “Boring clients with little stomach for investing. The 'you do it for me' investors.” Franklin says: “This is a true investing type of fund and the lack of constraint makes this an ideal satellite fund, with a core of under tracking. I would expect some degree of volatility.” Walker suggests the more experienced type of investor.
Assessing the marketing potential of the fund Franklin says: “Existing Merrill Lynch fans and those looking for European diversification within their portfolios.” Walker says: “To build upon an existing European fund, this is not the type of fund to purchase for mainstream European exposure. Marketing opportunities are relatively limited.” Wright feels it offers nothing new.
Highlighting the main useful features and strong points of the fund Walker says: “It has a flexible mandate, thus not linked to say a growth or value style. It will invest in a range of companies across the market capitalisation spectrum. Thus exposure to small, medium and larger companies may be gained.” Wright says: “Isa and Pep transfers for those investors who still require a spread of funds to include Europe.” Franklin says: “The lack of constraints, the reputation of Merrill Lynch and the limited number of shares held.”
Considering the fund's investment strategy Wright says: “It is disappointing. The opening paragraph of the literature talks of the flexibility of fund manager, but then the proposed country allocation puts a constraint on any flexibility to follow performance.” Franklin disagrees, stating that he finds the investment strategy clear and useful.
Walker says: “Although the number of stocks is not as concentrated as some funds by typically holding about 60, this is lower than many funds. As a result of that, the manager's stockpicking skills will be of prime concern. The strategy is, however, sound.”
Pointing to the fund's drawbacks Franklin says: “It will be great when Merrill Lynch gets it right, but no so great when things go wrong.” Walker says: “It is not a mainstream fund, so it is more likely to appeal to a more experienced investor with a larger portfolio.” Wright says: “With the exception of the old Eastern bloc, Europe has been sluggish for a few years and does not have a good story to tell for the future, as far as I can see.”
Assessing the company's reputation Walker says: “There is concern over the strength of the UK team at present, as several managers recently left. Although this should have little impact on the European team, it does indicate that there is some disruption taking place - always an unwelcome feature.” Wright thinks Merrill Lynch's reputation is very good. Franklin says: “Its reputation is better than its performance. It does lack a certain amount of flair and sparkle.”
Turning to Merrill Lynch's investment past performance record, Wright feels this is quite good. Franklin says: “It is mixed, with some real dogs.” Walker says: “The UK equity side has been average at best, with the exception of UK income, a good performer for many years. Its European team is quite well regarded. there have been several Standard & Poor's fund research rated funds.”
In terms of the competition the fund is likely to face, Franklin feels that Investec European, Gartmore's focus funds, Gartmore select opportunities and Invesco Perpetual European funds are the main competitors. Wright goes for the Skandia multifunds Isa and the Co Funds fund shop for a unit trust or Oeic investment.
Walker says: “Investec European, which has an outstanding fund manager in Albert Morillo. Also, Artemis European, as Philip Wolstencraft is developing an excellent record. His many previous years as a highly rated analyst have been translated into superior fund performance as a fund manager.” He also points out that it mentions a fund manager running a fund with the maximum fund rating from Standard & Poor's Fund Research, which has been reduced to AA since the literature was produced.
Looking at the charges, Franklin says: “They are standard, but 1.5 per cent is high in a low inflationary environment. All groups will have to reduce costs to survive in the medium term.” Wright says: “The charges are a bit high, but fairly normal these days.” Walker says: “They are fairly typical. As usual, if the fund is held within an Isa, the charges are lower”
The panel agree that commission is standard, but Franklin adds: “Monthly investment loses the adviser renewal commission, which I don't like at all.”
Examining the product literature Walker says: “It is good. The details on country and sector allocation are clear. An indication of likely stocks is helpful, as most potential clients would recognise some of the top five holdings.” Wright thinks the product literature is a bit bland. Franklin says: “Boring, boring, boring. I don't like the dates on the form because it is easy to make an error over a year end and there is too much small print.”
Summing up Franklin says: “It is a very average product from an average investment company. It has high charges and is not very exciting.”