MARLBOROUGH FUND MANAGERS
MFM SLATER RECOVERY FUND
Type: Unit trust
Aim: Growth by investing in UK companies
Minimum investment: Lump sum Â£3,000
Investment split: 100% in UK companies
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.25%
Tel: 0845 6023095
The panel: Stuart Smith, Deputy managing director, R J Hurst & Partners, Michael Both, Proprietor, Michael Philips,
Steve Laird, Senior partner, Laird Financial Plannng,
Martin Dilke-Wing, Director, MorganÂ's Independent Advisers
Suitability to market 7.0
Investment strategy 8.0
Past performance 8.0
CompanyÂ's reputation 6.8
Product literature 5.3
The MFM Slater recovery fund from Marlborough Fund Managers is a unit trust investing in UK companies that appear undervalued to the fund manager, Mark Slater.
Looking at the fundÂ's market suitability Both says: “When most of the fund industry is heading lemming-like for the cliff of index trackers, itÂ's refreshing to find a manager who is prepared to add some active management.” Dilke-Wing says: “Mark Slater has some undeniably good performance figures to his name. The market is becoming increasingly exposed to small stockpicking funds trading on the performance of boutique managers.”
Smith says: “While it is good to see the launch of another fund which will not be a closet tracker, there are already enough funds available and with its relatively unknown brand name, this one will struggle to pull in retail money. It may be more popular with fund of fund managers if it performs well.” Laird says: “It fits the growing perception that even in a drifting market thereÂ's value to be had out there.”
Identifying the type of client the fund could suit Smith says: “At the moment, most clients are looking for fairly cautious funds. This new fund will only be suitable for a very small number of clients looking for a higher-risk investment.Â' Laird says: “ItÂ's a growth-orientated risk taker, probably an endangered species at present.” Dilke-Wing says: “ItÂ's suitable for individuals looking for a new launch in the UK where the emphasis is on recovery plays and special situations.”
Both says: “Clients who are prepared to take a view, and a gamble, on finding profitable UK equities which have fallen out of favour, possibly more than they deserved.”
Assessing the potential marketing opportunities the product could provide Laird says: “Limited, as despite the Slater familyÂ's high profile in the industry, theyÂ're less well known by the investing public. Very few would also have heard of Marlborough. The main opportunity will be with clients who like something a little bit different.” Dilke-Wing says: “It is unlikely the fund will provide any specific marketing opportunities. While it may be possible that the UK equity market has bottomed out, I have not noticed clients clamouring to invest.”
Both says: “It will appeal to the few committed investors who realise equities are not easy money and they will only deserve reward if they take a risk.” Smith says: “Very few at present, because of its risk profile and the lack of name awareness. If it becomes available through fund supermarkets, we may use the fund as a small higher-risk element of an aggressive portfolio.”
Highlighting the main useful features and strong points of the product Both says: “The fund managers have put a significant amount of their own money into the fund. If that doesn't concentrate their minds on getting good returns for the fund holders, nothing will.” Smith says: “The fundÂ's clear investment strategy is a plus as it should appeal to the anti-tracker brigade. It is also likely to remain fairly small, which should enable it to be nimble. The ability to move into cash is also very welcome.”
Laird says: “Slater has an excellent record with the MFM Bowland fund and I would expect it to continue with this fund. The principals are investing Â£3m of their own money which will go down well with clients.”
The panel review the investment strategy. Dilke-Wing says: “As with all stockpicking funds run by a star manager, you are not buying an investment strategy because the manager will change his strategy according to how he perceives opportunities arising.” Both says: “It looks for companies which have taken a particular beating from the bear market, but where in the managerÂ's view they are over-sold. It is a good concept and unlike most managers, Slater can probably pull it off.” Smith says: “It appears to be clear and well thought out. It should work well whether growth or value investments are in vogue.”
Discussing the drawbacks of the fund Smith says: “It is an aggressive fund being launched when sentiment is in favour of reduced volatility. I also believe the lack of name awareness will hamper fund raising. Minor disadvantages include the high minimum investment, the lack of a regular contribution facility and the poor literature.” Laird says: “SlaterÂ's funds have tended to be highly volatile so this is not for widows and orphans.”
Dilke-Wing sees it as narrow and completely dependent on SlaterÂ's skills.
Appraising the companyÂ's reputation Both says: “Marlborough seems to be a niche player offering interesting funds from very small fund managers. This fund is consistent with that philosophy.” Smith says: “Both Marlborough and Slater have very low profiles and while they may have a reasonably good reputation in the industry, they are virtually unknown among the general public.” Dilke-Wing says: “Marlborough is perceived as a relatively small specialist fund management group. Its all round performance appears to be acceptable without being stunning.”
Considering the companyÂ's past performance record Laird says: “Consistent outperformance of the market, albeit in return for an above-average risk profile.” Smith says the MFM Bowland fund, also run by Slater, has a first class track record. But he points out SlaterÂ's performance tailed off towards the end of his tenure at Legg Mason.
Identifying the competition the fund could face, the panel suggest funds from Liontrust, Rathbones, Neptune and Cazenove. They also cite New Star select opportunities, Cavendish opportunities, Fidelity recovery, M&G recovery, Invesco Perpetual aggressive growth, Schroder recovery, Jupiter undervalued assets, Isis Prime, Gartmore UK focus, Newton UK opportunities, BWD aggressive and Nigel ThomasÂ' new fund at Framlington.
Analysing the charges, Smith thinks the initial charge is a little on the high side, but the annual charge is fairly standard. Laird says: “IÂ've no problems with the charges as itÂ's likely investors will get what they pay for. But it would be good to see an Isa discount which would encourage investors to try out the fund.” Dilke-Wing thinks the charges are on the dear side.
Moving to commission, Both thinks it is reasonable. The rest of the panel think the initial commission is standard, but feel 0.25 per cent renewal is low. Laird says: “0.5% renewal would have been preferable. But as this is likely to be a small fund, I dare say it hasnÂ't got much to play with.”
Looking at the product literature Both says: “Satisfactory. The description of the fundÂ's aims is considerably more informative than the usual bland waffle. Few clients believe any of it anymore anyway.” Smith says: “ItÂ's extremely sparse. It clearly has a very small marketing budget and is not aiming the fund at the direct marketing brokers. Those using the fund supermarkets will not be too bothered as long as a decent fact sheet is produced on a regular basis.” Laird regards it as attractive, clear and to the point.” Dilke-Wing says: “The fund fact sheet was concise and contained all the information that a client would need.”
Summing up, Smith concludes: “The fund is likely to struggle to raise money in the current climate but its investment strategy will see it in the top quartile over the longer term. ItÂ's one to keep an eye on.”