NEW STAR ASSET MANAGEMENT
UK AGGRESSIVE GROWTH FUND
Aim: Growth by investing in UK equities.
Minimum investment: Lump sum £1,000, monthly £100.
Investment split: 100 per cent UK equities.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 5.25 per cent, annual 1.5 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 0845 6088704.
The panel: Neil Franklin, Partner, Franklin's Financial Services,
Andrew Hosking, Director, Eggar Forrester,
Brian Pack, Principal, Brian Pack Financial Services,
Kenneth Ball, Proprietor, K J Ball Financial Services.
Suitability to market 7.3
Investment strategy 6.5
Product literature 5.5
New Star Asset Management has introduced the UK aggressive growth fund, an Oeic which invests in a concentrated portfolio of between 35 and 40 UK stocks. It is managed by Tim Steer, a former analyst.
Looking at the market suitability of the fund Ball says: “An aggressive fund into a well researched portfolio of 35 to 40 companies is well placed to show prospective growth well above average. This is especially so in having a cash base rather than being encumbered in a fund with stocks that have shown substantial falls over the last 15 months. This does not apply here.”
Pack says: “The fund is being launched when the market is at a very low level so it should fit very well.” Hosking points out that it accepts lump sums or regular monthly investments and is set in the UK sector. Franklin says: “It is one of several real managed funds. It could be confused with a number of recent launches where the fund manager limits the number of holdings to increase potential returns whereas this fund does both this and mid-cap investment.”
Identifying the type of client the fund is likely to attract, Hosking says: “The investment is designed for those looking for capital growth through active management. It is suitable for clients who are fed up with passively managed funds. It is suitable for modest investments as the minimum lump sum is only £1,000.” Franklin says: “It is for monthly savers with longer time horizon.”
Ball says: “The events on September 11 have made investors more cautious generally. Not least by the general decline in fund values over the last 15 months, but economic world instability following September 11 has created investor apprehensiveness. Investors with a broad portfolio or younger clients projecting 10 years on and longer would appear most suitable applicants.” Pack identifies general investors who accent risk and view the current market as a long-term opportunity.
Assessing the fund's marketing potential Pack says: “I feel it will provide good marketing opportunities to my client base.” Franklin takes the opposite view, believing opportunities to be limited.Hosking thinks it will provide marketing opportunities to clients looking to get back into the market with some active fund management from a new player.
Ball says: “New funds, particularly with a good pedigree fund manager, are attractive to clients whose risk profile is in the medium to higher-risk category and have surplus funds to invest.”
Examining the useful features and strong points of the fund Hosking says: “The low minimum lump sum investment, active management, its availability as an Isa and the concentration on a limited number of companies. This is a new fund with no holdings to sell so can invest where it wants to immediately.” Franklin says: “It is different to most other offerings. New Star could become one of the major players.”
Ball says: “The investment into a relatively small number of companies should pay handsome rewards and I will certainly promote this to appropriate clients. Focusing on well-researched products and generally into areas with the greatest considered potential, at this time, should do well.” Pack says: “It is a new company and the fund manager is well known and respected. It has a reputation made from Jupiter.”
Discussing the investment strategy Pack says: “It is reasonable but somewhat limited if investing only in UK companies.” Franklin views it as excellent for above average risk takers, but a niche product by definition. Ball says: The market is still subject to considerable volatility. How the war against terrorism develops could have an impact on shares generally in the short term. Thirty-five to 45 companies may not provide the broad product spread for the medium to longer term. The fund is positioned for risk taking and not safety. Why is it restricted to UK shares only?”
Hosking says: “The strategy is very much concentrated on active fund management with the objective of outperforming the index, concentrating on growth potential of the more dynamic UK companies. The proof of the pudding will be in the index.”
Looking at the fund's disadvantages Ball says: “John Duffield did well with developing and then selling Jupiter. His New Star business is based on employing top fund managers and by focusing on three funds only is a sincere minded and a sound strategy. Markets are very different today to when John Duffield started Jupiter. But the fund managers he has introduced are at the leading edge of selective asset management.”
Hosking says: “There are no disadvantages if share selection is good, it will be very reliant on Tim Steers' stock selection.” Franklin says: “Liquidity, if it gets large, could be volatile. What happens if the fund manager leaves?” Pack says: “It has no track record and the timing with regards to the recovery of the stockmarket is unknown.”
Considering the company's reputation Ball points out that it has no track record and is too new to comment on. Franklin says: “So far excellent.” Hosking says: “New Star has a growing reputation under John Duffield. A new player it may be but with significant weight and expertise behind it.” Pack says it is just relying on the past reputation of Duffield and Jupiter.
Looking at past performance Hosking says it is too early to judge, Ball believes the company is too new to comment and Pack also highlights its lack of a track record. Franklin says: “The jury is out. Fund managers have excellent history but we are not allowed to consider past performance.”
Identifying where the competition will come from Ball says: “Artemis UK growth is the main direct competition. A number of biological and medical discovery funds and property funds are direct alternatives.” Franklin goes for Dresdner, Pack cites Jupiter and ABN Amro, while Hosking suggests fund in the UK equity sector, including trackers.
The majority of the panel agree that the charges are acceptable, but Pack feels they are high. They agree that commission is reasonable.
Mixed opinions emerge as the panel examine the product literature. Hosking says: “It is clear and concise, focused on what the fund intends to achieve and is well produced.” In contrast, Franklin says: “It is not clear on the product, it is more about people than I would like when returns are what is of interest. It has a good front cover but is let down in the middle. Why not link it to greater details on the website?” Ball says: “It is good on visual appearance but has lots of small print.” Pack is not impressed and labels it bland.
Summing up, Pack says: “New Star may be able to take advantage of the combination of statistics with a clean sheet, plus a very low market level.” Franklin concludes: “Researchers don't always make fund managers.”