Type: Unit trust
Aim: Growth by investing in equities, bonds, cash, commodities, hedge funds, private equity and property
Minimum investment: Lump sum 10,000
Investment split: 32% equities, 20% investment-grade bonds, 16% hedge funds, 12% property, 4% index-linked bonds, 6% high-yield bonds, 4% private equity, 4% gold 1% cash, 1% other
Isa link: No
Pep transfers: No
Charges: Initial up to 3%, annual 1.25%
Commission: Initial 2%, renewal 0.5%
Tel: 0500 660000
The Newton phoenix fund, which invests in equities, bonds, property, private equity, gold, hedge funds and cash, is now available to retail investors after building up an institutional track record.
Morgans Independent Advisers investment director Martin Dilke-Wing believes the fund helps to bring non-traditional asset classes to the mainstream. He sees it as a way for the non-specialist IFA and the man in the street to access a type of fund that would normally be too complex or expensive to be viable.
Looking at other attractive features of the fund Dilke-Wing says: “The product is good for advisers and their clients at the lower end of the investment spectrum typically for clients with between 10,000 and 50,000 to invest. It is targeted at investors seeking a diversified portfolio, including significant exposure to non-long only equity and bond strategies.” He also believes the existence of an institutional track record and a degree of past performance provides reassurance for potential investors.
Dilke-Wing regards the funds exposure to private equity, hedge funds and non-correlated asset classes that are not generally available to private investors at this level as a strong point. He adds: “As you would expect, the total expense ratio looks quite hefty but exposure to this degree of diversification is never going to be cheap.”
The literature is praised by Dilke-Wing. In his view, the explanation of how the fund works and why it might be suitable is communicated clearly and efficiently.
Asked what he dislikes about the fund, Dilke-Wing says: “The major disadvantage is that it is limited by the investment skills of the Mellon range of companies. This may not be too much of a disadvantage given that the component parts have performed strongly. Nonetheless, it may not be as good as an unfettered manager of manager service.”
He also points out that a high degree of diversification is offered to investors with relatively small amounts or those who have invested in with-profits bonds. But it is difficult for him to see why investors with more significant amounts in excess of 100,000 would invest in this fund when they can probably have access to multi-manager arrangements on a discretionary or advisory basis which provide bespoke asset allocation
“The fund will suit investors who want a third in equities, a third in bonds and a third in alternative strategies but this in itself is limiting,” says Dilke-Wing. “If you want any other mix you are back to devising it yourself. This could be particularly relevant if you are planing to use Isa strategies for a proportion of the portfolio.”
Scanning the market for possible competitors. Dilke-Wing says that on the collective side there are a number of managers pitching for with-profits bond fallout money and for most the mantra is diversification or non-correlated asset classes. “But the main competition will come from IFAs who are prepared to do the research and construct their own portfolios, or employ third parties to do this research for them,” says Dilke-Wing. “There is so much money in investment and pensions that quit frankly any IFA worth their salt should be embarking on a strategy that incorporates this type of investment planning.”
Summing up Dilke-Wing says: “It is good to see a mainstream manager acknowledging that the investment climate may be propitious to the launch of a non-equity/bond collective investment fund into the retail market at a relatively low level.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good