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Plan for all seasons

Morgan Grenfell has unveiled its All-Weather Equity Fund to the unit-trust market in the hope of attracting investors who want access to the stockmarket while offering a cushion against volatility.

The panel review the fund and look at how it fits into the market.

White says: "This is a welcome addition that combines active management with avoiding nasty shocks."

Spencer says many customers in this market would be looking for an underlying guarantee but adds: "Where this is not required, this fund may be suitable."

Kenny says: "This is the kind of investment that must put thinking back into the art of narrow-risk investment strategy."

Jones believes the fund will be suitable for clients who are risk-averse and have money in banks and building societies. He says: "It provides an alternative and complementary product to bonds."

Spencer says: "It is suitable for clients looking for equ ity exposure with a limited downside."

White says: "This is for first- time investors who need a gentle introduction to equity investment. A lot of people still remember the crash of 1987 and it has become part of folklore. This fund would have come into its own at that time if it had been available."

The panel express differ ing opinions on whether the fund will offer any marketing opportunities.

Spencer is sceptical but White thinks there may be an opportunity to market the fund to experienced investors nearing retirement who may want to consolidate their portfolio.

Kenny highlights the main useful features as the Pep link, versatility and small monthly minimum investment.

White makes reference to Morgan Grenfell&#39s strong UK growth expertise combined with a downside cushion.

Spencer says: "The low minimum investment is a strong point as is the active management element, both in terms of the stock selection and the application of the safety net."

Commenting on the fund flexibility, Kenny says: "It is what the industry has been demanding and should set a new benchmark."

White says: "One wonders why the Individual Savings Account needs to be introduced when some Pep providers have minimum monthly premiums as low as £25. The ability to draw dividends is attractive as is going into and out of the fund whenever you like."

Most of the panel are happy with the stock selection process although Jones says: "This is no different to what other companies do."

Spencer says: "Exposure is given to selected FTSE 100 companies. The selection process, aimed at selecting those most likely to perform well, should produce improved results."

White says: "It must be an improvement on a tracker which it tries to outperform. The process looks quite rigorous, so it should work."

Kenny says: "The process is slightly mysterious but in the end we back the judgement of the fund managers. It would be interesting to see which companies are weeded out."

Discussing the managed protection strategy, Jones says: "It is a good idea. However, a 10 per cent loss a year can still be made. This strategy would be of no use during a prolonged period of underperformance of the stockmarket. It is really only of use in the event of a crash."

Spencer says: "When a client is looking for some kind of protected fund, they tend to be looking for a capital guarantee. With this fund, the customer could lose 10 per cent of their capital each year. Over a five- year term, this could, in extreme circumstances, mean they lose a substantial proportion of their initial capital. Very careful positioning would be required to ensure the customer understood this."

Moving on to discuss Morgan Grenfell&#39s reputation in the market, White says: "Unfortunately, this has been dented twice recently with the Young and Horlick incidents, which are a lot more newsworthy than consistent fund performance. Morgan Grenfell did act responsibly over its European funds, which it did not get a lot of credit for. Had it not had Deutsch Bank as a wealthy parent, things could have been a lot worse."

Spencer says: "The company&#39s reputation in the market is improving but the Peter Young debacle is still remembered by customers and can sometimes be a difficult obstacle to overcome."

White praises Morgan Grenfell&#39s performance record. He says: "It has done excellent work for institutional investors and it is good to see it offering these funds to private investors now. Looking at its quartile figures, it is a lot stronger on growth rather than income funds."

Spencer says: "Morgan Grenfell has a number of funds with excellent performance records, particularly UK-based funds."

Other than the potential loss each year, the panel are unable to find any other drawbacks. But White says: "In a stagnant market, the cost of buying the options will use up a lot of the dividends, so this is one thing that a conventional unit trust has in its favour."

Kenny thinks the main competition to the fund will come from with-profits bonds, corporate-bond Peps and distribution bonds.

White says: "Close Fund Management is a specialist in this sort of risk reduction but it works on a quarterly basis, whereas Morgan Grenfell will take advantage of market rebounds."

Most of the panel think the Pep charges are fair although Spencer reckons the unit- trust charges are high. She says: "It would be reasonable to expect lower charges for this type of fund, which is essentially index-driven. However, the use of derivatives could account for at least some of the increased costs."

White calls the product literature straightforward, well presented and easy on the eye.

Jones is happy with the explanation of the concept although he says the brochure could be improved with more colour. Summing up, Kenny says: "In a competitive market, IFAs need an edge. This is a sharp edge with which to battle with direct tracker Peps and is to be commended for its innovation."


James Kenny, principal, Rainbow Independent Financial Advisers,

Caroline Spencer, assistant business support manager (products), Halifax Independent Financial Advisers,

Paul White, associate,

Peter Frederick Associates, Colin Jones, independent financial adviser, Coleman & McCullough


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