Aim: Growth by investing in zero-dividend preference shares.
Minimum investment: £1,000.
Investment split: 100 per cent in zero-dividend preference shares.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 5 per cent, annual 1.25 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 01483 306090.
Suitability to market 7.3
Investment strategy 7.3
Past performance 7.0
Company's reputation 6.7
Product literature 7.0
Premier Asset Management has introduced the C-Lect cautious portfolio, an open-ended investment company (Oeic) that aims for growth by investing in zero-dividend preference shares.
Looking at how the fund fits in to the market, Bulgin says: “The product is part of a range of funds of funds for the investor seeking a good spread of underlying investments.”
Vaughan says: “This portfolio investment is one of a growing list of portfolio management products coming on to the market. However this product does have some interesting features.”
Collins says: “This is a niche fund with a restricted market, unless used as part of a broader portfolio. However it should find favour with trustees.”
Moving on to the type of client that the fund is suitable for, Vaughan says: “This is for reasonably high net worth clients, due to the products minimum £20,000 investment. It is also useful for Pep transfers which could easily exceed the minimum requirement. I see the investment range as being between £20,000 and £200,000 and mainly in income.”
Collins says: “This product is for trustees who want a lower risk investment capable of providing income if required with no liability to income tax, as well as for higher rate taxpayers, again for income tax reasons. It is also for investors who want the potential for steady growth, particularly when building society interest is low, but who are not prepared to consider higher risk long term investments.”
Bulgin says: “This is suitable for the investor with limited funds who is looking for exposure to many funds and fund managers.”
Identifying the marketing opportunities that the plan provides, Collins says: “This can be marketed to trustees and to lower risk profile clients as a part of a more balanced portfolio to form the, or part of the, lower risk portion.”
Bulgin says: “The Oeic could target specific groups and individuals, especially anyone looking for a fixed income from the fund.”
Vaughan says: “The product lends itself conveniently for acceptance of Pep transfers for those clients wishing to refresh old or stale investments and exceed their investment choice. It is also useful for those requiring tax efficient income by utilising their capital gains tax allowances.”
Addressing the main useful features and strong points of the product, Bulgin says: “The ability to take an income from encashment of units is useful. Also clearly a fund of funds spreads risk.”
Vaughan says: “It has a good clear fund and risk selection, with an impressive list of underlying investment holdings. The life cover option is a definite attraction for those under the age of 75. There is also the ability to switch between funds without incurring or using up capital gains allowances.”
Collins says: “The product is low risk and has no income tax liabilities. There is also the life assurance option. I am very impressed by this addition, as it will be a good selling point.”
Turning to the other side of the coin and looking at the disadvantages of the fund, Vaughan says: “There does not appear to be any guidance as to the yield or the recommended minimum/maximum percentage withdrawals. I would be hesitant to recommend regular income, preferring to take income from capital growth and offsetting against capital gains. Income generated from investments is also reinvested for growth.”
Collins says: “This is a low risk fund which precludes higher growth in times when stockmarkets are rising well.”
Bulgin says: “As with most fund of funds, it is far more expensive than investing directly in the underlying trusts. Performance will tend to be average though. The Premier enterprise fund is a top performer in its sector.”
Looking at the reputation of Premier, Bulgin says: “Premier is a well-established name in the IFA sector which has offered a number of funds and other products over the past few years.”
Collins points out that he does not have enough experience of the company to offer an opinion, while Vaughan says: “Premier appears to have a growing reputation for achieving sound investment performance from good outsourcing and active management.”
Moving on to the past performance record of Premier, Collins says: “The company's balanced and enterprise funds have performed well over the past five years and coped well with the recent stockmarket falls. However the Premier growth fund did not cope as well.”
Bulgin thinks that past performance has by and large been satisfactory. Vaughan says: “I think that past performance, while only over five years in respect of the growth and balanced portfolios, two years for the enterprise and one month for the cautious portfolio, has been impressive and above average during periods of high volatility in the markets.”
Picking out the competition that the fund will face, Bulgin says: “Competition will come from other portfolios and funds of funds, such as from Portfolio, Edinburgh, Friends Provident and Henderson.”
Vaughan says: “There are many competitors in this market from banks, stockbrokers, fund management groups and so on. Portfolio managers that continue to achieve higher than average returns at reasonable cost will as always prove to be successful.”
Collins says: “Competition will come from specialist stockbroker portfolio managers, run on a discretionary or advisory basis. Also from other fund of funds managers and unit trust/Oeics such as Exeter's.”
Commenting on if the charges are fair and reasonable, Bulgin says: “Funds of funds are usually expensive, and this product is no exception. In an era of falling returns, charges do have more bearing.”
Vaughan says: “For this type of fund management, the charges appear to be in line with other products. However I feel, like it or not, that there is a strong movement to lowering of all charges. Five per cent initial and 1.5 per cent annual is the current going rate, but for how long?”
Looking at the product literature, Collins says: “The literature is bright and cheerful, well laid out and is understandable. However the application form is a gloomy document.”
Vaughan says: “The literature is clear and concise, easy to read and covers most of the main points. However I would have liked a better indication of the likely yields under the different options.”
Bulgin says: “It is attractive and professional. However it offers little real detail for the inquisitive investor.”
Finally Collins says: “The sample valuation included in the pack lets the whole thing down. Clients basically want to know three things – how much do I invest? How much has it grown/lost? How much is it worth now? Only the last of these is shown on the valuation.”
Bulgin says: “For the investor with a limited investment budget this is a good way of accessing a wide range of funds, but it is expensive. Other investors could be better advised to invest directly in the underlying funds.”
Summing up Vaughan says: “I feel that the product is reasonably well presented and I can see some opportunities for introducing it to some of my clients.”
Christopher Collins, Partner, Kingstons Financial Management, Bruce Bulgin, Partner, Chadney Bulgin, Bob Vaughan, Partner, Ashley Vaughan Partners.