On the subject of the investment strategy of the fund, Pack says: “Very sound with a strong mix of 30-40 holdings. I feel that the target redemption yield of 8 per cent is slightly high.”
Marsh feels that the strategy is a very sensible approach for its target. He mentions that zeros are quite a complex investment to explain to clients. Clayton feels that anyone who can afford to invest in such a product would do better to invest in equities, as they are bound to bounce back.
When asked about the fund's disadvantages, Marsh says: “The market of zeros is small and relatively illiquid, which may cause problems for them if they attract too much money for the fund in meeting the target return.”
Stather says that despite new issues of zeros, the market is relatively limited. He says that unit trust and Oeic managers need to demonstrate their knowledge and skill to investors.
Clayton says: “The rate of return is unlikely to be higher than 5-6 per cent. You can almost do as well with no risk and no initial charge in a building society.” Pack points to the lack of public awareness of Premier fund managers.
Moving on to the panel's opinion of Premier Asset Management's reputation, Stather says that he doesn't know it, while Clayton calls it an almost unknown small company. He says that they have just recruited some good fund managers from better known companies.
Pack says: “Within the industry it is good, but it is unknown to the public.” Marsh says that it is pretty good and innovative.
Turning to Premier's past performance record, Clayton says that it is: “Often top quartile (longer term), but recently about average.”
Stather says that it appears to be only average, at least as far as the specific fund manager is concerned.
Marsh says: “With only three of their funds more than £15 million, the small size should help the funds performance through their agility. Reality shows that this is reflected in the slightly higher volatility, but only ends up with second quartile performance.” Pack calls their past performance good and sound.
When asked which funds will provide the main competition, the panel list Exeter, ABN Amro, Norwich Union, Henderson, Investec and Framlington.
Considering whether the charges are fair and reasonable, the majority of the panel are in agreement. Pack says: “On the high side at 5 per cent and 1.25 per cent a year.”
Marsh says that while the charges are typical or on the high end of their sector, they are too high for current conditions.
Clayton says: “Annual charge of 1.25 per cent seems high for managing zeros. It should be 1 per cent.”
Stather disagrees, saying: “They appear to be in line with the average for this product.”
When asked the same question about the commission payable on the fund, Clayton and Pack agree that it is fair and reasonable.
Marsh calls it typically unfair, and Stather says: “For investments of over £20,000, commission is above average, with initial and renewal. Renewal commission on all investments, including non-Isa, is attractive.”
Moving on to the product literature, Marsh says: “Content fair, presentation poor – my colour inkjet does better.”
Clayton calls the literature plain and conservative. Stather says: “It's quite attractive, free of jargon and not too long. However, a straightforward description of zero preference shares would be required by many clients.” Pack calls the literature very basic with no flair and says it is rather boring.
Summing up, Clayton says that he is unlikely to use the fund. Stather says: “This sort of fund is increasingly useful in a low inflation environment. However, the manager must demonstrate the ability to maintain steady growth.”