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Product Matters

The launch of the Gartmore stable growth fund, which will invest

predominantly in zero-dividend preference shares, is of note for a couple

of reasons.

First, the new fund is being offered as the only rollover vehicle – other

than cash – for investors in the Gartmore Scotland investment trust. This

applies whatever class of share the investor holds.

There are currently four classes of shareholder, if one includes the

package units. So the group seems to have adopted an unusual approach, with

the vastly differing needs of the capital, income and zero holders becoming

as one. It would seem that one size really does fit all and, in basic

terms, the trust is being unitised.

The second point of note relates to the fund charges. The annual

management charge of 1.5 per cent is the highest within the mini-sector and

is on the expensive side, even allowing for the effect of the lower initial

charge. The latter is offset by an exit charge that remains in place for

five years although, should some hapless executor dispose of the investment

following the death of the holder, then the exit fee will still apply. I

see this as an irritating and unnecessary feature, however minor.

These minor considerations aside, the product is reasonable and provides

further armoury to the zero sector. IFAs and clients require low-risk

alternatives and zeros fit the bill. Given the annual charge problem, I do

not think there is a clear-cut case to prefer Gartmore over the likes of

Exeter, Aberdeen, Investec and Framlington. With a little more thought,

the product could have stolen a considerable march on the opposition.

Michael Owen is

joint managing director of Plan Invest


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