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Reflections on mirror

Royal & Sun Alliance Eurolife has introduced the RSAE Framlington health fund, a Sicav investing in healthcare, medical services and product companies, which mirrors the offshore Framlington international portfolios health fund.

Asked how the fund fits into the market, Pack says: “It is entering a crowded market with the big boys of pan-Europe.”

Hill says it is a speculative product and points out that biotech has had some spectacular failures recently.

Marsh says: “It fits well as one of the few providers with a pedigree in this sector.”

Looking at the types of client for whom the fund may be suitable, Hill suggests: “Younger clients who expect this type of company to lead the world.”

Pack thinks that clients who are prepared to accept some risk in order to obtain good growth will like the product.

Marsh says: “Most clients with a moderate-plus risk acceptance could have this fund in a portfolio of £100,000 plus.”

Moving on to the marketing opportunities offered by the product, Marsh says: “It is a good opportunity because of the current low prices for those wanting such a fund.”

Hill says: “The opening will be there at a time when the biotechs are a success.”

Packs fails to identify any marketing opportunities for the fund.

Considering the main useful features and strong points of the fund, Marsh says: “It invests in a good and growing sector and currently has a low price.”

Hill thinks the healthcare market will always be strong due to the ageing population.

Pack says: “Framlington has built a very strong team specialising in healthcare.”

Asked to identify the disadvantages of the Sicav, Marsh says: “None except it must be part of a bigger portfolio due to its longer-term nature. This is because its success is reliant on legislative changes.”

Pack picks out the bid/offer spread, which he says is high, and Royal & Sun Alliance&#39s declining reputation. He adds that the fund is subject to currency risk.

Hill says: “The failures of the sector get big press coverage.”

The panel are not impressed by the flexibility offered by the fund. Pack says: “The bid/offer spread is high, which cuts out the flexibility in moving funds around.”

Hill says there are more flexible products available.

Considering the investment strategy of the fund, Marsh says: “It is not that different from other healthcare products. Healthcare is a growing market area. It is fine for the long term but for the short term it is probably the most volatile fund in its sector.”

Hill does not have a problem with the strategy. Pack thinks the strategy is quite good and the sort of thing you would expect from a healthcare fund.

Turning to the reputation of Royal & Sun Alliance Eurolife, Hill is not particularly impressed. “It is not an all-singing, all-dancing attraction. It does not back up what it says. The sales pitch is not supported by the performance,” he says.

Pack says its reputation is declining. Marsh is slightly more enthusiastic, calling it fair, but saying it is Framlington&#39s reputation that is relevant in this case and this is good.

The panel have differing opinions on Framlington&#39s past performance. Hill calls it mixed, saying: “Few companies have good funds across the board.”

Marsh says: “The Framlington health fund has been going for 10 years. Over this time, it has been volatile but this is only to be expected. It has a good record for the long haul.”

Pack says: “Its past performance is excellent. It is very good in most fields and always particularly strong in healthcare.”

Asked to name the main competitors to the fund, the panel list NPI&#39s health fund, CA Funds and Close Finsbury. Hill says: “You can access Framlington via other multi-funds at less cost, with no charge to switch. Why go with a mirror fund when you can go direct?”

Commenting on whether the charges are fair and reasonable, Pack says: “The annual charge is reasonable but the bid/offer spread is far too high.” Hill thinks all the charges are too high but Marsh says they are fair and reasonable.

Asked the same question regarding commission, Marsh and Hill think it is fair and reasonable. Marsh adds that multi-funds usually pay around 4.75 per cent initial.

Pack thinks the commission is too high.

There is a difference of opinion when it comes to the product literature. Pack calls it very poor while Marsh says: “The factsheet is long on history of the sector but not on the manager and its track record.”

Hill says: “It is a factsheet and that is all we are interested in. There is no point hiding the facts in a glossy brochure. Keep it simple.”

Summing up, Hill says: “Framlington&#39s three-year volatility is approximately 13 per cent. If this is to mirror that fund, should not the volatility be similar? The fund is fine but I will probably access it via multi-funds, especially under current market conditions.”

Brian Pack, principal, Brian Pack Financial Services,

John Hill, IFA, Positive Solutions,

Jeremy Marsh, investment manager, Lupton Fawcett

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