Aim: Growth of 3.5% above UK inflation by investing in equities and derivatives
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 30% equities, 5% short equity, 60% short futures, 5% cash/near cash
Isa link: Yes
Pep transfers: Yes
Charges: Initial up to 5%, annual 1.25%, performance fee 20%
Commission: Initial up to 3%, renewal 0.5%
Tel: 020 7038 7002
Sarasin Chiswell has also brought out a Ucits III compliant version of its EquiSar fund.
Hargreaves Lansdown senior analyst Meera Patel says: “One of the attractions of this fund is that it makes use of the wider investment powers available under Ucits III to potentially add greater value to the fund in both rising and falling markets, provided the manager has the skills to use these.”
She notes that Sarasin has already been successful in applying the concept of asset allocation, both geographically and with the use of themes, across other products for over a decade so it already has a proven track record in this field, which bodes well for this new launch. “I also believe Guy Monson is a talented and a highly intelligent individual and has a proven track record in running thematic funds so from this perspective I feel comfortable that he is spearheading the fund,” says Patel.
Patel points out that the fund is expected to sit between more traditional long-only funds and hedge funds, given its features of being able to lower volatility and preserve capital through greater use of cash and derivatives. “This allows advisers the ability to diversify a client’s portfolio in terms of risk and volatility. In addition, unlike hedge funds, this is a more transparent and liquid portfolio, something which investors tend to like.”
Considering the less appealing features of the fund Patel says: “The target return of UK RPI plus 3 per cent a year over a rolling three-year period may seem easily achievable in the current environment. However, if inflation crept up over the coming years this would make it more difficult to meet the fund’s target and achieve the real return investors would expect. In order to achieve the target, there is a possibility that risk in the fund would increase,” she says.
Discussing whether the charges are fair Patel says: “An annual charge of 1.25% does not seem onerous on first impressions. However one needs to bear in mind that there is a performance fee of 20 per cent of gains made in excess of the target return, and this can potentially increase charges.
“As a general rule, we are not keen on performance fees because they give nothing back to the investor on the downside. While all parties concerned benefit from any upside, if the fund fails to achieve the target, investors still have to pay an annual charge. “
Patel feels there is little in the market to provide a like for like comparison with this fund. “At a struggle I guess the main competition would be other absolute/target return funds or hedge funds, but one would need to be selective about using these. Although some funds offer a similar target return, many of these funds achieve it in different ways,” she says.
Patel concludes that have wider investment powers under Ucits III is one thing, but having the skill and risk monitoring to use them is another. “However, to be fair to most groups, not all are currently making use of these investment powers until they feel confident they have the right teams in place. Products currently making use of Ucits III are unproven and both advisers and investors need to have a full understanding of how these work and should tread carefully when investing.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average