Schroder Recovery Fund
Type: Unit trust
Aim: Growth by investing in UK companies that have suffered a setback
Minimum investment: Lump sum 1,000
Investment split: 31.2% cyclical services, 19.5% financials, 11.4% non-cyclical consumer goods, 8.8% general industrials, 4.7% non-cyclical services, 4.3% resources, 2.7% cyclical consumer goods, 2.5% basic industries, 2.4% utilities, 2.2% Information technology, 0.5% other, 9.8% cash
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 718777
The Schroder recovery fund, formerly the Schroder institutional recovery fund, invests in companies that have suffered a setback and their valuations will reflect this.
Morgans Independent Advisers director Martin Dilke-Wing would expect to see this fund become a favourite with IFAs and clients, assuming that the market doesnt suffer any major correction.
He says: “The product is good for IFAs and their clients because it brings a new and successful management option to the retail sector for the first time. While there has been a mid-cap recovery, special situations funds have largely continued to maintain their performance when measured against the index or against large cap funds. But it can only be to clients advantage when access is provided to another proven and competent stockpicker.
In Dilke-Wings view, the performance of the institutional fund speaks for itself and the potential for added value provided by Ben Whitmores approach will make this a valuable component of any prospective balanced portfolio.
Discussing the negative features of the fund Dilke-Wing says: “What is there not to like? The charges are average and the absence of a profit-related fee may make this fund more attractive to investors than funds where the manager takes a percentage of the upside.”
Dilke-Wing believes this fund is aimed at investors that are looking for active management and have a high degree of volatility tolerance. He says: “The fund is transparently unsuitable for anybody who would rather be invested in a tracker, a large cap fund or believes in the banking and pharmaceutical sectors because they are unlikely to see any positive returns from these areas mirrored by this fund.
“If, however, you believe that most successful fund managers achieve their returns from stock selection then you have only to worry about the consistency and longevity of Whitmores stockpicking ability.”
However, Dilke-Wing observes that the obvious weakness is that the fund could become a star manager fund with the problems that this may entail for investors who get left behind if the manager moves.
Highlighting the main competitors Dilke-Wing says: “The main competition comes from both the established managers in this sector such as Fidelity, Old Mutual, Framlington and Merrill Lynch, where the funds and managers have long established track records. Also, the newcomers that are starting to make a name for themselves with some strong short-term numbers such as Lazard, Cazenove and Threadneedle.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good