UK Select Opportunities Fund
Type: Unit trust.
Aim: Growth by investing in small, mid and large-cap UK companies.
Minimum investment: Lump sum £1,000, monthly £50.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 5 per cent, annual 1.5 per cent.
.Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 0800 0922090.
Colin Shaw, Director, Woodfield Financial Services,
Stephen Fairhall, Investment director, Ronald Blue & Co,
Scott Clayson, Principal, Professional Financial Services.
Suitability to market 7.7
Investment strategy 7.7
Past performance 9.0
Company's reputation 8.7
Product literature 7.0
The ABN Amro UK select opportunities fund is a unit trust that invests in a portfolio of up to 50 small to medium sized UK companies. It will focus on companies that are likely to produce above average returns, such as value and technology stocks and companies that are involved in takeovers and refinancing.
Assessing how the fund fits into the market, Fairhall says: “It will fit into the market alongside a number of funds with similar fund objectives.”
Clayson says: “It is a good alternative to the Threadneedle UK select growth fund ABN Amro has already proved its expertise in the UK with its top performing UK growth fund.”
Shaw says: “With many older unit trust funds being consolidated, there is room for new potentially dynamic funds to offer good long-term performance.”
Identifying the type of client the fund is suitable for, Clayson says: “It could suit investors with at least £50,000 to invest who are seeking growth, not income.”
Shaw says: “It is suitable for the client who is prepared to take some risk. It is fully equity based but not a blue chip fund - although I am not saying blue chips are safe in the present climate.”
Fairhall says: “It is suitable for those who are prepared to accept higher volatility than with typical UK growth funds.”
Moving onto the marketing opportunities the fund is likely to provide, Shaw says: “It could be a useful addition to a portfolio, for a new Isa or even a transfer from a Pep fund.” Fairhall says: “ABN Amro has a growing reputation for management of UK equity funds, supported by excellent performance from the UK growth and UK equity income funds. Nigel Thomas, the fund manager, has spearheaded UK growth fund management since 1986 demonstrating his credentials over the long term.”
Clayson says: “The fund could be added to a UK portfolio.”
Discussing the main useful features and strong points of the fund, Fairhall says: “The investment strategy gives the opportunity and the potential to deliver excellent performance.” Shaw says: “The main attraction is that the fund will be invested in FTSE all share stocks and will not be bound by any sector weightings.” Clayson says: “This fund has a proven sister fund - the ABN Amro UK growth fund.”
Looking at the investment strategy, Shaw says: “It is a good strategy not to shadow any index. We have seen over the last 18 months that tracker funds can be far more risky than most investors had imagined.”
Fairhall says: “The investment strategy is broad and enables the fund manager to pursue opportunities without significant restriction.”
Clayson says: “It is a high risk fund with the potential of high reward over the long term only.”
Identifying the disadvantages of the fund, investment risk is mentioned by Clayson and Shaw. Clayson says: “Investing for unrecognised potential may mean a long wait before that potential if realised. In the short term, sentiment may reduce the price of these shares.”
Shaw says: “It is a somewhat more risky fund than average and the annual management charge can be seen as quite high.” Fairhall is out on a limb in that he can find no obvious disadvantages.
Moving onto ABN Amro's reputation, Fairhill thinks it is very good. Clayson says: “ABN Amro has a good reputation for outperformance in UK fund management. However, it has a small range of funds.”
Shaw says: “ABN Amro has been well received by the market in recent years. It has had a few excellent performances and many advisers have started to include these funds in a portfolio of unit trusts.”
Discussing ABN Amro's past performance record, Clayson thinks it is excellent. Fairhall thinks ABN Amro's past performance record is very good in the UK equity market. Shaw reiterates the opinions he expressed in relation to ABN Amro's reputation and adds: “It has had extremely good funds in recent years.”
Identifying the fund's likely competitors, Fairhall says: “Among the larger fund management groups, Fidelity special situations could provide competition. Rathbone special situations and Solus UK special situations are among the smaller funds that could also compete with the ABN Amro fund.”
Clayson cites the Threadneedle UK select growth and Norwich Union UK growth funds.
Shaw says: ABN Amro can hold its own against the likes of Schroder, Perpetual and Fidelity.”
Moving onto the charges, Shaw says: The charges are high. The annual management fee is above average at 1.5 per cent a year and reduction in yield is six per cent to 3.66 per cent for unit trusts and seven per cent to 4.64 per cent for Isas.”
Clayson agrees. He says: “The annual management charge of 1.5 per cent is high, but it is reasonable given the extra work involved in planning this type of fund. But its performance will need to be very good to justify the high annual management charge.”
Fairhall is again out on a limb as he thinks the charges are fair and reasonable. Turning to commission, Shaw and Fairhall think the commission is fair and reasonable. Clayson says: “Three per cent initial plus 0.5 per cent renewal commission is standard for the market.”
Looking at the product literature, Fairhall thinks it is straightforward and easy to read. Clayson says: “It is good, but page two could be expanded more in relation to what are select opportunities.”
Shaw says: “The literature is good. I like the picture of the chess piece - investing can be like a game of chess. A lot of ups and downs all the way to the other side.”
Summing up, Fairhall says: “With the current market volatility, the timing of the fund launch could be very opportune enabling the fund manager to make some stock purchases at attractive valuations.”
Clayson adds: “We like ABN Amro, but our clients are not really aware of the name until we tell them about the company.” Shaw concludes: “It may well have got the timing right with the market just off the bottom at the time of writing.