American Growth Unit Trust
Type: Unit trust.
Aim: Growth by investing in quoted US companies.
Minimum investment: Lump sum £1,000, monthly £50.
Investment split: US 88 per cent, Canada 2 per cent, futures 7 per cent, cash 3 per cent.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 5.25 per cent, annual 1.5 per cent.
Special offer: Initial charge reduced to 3.25 per cent.
Offer period: Until June 29, 2001.
Commission: Initial 3 per cent, Isas and Pep transfers renewal 0.5 per cent.
Tel: 0808 1004432.
Suitability to market 7.6
Investment strategy 7.9
Past performance 7.8
Company's reputation 7.0
Product literature 7.5
SocGen has introduced the American growth fund, a unit trust that invests in US equities, with a small amount of exposure to Canadian equities as well. The fund also has an option that allows the fund managers to invest a small amount in Latin America in the future.
Looking at how the fund fits into the market, Lakey says: “After a period of falling the US market appears to have stabilised at the middle of July. This could be an appropriate opportunity to launch a new aggressive fund.”
Jackson says: “This fund will fit into the market well. SocGen has become accepted as a first class investment house over the past couple of years.”
Cox says: “It adds further competition to the sector but is probably more advantageous to SocGen as it would allow investors to gain access to the American market through its products.”
Rutter says: “The North American unit trust sector is not too crowded yet. This fund fits in well, coming from a name which is quickly establishing itself. Timing could work in SocGen's favour with the American market preferred by many advisers to Europe.”
Moving on to the type of client that the fund is suitable for, Jackson says: “This fund will complement investors who own investments in Europe and the UK and who want to spread their investments into the US.”
Cox thinks that it is for most investors who require some exposure to the US through an collective investment, while Rutter says: “The fund is suitable for those looking to increase their exposure to the US market and who are happy with large-cap rather than small-cap stocks. There is also an Isa selection for those who have been holding back a year's investment.”
Lakey is more cautious. He says: “This must be considered as being somewhat speculative and most appropriate for clients who have safer core holdings.”
Evaluating the marketing opportunities that the plan provides, Rutter says: “This can be marketed to clients who may have pulled out of the US after the recent volatility, who are nursing technology losses, for switches from poorly performing funds in the sector, or for Pep transfers where clients have no North American exposure.”
Jackson says: “The US is still making movements up and down. I think that the US is a good long term bet and that clients should be offered American investments.”
Lakey says: “For the right client it may prove an opportunity to get in on the ground floor. The £50 a month minimum contribution will appeal to pound cost averaging enthusiasts.”
Identifying the strong points of the product, Jackson says: “There is the plus of the SocGen name and the fact that it is already boasting a proven track record. Finally there is fund manager Alan Torry's 26 years of experience in US funds.”
Lakey says: “The strong points are the £1,000 lump sum and the £50 per month minimums, as well as the success of the existing institutional fund.”
Rutter agrees. He says: “Pluses for the fund include the modest entry levels and the possible exposure to the Canadian and Latin American markets. There is also the track record of the institutional version of the fund and the fact that it has a top manager in Alan Torry.”
Cox says: “The fund invests in large companies, it offers diversification and through the institutional fund has a track record.”
Commenting on the disadvantages of the fund, Rutter says: “To some, SocGen is still the new kid in town. There is also the fact that TMT and financials together make up over 40 per cent of the portfolio, which may be on the heavy side if there is a consumer-led recovery in the US.”
Cox says: “I cannot see any investment disadvantages, although the initial charge may be a general disadvantage.”
Lakey adds: “The fund's aggressive stance will clearly suffer in a continuing bear market and the Latin exposure may prove to be dangerous.”
Moving on to the investment strategy Jackson says: “This fund has a good investment strategy with a nice spread of well-known holdings in the top ten investments.”
Lakey says: “The ability to diversify into Canada and Latin America adds an additional element of risk which, if it pays off, is likely to provide top quartile performance.”
Rutter says: “When the US recovery comes it is more likely to be felt through the S&P index rather than the Nasdaq. Alan Torry has gone for a fairly conventional strategy but has given himself options on Latin America, where there are selective opportunities, and Canada, which has been a strongly performing market in recent years. The fund is also looking to blend growth and value stocks.”
Assessing the reputation of SocGen, Cox feels that this is very good, while Lakey says: “Its reputation is above average and the existing retail funds are also above average, on balance.”
Rutter says: “The company's reputation is growing, although its UK performance is only average. However it needs to move away from being seen as the Nicola Horlick empire. Also, SocGen is still not a familiar name with the general public.”
But Jackson says: “It has a very good reputation which has been improving constantly since Nicola Horlick arrived on the scene.”
Moving on to the issue of the charges being fair and reasonable, Rutter says: “The charges are at the top of the scale. The reduction in yield is quite uncompetitive for direct investment but is about average within an Isa.”
Jackson says: “The charges are a bit on the high side. An annual management charge of 1 per cent would have been better,” while Cox says: “I think that the initial charge is a bit on the high side.”
However Lakey says: “The charges are fair and reasonable and are pretty typical of international growth funds.”
Looking at the product literature Jackson thinks that this is plain and simple to understand, while Cox says: “I quite like it, it is straightforward and gets to the point.”
Lakey says: “The literature is very clear and understandable. Although a sector breakdown of the fund is given, I would also like to see whether it is currently in Canada or Latin America.”
Rutter says: “It is bright, brief and factual. But is also bitty, with too many inserts. Could the application form not have been incorporated in the product guide/key features documents? For me, the proliferation of Nicola Horlick pictures on SocGen literature does not work.”
Summing up, Lakey says: “This offers an excellent opportunity to jump aboard a likely chart topper,” while Cox says: “This fund complements the SocGen equity funds and has a good background track record. However I think that the initial charge should be reduced if SocGen wants to compete head to head with companies like Fidelity.”
Finally Rutter says: “If the US market begins a steady recovery – although I think it may be 2002 before we see it – this fund under Alan Torry has a better than average chance of delivering good results.”
Roy Rutter, Principal, Aptitude Financial Planning, Peter Cox, Principal, James Tate Independent Financial Consultants, Alan Lakey, Partner, Highclere Financial Services, Robert Jackson, Independent financial adviser, Kensingtons Asset Management.