UK Opportunities Fund
Aim: Growth by investing in medium and smaller UK companies
Minimum investment: Lump sum £1,000
Investment split: 100% in medium and smaller UK companies
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 0199110
Michael Gilbey, managing director, Atlantean Financial Management, Andrew Hosking, partner, Oracle Financial Planning, Barry Laymond, senior practitioner, Barry Laymond Financial Services, Bruce Macfarlane, partner, Capital Trust Financial Management, Roy Rutter, principal, Aptitude Financial Planning
Suitability to market 7.2
Investment strategy 7.1
Past performance 7.9
Company's reputation 7.7
Product literature 7.6
The UK opportunities Oeic from SVM Asset Management invests in medium and smaller UK companies.
Commenting on how the fund fits into the market, Laymond thinks it is an ideal fund for a portion of any portfolio. Gilbey says: "This is a difficult fund to categorise. It is an Oeic that is included in the Investment Managers Association's UK all companies sector classification, but potentially has a lot in common with funds in the UK smaller companies sector." Hosking says it is aimed at the Isa and Oeic lump sum investment market and those looking for long-term growth. Rutter says: "In the continuing bear market, stock picking, especially among small and mid-cap companies is the key."
The panel next consider the types of investors for whom it is most suitable. Hosking says: "Clients looking for strong active management rather than the passive nature of large funds or the simplicity of tracker funds." Gilbey thinks it is suitable for a client with an adventurous risk profile because the fund will hold a concentrated portfolio of 40 or so FTSE 250 and UK smaller companies. He adds: "There will also be exposure to Aim listed and unlisted securities, so this is not for the faint hearted. The fund could also be suitable for clients with a large portfolio and a moderately adventurous risk profile as a means of diversification." Rutter says: "Clients looking for capital growth at an average or slightly above average risk level." Laymond and Macfarlane suggest clients looking for growth and those interested in small to mid cap companies.
Looking at the marketing opportunities the fund will provide, Rutter says: "Transfers from underperforming funds and clients coming back into the market who can look longer term and might not have used this year's Isa allowance. Laymond says it is just another product to add to the range on offer. Hosking thinks it is an added string to the bow in a difficult time for promoting any equity investment, while Macfarlane feels the current conditions do not provide many opportunities for marketing equity-based products.
Assessing the main useful features and strong points of the fund, Laymond says: "The minimum investment of £1,000 and eligibility for Isa wrappers." Gilbey suggests the quality of the investment team and the classification of the fund in the UK all companies sector. Macfarlane says: "It has a rigorous stock selection process and well defined fund management process which should continue to provide value for investors over the long term." Hosking likes the fact it is available for Isa or direct investments.
The panel are then asked for their views on the investment strategy. Gilbey says: "It is focused with concentrated stock picking of the kind that is refreshingly clear and easy to understand. This is not a closet tracker or computer-designed system. There are no secret formulas or short cuts, just plain hard graft and reasoned decision making." Rutter thinks the mix is sound and although it lacks the resources of a Fidelity or a Jupiter, it clearly researches well and picks stocks sensibly. Laymond says: "Satisfactory and a style many will appreciate in these uncertain and volatile markets." Hosking says: "It is very heavily dependent and marketed on the credentials of the fund manager and his investment team."
The panel next comment on the fund's drawbacks. Hosking also sees the investment strategy as the fund's main disadvantage. He says: "The fund stands or falls on the choices made by the management team." Gilbey says: "The main disadvantage is that SVM is relatively unknown to the retail market. Additionally, the fund is higher risk in profile and without the magic words capital protected or guaranteed in its armoury, it has little direct consumer appeal at the moment." Laymond says investing in small to mid caps may restrict the fund manager's ability to benefit from exposure to the whole market. Rutter says: "It is a crowded marketplace and it is up against names that are better known to investors." Macfarlane can find no obvious disadvantages.
When asked to consider SVM Asset Management's reputation, the panel think it is excellent among institutional investors and specialist investment advisers, but it is relatively unknown to retail consumers. Hosking says it is good as a niche player in the active management market, but it is a new boy establishing a track record.
Next the panel analyse SVM Asset Management's past performance record. Gilbey says: "In general, SVM has achieved very good past performance and has been above average for most of its investment trusts and funds. Its flagship funds have remained so despite some anxious times." Hosking reckons it has had relatively strong performance during a difficult period but no long-term track record. Rutter says: "Consistently in the premier division. Its concentration on a small number of funds has paid off." Laymond thinks SVM has a superb track record and one that must be the envy of its competitors.
Highlighting the funds that will provide the main competition, Laymond highlights those from Skandia Multifunds and Christows. Macfarlane lists Artemis UK special situations, Jupiter undervalued assets and Fidelity special situations. Rutter mentions the funds from Rathbone and Lazard while Gilbey suggests many of the funds in the UK all companies and UK smaller companies sectors could provide stiff opposition.
Analysing the charges, Gilbey and Macfarlane think they are very much in line with the competition. But Gilbey adds: "Both initial and annual charges for pooled funds in the UK are high in general and represent a marketing structure priced to permit active marketing and reward all trade parties, rather than a cost-based structure priced to sell." Laymond is critical of the charges. He says: "The initial charge of 5.25 per cent and annual charge of 1.5 per cent may be somewhat high at a time when investors are sitting on cash earning interest." Rutter too would like to see a lower annual management charge of 1.25 per cent. Hosking says the charges are as expected.
Moving on to commission, the panel think it is standard, but Laymond points out there is no renewal commission.
Finally, the panel comment on the product literature. Gilbey says: "It is attractive but with too many loose forms and leaflets. The marketing message does not identify a target investor or market, but it does give a clear and strong message about the quality of the investment team and the investment strategy." Laymond thinks it has a very striking cover and that overall it stands out from the crowd. While Hosking says: "Very well presented both for client and intermediary. It gives you a very positive message that the company believes it can deliver."