Friends Ivory & Sime has introduced its Isis Aim growth fund, an Oeic which allows investors to invest in companies listed on the Alternative Investment Market and the Techmark index.
Looking at how the fund fits into the market,, Vaughan says: “Although this fund could be described as just another high-tech or dotcom fund, it is a new launch without the baggage associated with existing funds and previous poor stock selections.
“This new fund can start clean and hopefully find some sensibly priced investment opportunities. By investing via a fund, the risk is spread among a number of companies rather than individual selection.”
Croft says: “The Aim fund is unusual and usefully extends the range of funds available. The dynamic and zero-dividend preference share funds represent additions to a growing sector. The smaller companies fund sector is already substantial.”
Clayson says: “It is a quality higher-risk fund – a good alternative to technology funds.”
Rogers says: “It is innovative and interesting but could have very poor timing due to recent events and their impact on consumer confidence.”
Identifying the type of client the fund is suitable for Croft says: “It is not for widows and orphans. Clients will need an appetite for risk and funds such as the Aim fund will represent only a small part of the total portfolio.”
Rogers thinks that it will appeal to the more sophisticated and financially aware investor and those with a very optimistic or aggressive attitude.
Vaughan says: “The literature suggests younger investors with spare capital investing for the long term would be most suited to investment in the Aim fund. I would add to this anyone wishing to take a punt on new ventures or developing technology but who are also aware, from more recent performance, how volatile this type of investment can be.”
On the other hand, Clayson believes wealthier clients with a long-term investment horizon would find this fund attractive. He says: “I would not recommend more than 5 per cent of a portfolio in this fund because of its high-risk profile.”
Analysing the marketing opportunities the fund will provide, Croft says: “The Aim fund adds a string to the IFA's bow.”
Clayson thinks the fund will provide an opportunity for investors who are frightened of high-tech stocks whereas Rogers believes opportunities are limited due to the timing. He says: “It is OK within a balanced portfolio of an aggressively-minded investor.”
Vaughan says: “Having witnessed the volatility of high-tech and dotcom funds, it requires a brave investor with a long-term or cavalier outlook to commit to such funds at the present time. I feel regular premiums would perhaps be more popular for younger investors and small single premiums for wealthier older clients – both via Isas.”
Discussing the main useful features and strong points of the Oeic, Clayson points out the high growth potential and diversification, which includes healthcare, mining and software from new companies. Rogers highlights the innovation and clarity of vision.
Vaughan says: “The useful features are the ability to invest from £1,000 as a single premium and from £50 a month for regular premiums. The fund is also available via Isas. The strong points are the two fund managers, Bill Brown and Robert Mitchell, who have a wealth of experience and a good track record.”
Croft says: “The withdrawal facility provides easy access to total return. At this stage, this is only a minor benefit but, with falling yields, some clients will need to resort to capital accruals.”
Discussing the investment strategy of the Oeic, Vaughan says: “Despite the falls in technology stocks and risks associated with smaller companies there is still a belief that the future, and with it true growth potential, lies with the type of companies listed on the London Stock Exchange's Aim market. A good fund manager (or two) could exploit this opportunity in the longer term.”
Clayson says: “High risk with high growth potential. If you can stand the risk of some holdings disappearing, then investing in a well-researched new venture provides high profit potential for the long term.”
Croft says: “There is not much to pick and choose between this and the competition. We know that much will depend not on the stated objective but on how the manager interprets and implements it.”
Rogers says: “Recent events may prove their strategy to be misplaced. The market is so unpredictable that even good opportunities may be passed up, which is the basis of the fund strategy.”
Turning to disadvantages Croft says: “Short of a performance record, there is little here to hang a hat on. Even the lead managers are only named in faint and small print on front of the factsheet and the potted biographies do not add greatly.”
Drawbacks Rogers identifies include the slightly high charges – both up-front and ongoing. “This could be confusing as there is no explanation in the literature,” he says.
Vaughan says: “Due to the higher-risk nature of the investments, the attraction is limited to the more adventurous investors. There is scope to invest in bigger companies and those listed on the Techmark index and hopefully this will not lead to just another high-tech investment.”
Clayson says: “There is a high risk that some or all of the underlying investment could lose value dramatically. Volatility will be an inevitable problem.”
The panel speak favourably of Friends Ivory & Sime's reputation. Clayson describes it as “top drawer” while Rogers thinks it is good within its specialist sectors.
Croft says: “Friends has a reputation for ethical investment. Ivory & Sime's is a bit more patchy – they were let down by poor administration but that is not uncommon.”
Vaughan says: “Friends Provident and Ivory & Sime both have good past reputations. Friends Provident is experiencing many problems at present and it is hoped that these do not deter from the formation of the new Isis brand. It is perhaps appropriate that the Friends has been dropped.”
Looking at Friends Ivory & Sime's investment past performance, the panel are in agreement that it is good. Croft says: “Very fair, but to what extent that is due to fund managers who have moved on is debatable.”
Discussing what will be the main competition, the panel mention funds from Artemis, Threadneedle, Investec, Aberdeen, Credit Suisse, BWD, Liontrust and Exeter.
Assessing whether the charges are fair and reasonable most of the panel agree they are competitive and in line with similar funds. Rogers thinks they are too high.
Turning to whether the commission is fair and reasonable, all agree it is.
Moving on to the product literature, Rogers and Clayson think it is clear and easy to read. Croft says: “Uninspiring.”
Vaughan says: “It is relatively easy to read but dull in appearance.”
Summing up, Croft says:”I am concerned that these are relatively high-risk funds upon which clients should be fully advised. They should not be sold on the back of a mailshot.”
Vaughan says: “There seem to be a number of new, young dynamic companies launching funds at the present time but hopefully the investors will not become too confused. Not all new ventures will prove successful.”
Nick Rogers, IFA, Lauren Charles Financial Management
Douglas Croft, Partner, Andrews Gwynne & Associates
Scott Clayson, Principal, Professional Financial Services
Bob Vaughan, Partner, Ashley Vaughan Partnership