Teather & Greenwood Investment Management
UK Smaller Companies Fund
Aim: Growth by investing in Aim-listed companies
Minimum investment: Lump sum £500
Investment split: 100 % invested in Aim-listed companies
Isa link: Yes
Pep transfer: Yes
Charges: Initial 5 %, annual 1.4 %
Commission: Initial 3 %
Tel: 020 7426 9003
Ray Ward, Proprietor, Ray Ward IFA, David Cuthbert, Corporate sales manager, Russell Plaice & Partners, Robert Graham, Associate, The Scottish Financial Independence Group, Godfrey Bloom, Research director, TBO Corporate Benefit Consultants
Suitability to the market 7.3
Investment strategy 7.8
Past performance 5.8
Company's reputation 4.5
Product literature 6.8
The investment management arm of Teather & Greenwood has introduced the UK smaller companies fund, which aims to provide growth by investing in Aim-listed companies.
Commenting on how the fund fits into the market, Cuthbert says: "It is a fairly high risk specialist fund which will have to compete with some existing funds in the sector with excellent track records." Ward says: "With more than 90 funds already in the UK smaller companies sector, it will soon become just another available fund." Bloom says: "According to our calculation it comes in at number 70.
Identifying the type of client for whom this fund is most suitable, Graham says: "One who has a broad range of investments. They should understand market volatility and be prepared to wait. It is excellent for the regular saver." Cuthbert thinks it could be part of a portfolio for a client happy with at least some fairly high risk, but stresses it should not be used as a core investment. Bloom says: "Clients who wish to pick up some exposure to smaller companies or who wish to transfer from less successful fund managers." Ward feels it is most suitable for the higher net worth client that can understand the risk involved.
Turning to the marketing opportunities the fund will provide, Bloom says: "Given the strength of the management team and the position in the cycle on small cap, quite good for clients looking for a slightly higher risk profile within their equity portfolios." Cuthbert says: "Only in as much as some clients like to invest in new funds and economic recovery is often lead by smaller companies." Graham thinks it is a good chance to contact clients who may like an extra opportunity fund for a small percentage of capital, or regular savings. He adds: "SSAS holders with youngish members could also be interested." Ward thinks for him, opportunities are very limited.
Considering the main useful features and strong points of the product, Cuthbert says: "The wide spread of holdings, both in size of company and sector. Although a new fund, the fund manager has a good track record previously, with Invesco Perpetual." Bloom cites the management of John Sweet and his background and his presumed commitment to Teather & Greenwood Investment Management.
Graham also highlights the fund manager and his known track record. He also feels Teather & Greenwood Invest Management is a respectable stable and likes its willingness to access the Aim market. Ward says: "The fund manager, the diversification of investment within the fund seems to have been well thought out, the ability to include it in an Isa and regular contributions can gain from pound cost averaging."
Looking at the investment strategy of the fund, Cuthbert says: "It sounds good for this style of fund and will probably produce good results." Graham says: "It is probably good timing because many now feel large caps will not give the necessary returns. Smaller caps are becoming more attractive to many investors." Ward reckons that some investments will be quite high risk because a stock where the company's management has equity stakes does not mean that management is good or that good growth is guaranteed. Bloom says: "It is a sensible approach, disciplined with good sector weightings - not much risk within the sector."
Next, the panel assess the fund's disadvantages. Ward cites the £50 exit charge if it is held as an Isa and Bloom thinks it may be a bit early for investors to brave the smaller cap sector. Cuthbert and Graham agree that volatility is an issue. Cuthbert says: "It is likely to be too volatile to be recommended as a core holding." Graham agrees and adds: "The fund has to establish a clear identity because it will be volatile."
Turning to Teather & Greenwood Investment Management's reputation, Graham thinks it is highly regarded and Bloom says it is good. Ward says: "The addition of John Sweet from Invesco Perpetual will enhance it." Cuthbert says: "I am unable to comment as I have never come across it before."
On the subject of Teather & Greenwood Investment Management's investment past performance record, Graham says it is good and Bloom says: "It is too difficult to judge as a house because it is too small, but if one judges the team it is very good." Ward says: "The literature says very little of Teather & Greenwood Investment Management's past performance, but quite rightly concentrates on the past performance of fund manager John Sweet."
When deciding which funds will provide the competition, Cuthbert points to Baring's and HSBC's UK smaller companies funds. Graham suggests Schroder institutional, Deutsche genesis and Merrill Lynch smaller companies. Bloom mentions Artemis smaller cap and Ward says: "Invesco Perpetual will want to maintain its good past performance, even without John Sweet. I think this will be the main competition."
Considering whether the charges are fair and reasonable, Ward, Cuthbert and Bloom agree that they are normal for this type of fund but Graham says: "They are higher than Schroder or Deutsche, toward the high end of the sector."
The panel next comment on the commission. Ward, Bloom and Graham agree that it is fair and reasonable, but Cuthbert says: "Initial commission of 3 per cent is standard but some firms now pay 0.5 per cent trail on unit trusts and Oeics as well as Isas. There appears to be no trail commission on either for this investment."
Moving on, the panel give their views on the product literature. Bloom says: "It is helpful but it does not make clear what its unique feature may be. For instance, why pay the relatively high charges?" Cuthbert thinks the literature is reasonably smart and straightforward but not attention grabbing and Bloom thinks it is good. Ward says: "It is fairly basic and minimal, but too much does tend to confuse most potential investors."
Finally, Graham says: "Teather & Greenwood needs to be clearer about why we should choose this fund rather than established ones." Ward says: "This fund is too high risk for the majority of investors. Bloom adds: "If we return to a bull market and really do avoid recession it could be good timing."