Framlington Unit Management – Nasdaq Fund
Type: Unit trust.
Aim: Growth by investing in the Nasda composite index.
Minimum investment: Unit trust – £500 lump sum, Isa – £1,000 lump sum.
Investment split: Technology 27.8 per cent, industrials 21.4 per cent, healthcare 17.2 per cent, consumer 15.9 per cent, telecommunications 12.1 per cent, financial 3.1 per cent, materials 2.5 per cent.
Isa link: Yes.
Pep transfer: Yes.
Charges: Initial 5 per cent, annual 1.5 per cent.
Special offer: Initial charge on lump sum investments reduced to 4 per cent.
Offer period: Until December 31, 2000.
Commission: Initial 3 per cent, renewal commission on Isas and Pep transfers 0.5 per cent.
Tel: 0845 7660184.
Colin Shaw – Director, Woodfield Financial Services
Alan Buswell – Proprietor, Glenburn Financial Services
David Wingar – Partner, Courts Independent Financial Management
Jeremy Hulbert – Proprietor, Hulbert Financial Services
Broker Ratings (ave. marks out of 10):-
Suitability to market: 7.8
Investment strategy: 7.3
Past performance: 6.5
Company's reputation: 7.5
Product literature: 7.8
Framlington has introduced the Nasdaq fund, a unit trust that invests in the Nasdaq composite index.
Looking at how the fund fits in to the market, Shaw says: “Framlington has become the first UK unit trust group to have a fund wholly committed to the Nasdaq index. It therefore gives it a head start as many more will follow.”
Hulbert thinks that the product is suitable for the investor who has a higher than average risk profile. Wingar says: “As Nasdaq is a word associated with America, growth and technology, this fund will fit very well into the market.”
Buswell says: “There are not many Nasdaq funds on the market at the moment and as the index has lost something like 25 per cent of its value in the last six months it could be argued that this is either terrible timing, or ideal, depending on your attitude to risk.”
Turning to the type of client that the fund is most suitable for, Hulbert says: “This is a product for any client willing to accept higher than average investment risk.”
Wingar feels that it is for any client looking to invest in equities for five or more years and who is looking to diversify their portfolio.
Buswell says: “This is for those not of a nervous disposition. To say that the Nasdaq has had an eventful ride of late is to put it mildly. I think there is no doubt that over the medium to long term the Nasdaq will do very well indeed, so this fund would be suitable as part of an overall investment portfolio looking for long-term growth.”
Shaw says: “The fund is suitable for those clients with a fairly aggressive attitude to investing. Maybe others would venture to put say five per cent of a portfolio into this fund.”
The panel disagree about the types of marketing opportunities that the product will provide.
Hulbert says: “There are no special marketing opportunities here, as this is just another North American fund with a technology bias.”
Wingar is a little more positive: “There are no marketing opportunities for me personally, but this is a good potential fund to consider for investment advice.”
On the other hand Shaw says: “The fund could open up opportunities to market it to those investors with most of their portfolio in UK funds or equities and who are looking for a bit of spice.”
Buswell says: “Exciting is the word that immediately springs to mind. With the Nas daq having fallen so much lately this could be construed as ideal timing for the investor with spare capital who doesn't mind taking a beating in the short term.”
Evaluating the fund's stren gths, Wingar says: “I do not know of any other fund that just invests in Nasdaq stocks, so this will appeal to certain investors.”
Shaw says: “The Nasdaq stockmarket lists over 5,000 companies, so the fund managers have a wide variety of companies to invest in, and they are not all high-tech.”
Buswell says: “This is probably going to be the world's strongest market over the next 10 years and more as technology, media and telecommunications investing gradually comes back into favour.”
Looking at the potential drawbacks of the product, Hulbert says: “There are none, provided that potential invest ors are aware of the high risk profile.”
Shaw agrees. He says: “Volatility is the main bugbear. This is a market which has fallen by 30 per cent in five weeks and is still down at the time of writing by 1,900 points from its 4,733 peak on March 27, 2000.”
Buswell thinks that the current volatility of the Nasdaq will discourage many people from investing into it.
Looking at the fund's investment strategy, Shaw says: “Within the companies in the Nasdaq there is a good spread of sectors, including healthcare and telecoms.”
Hulbert says: “This is a high-risk growth fund with over 50 per cent exposure to pure technology stocks,” while Wingar says: “Technology and growth stocks are the future, so the investment strategy is correct.”
Commenting on Framling ton's reputation, Buswell says: “The company has a strong reputation within the industry, but is not well known among the general public, which may hold back individual investors who like the perceived comfort of a known name.”
Shaw says: “Framlington has an excellent reputation and a number of insurance companies have used it to provide fund links.” Wingar feels that Framlington is a good solid fund management group. Hulbert says: “Framlington has an excellent reputation for running high-risk niche area funds.”
Examining the past performance record of Framlington, Shaw says: “Generally the company's past performance is very good, especially in the American markets, but it has had some disappointment in UK investing.”
Buswell says: “Apart from its American growth fund, which has been a consistently superb performer, I think that Framlington should be viewed as a solid company offering consistent growth.”
Hulbert says: “The past performance record of Fram lington's funds is patchy, but this is to be expected when bearing in mind the type of funds offered. Niche funds like these are more volatile by nature.”
Turning to the funds that should provide the main competition, Shaw says: “The main players in the American market are Henderson, S&P, and Schroder, but Framlington stands up well.”
Buswell says: “Nasdaq is perceived as basically a technology, media and telecommunications market, so the main opposition will come from technology funds.”
Looking at the charges, Shaw says: “The charges are normal, which means it is a cheap way of getting into the American market, as buying US equities directly is expensive. Stockbrokers always whinge about the difficulty of placing such deals.”
Buswell and Hulbert both feel that the charges are standard for the industry.
Examining the product literature, Shaw says: “The literature is snappy and to the point. You can see at a glance what you are getting.” Buswell and Wingar both feel that it is clear and concise, while Hulbert says: “The literature is excellent. It is well-presented and written in plain English.”
Summing up the product Shaw says: “Those of a nervous disposition should stay away from this – the market moves sharply and the index is now quoted on Teletext, so you can see how you are doing very simply and speedily. It is even worse if you watch the Sky Money Channel.”
Buswell says: “It is nice to see that companies are still looking at new investment opportunities. But there are so many out there that making a choice becomes ever more difficult, which is where the fund supermarkets will come more and more into their own, thereby allowing cherry-picking of the very best performing funds, irrespective of company.”
Wingar is more positive. He adds: “This fund will do well in an already competitive investment market.”