Fund Times: 8 - 12 March
First State to launch offshore versions of its Asia and GEM funds; Martin Currie launches China fund; Ex-Liontrust managers to launch new investment boutique; UBS launches 69 Exchange Traded Commodities (ETCs) in London; Fund groups reduce fees; AEGON launches protected growth fund.
First State to launch offshore versions of its Asia and GEM funds
It was reported this week that First State will launch offshore versions of its Asia Pacific and GEM funds, initially to institutional investors and later this year to retail investors. First State has launched numerous new products in recent years including a sustainable versions of its GEM fund (first mentioned here) and a Latin American product. The number of launches is a concern, especially combined with the group’s recent decision to raise fees on some funds. So far though the launches appear focused on First State’s core capabilities where we remain highly confident in their abilities.
Martin Currie launches China fund
Martin Currie launched a China fund to UK investors on 10 March. The fund will be managed by James Chong, and will be similar to the Martin Currie Greater China SICAV which he has been running since 2006. Chong takes a slightly different approach from that used by his colleagues in the broader Martin Currie Asia Pacific fund to which Morningstar has awarded a Superior rating (see report here). That fund relies on Martin Currie’s DSM model and a team of fund managers and analysts based in Edinburgh. While Chong is also based in Edinburgh, he uses a team of Chinese analysts based in Shanghai and Edinburgh, providing more local insight into the nuances of the Chinese market. The fund will be a concentrated portfolio of 40 – 60 stocks, constructed with a combination of bottom-up and top-down research.
Ex-Liontrust managers to launch new investment boutique
It was reported this week that former Liontrust managers Jeremy Lang and William Pattisson are to launch a new investment boutique later this year. The firm will be called Ardevora Asset Management. Lang and Pattisson established successful track records running the First Income, First Growth and First Large Cap products at Liontrust, but left the firm in Janaury 2009, which prompted sharp outflows.
UBS launches 69 Exchange Traded Commodities (ETCs) in London
UBS has launched 69 ETCs – listed vehicles that track the performance of underlying commodities. The suite covers copper, gas, oil, gold, corn, live cattle and a huge range of other hard and soft commodities, as well as composites. We don’t think such a specialised investment will be appropriate for many retail investors, but the launch of low-cost investment vehicles is a positive development. Investors considering the ETCs will need to weigh up the wide range of competing alternatives for investing in commodities.
Fund groups reduce fees
Baillie Gifford has announced it will cut the AMC on its Greater China fund from 1.75% to 1.5%, effective 1 May 2010. Morningstar data shows a median TER in the Greater China category of 1.98%. If Baillie Gifford is able to keep a lid on additional expenses, we could see the fund’s TER fall comfortably below the median for the sector. Meanwhile AEGON has announced a temporary discount on its Global Opps fund, which will expire after two years. Their rationale for the temporary reduction is to offset high costs while the fund is new and is small in size, as well as to attract investors into the fund. Investors need to consider the long-term costs though, as this fee reduction is temporary. We welcome both these moves as any reduction in fees, temporary or permanent, is a benefit to investors.
AEGON launches protected growth fund
AEGON has launched a protected growth fund for offshore bonds. The fund will invest a maximum 70% in equities and keep 30% in cash; it will offer capital protection set at 80% of the highest ever unit price reached by the fund. We note that in this fund, equity exposure is increased as the market goes up, and reduced as the market falls. In trending markets, this can work well, but in volatile markets this can result in the fund buying equities at high levels and selling at low levels. We are sceptical of structured products launched for retail investors, which have been plagued by high fees and a lack of transparency in the structure. Investors considering the fund need to assess the total cost of the fund, not just the headline management charge, and consider any other potential costs or risks implied by the fund’s structure.
Morningstar qualitative ratings and reports issued this week
Morningstar issued new qualitative ratings and reports on a number of funds available to UK investors this week, including JPM Europe Dynamic and JPM Global Consumer Trends. Click here to see the full list.
