Each product has been given a star rating, representing its overall value for money, based on cost, terms and conditions and investment potential.

Product of the month
Royal London Asset Management (RLAM) Strategic Bond Fund
The aim for RLAM’s Strategic Bond Fund is to provide investors with an attractive total return through active investment management in all types of bonds, some equities and also derivatives. It is a focused portfolio that is eligible for stocks and shares ISA and ISA/PEP transfer investment.

RLAM champions this launch as a new generation of bond fund that uses derivatives to both enhance returns and protect against market risks. The fund will be jointly managed by Eric Holt, RLAM head of credit, and Paul Doran, head of derivatives, and will offer retail investors access to techniques that were previously only available to institutional investors.

Minimum initial investment: £1,000 initial or £50 per month
Initial Charge: 4 per cent
Annual Charge: 1.25 per cent
Contact: 08456 02 36 04 or www.rlam.co.uk

Philip Johnson says: The investment allocation for this new fund is likely to be 65 per cent in bonds, 25 per cent in derivatives and up to 10 per cent invested in equities. While it will primarily invest in corporate debt, derivatives will be used to remove interest rate risk from the fund. This concept gives retail investors access to the advantages of derivatives management previously only available to institutional investors.

The target total return is plus 2.5 per cent of the iBoxx non-gilts index, and investors can choose to take quarterly income payments or reinvest for higher total returns. The reinvested income is not subject to the initial charge.

This is an opportunity for investors to take advantage of this new concept in bond fund management utilising the proven expertise of RLAM’s investment team. I expect that the fund will provide an attractive relative return which should satisfy the needs of those investors who include a bond structure within their overall portfolio in order to balance and smooth the total investment return. The skilful use of derivatives and the equity content of the fund should produce a realistic total return that should also appeal to the more cautious investor who prefers limited equity exposure within their portfolio.

Those who are new to investment and nervous about the equity markets, but want something different to deposit-based arrangements may like to consider the monthly funding option. The minimum investment of £50 per month should bring this fund into the affordability range of many people and also contribute towards developing a savings discipline.

The team at RLAM have the know-how to make this work. I will be monitoring the performance on my ‘radar’ with interest.
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Skandia UK Best Ideas
The second in Skandia’s Best Ideas range (the first was the global fund lunched in June), the idea is to maximise the benefits of multi-manager investing. Skandia asks ten of the UK’s leading fund managers to pick their ten best stock ideas, and it then creates a single fund with the results. The managers were chosen for their ability, specialist expertise, philosophy, investment process and strong track records, according to Skandia.

Investment will be made in a portfolio dominated by UK securities, either directly in transferable securities or through collective investment schemes. The fund’s target is 100 per cent UK equities, but investments will cover a range of companies - from some of the world’s largest to smaller Alternative Investment Market-listed enterprises.
The managers currently included in Skandia’s UK Best Ideas Fund include Anthony Nutt of Jupiter, Stephen Whittaker of New Star and Richard Plackett of Merrill Lynch.

Minimum initial investment: £1,000 initial or £50 per month
Initial Charge: 5 per cent
Annual Charge: 1.5 per cent
Contact: www.skandiainvestmentmanagement.com

Patrick Connolly says: This fund launch has obtained a fair amount of publicity. The concept is that ten leading fund managers are selected and each chooses their ten best stock ideas to go into the overall portfolio. Top managers selecting only their very best ideas sounds like a sure-fire winner and will undoubtedly prove popular in an environment where the investing public like to believe in the concept of star fund managers.

This fund launch focuses on UK equities and follows on the heels of a similar global fund launch. That fund has proved very popular and the fund size is already in excess of £150 million. Skandia is hoping that this UK offering will raise between £30 million and £50 million in the first six months. This is eminently achievable.

The different investment approaches of the selected managers should lead to a diversified fund in terms of the type of company and its size. It is envisaged that the fund will have about 44 per cent in FTSE 100 stocks. However, while the charges on the fund may seem reasonable, a Total Expense Ratio (TER) of 2.45 per cent gives an accurate reflection of the underlying costs, which are perhaps higher than investors may suspect.

The charges are very much what could be expected from a fund-of-funds portfolio and essentially that is what this is. Fund-of-funds portfolios are suitable for most investors. However, fund-of-fund managers are able to combine underlying funds to effectively manage risk and if any are not performing they can quickly ship them out in favour of a suitable replacement. It is likely that will not be so easy with the Skandia fund.

So, while there are good features in the Skandia product and, no doubt, the marketing machine will work well, what you are effectively getting is a customised fund-of-fund proposition without somebody maintaining the overall balance of the portfolio.
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First State Investments
Managed by Sydney-based John Snowden, head of property securities at First State Investments, the group’s Global Property Securities Fund will leverage off the investment process currently used to manage the Colonial First State Colliers International Properties Securities Fund. Snowden will follow an active investment management style, combining macroeconomic and detailed bottom-up research. The team members behind this fund all have a strong background in managing money globally, with an average of 15 years’ experience per team member.

The fund will initially invest in the US, Finland, France, the Netherlands, Spain,
Italy, UK, Japan, Australia, Hong Kong, New Zealand and Singapore. However, as listed property security markets develop throughout Europe, Canada and Asia, the fund’s investments will spread. The implementation of real estate investment trust (REIT) legislation in more countries will also have an impact on the fund’s holdings.
First State Investments is optimistic about the future growth prospects for this market, thanks to the introduction of REIT-related legislation in the UK and Germany. It expects this to build upon current growth in this sector resulting from global economic growth and an increase in demand for income-producing property-type assets.

Minimum initial investment: £1,000 initial or £50 per month
Initial Charge: 4 per cent
Annual Charge: 1.5 per cent of net asset value
Contact: www.firststate.co.uk

Robin Amlôt says: That rumbling sound you hear is a bandwagon picking up speed. Schroders, Fidelity and JP Morgan Asset Management are all among those still admiring the shine on their new global property securities funds. Although domiciled in the UK and with a team of analysts in London, John Snowden, head of property securities at Colonial First State Global Asset Management, is running the First State Investments fund from Sydney.

A recent addition to Snowden’s team is Matthew Gulczynski, appointed 2 October 2006 as property securities analyst. He was previously an equities analyst for the UBS Securities real estate research team. Snowden himself joined in February from UBS, where he was head of UBS real estate and global real estate securities for Australia, New Zealand and Asia.

Global property is a relatively fresh sector for UK investors - even now only around 2 per cent of UK pension fund property assets are overseas. Odd really, when you consider that we have one of the most developed property markets in the world but as such only account for 10 per cent of the global property universe.

Raising your property investment horizon to encompass the rest of the world has benefits. Global securities provide another layer of diversification and offer the potential for greater returns than may be available within the UK. Furthermore, global property tends to show little correlation to global equity markets.

Property markets around the world tend to follow domestic drivers while shares, in a broad sense, follow global trends. Thus the factors affecting property prices in Chiyoda-ku in the centre of Tokyo are unlikely to be the same as those affecting London’s West End.

In fact, you can reckon on many parts of the global property market outperforming the UK in the next few years. Why? Well, on our doorstep the European economy is (at last) recovering, while further afield, growth in Asia will lead to greater demand for property assets.

A word of caution, though, and the word is ‘timing’. There were nasty falls in global property securities markets in the second quarter of this year. Japan was down 9.76 per cent, Singapore 8.11 per cent but Europe only 3.86 per cent, which, I suppose, goes to prove that different markets move at different paces.

The tax status of real estate investment trusts (REITs), a reasonable charging structure and the potential prospect of a decent income stream make global property securities funds worth a look. Should this be the one you choose? Maybe. Sister fund Colonial First State Colliers International Property Securities Fund led the global property securities pack with a 27 per cent return for individual investors in 2005.

One small snag, though: investors should know that the entire team responsible for that performance jumped ship and John Snowden was brought in to rebuild Colonial First State’s property investment operation. It may be too early to tell whether he has succeeded in this task.
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AXA Framlington
The AXA Framlington Japan Smaller Companies Fund aims to achieve long-term capital growth from a portfolio of mid and small-cap stocks across all sectors of the Japanese market. It is a UK-registered open-ended unit trust and is benchmarked against the IMA Japanese Smaller Companies sector.

The fund will typically hold between 70-85 stocks and will be managed by Chisako Hardie, who previously managed the SWIP Japanese Smaller Companies Fund. Hardie is a pure stock-picker, based in Edinburgh and is one of the few Japan small-cap specialists in the UK.

Minimum initial investment: £1,000 initial or £50 per month
Initial charge: 5.25 per cent
Annual charge: 1.5 per cent
Contact: 0845 777 5511 or www.axaframlington.com

James Davies says: There can be little doubt that AXA Framlington has a strong Japan Desk and with the addition of a fund manager who has a good track record of managing Japanese Smaller Companies funds, this fund aims to build further on their reputation.

Chisako Hardie was previously manager of the SWIP Japan Smaller Companies fund. She became manager in 2002 and during her tenure the fund ranked top quartile in the Japanese Smaller Companies sector, according to Financial Express. Hardie has experience in Japanese equities going back ten years and attended university in Tokyo. This experience should help her in stock-picking from the pool of around 3,000 small-cap stocks that are available.

My concern is not with Hardie’s natural ability to manage a Japanese Smaller Companies fund, or with AXA Framlington’s resources in providing her with every assistance to manage the fund well. Rather, I am concerned with the value of having a Japanese smaller companies’ fund at all. Investment houses are very good at coming up with marketing-driven fund launches as opposed to investment-driven funds.

Does having a Japanese smaller companies’ fund allow AXA Framlington to invest in Japanese stocks that it can’t do with the larger Japan Fund? Or, is a smaller companies fund simply aimed at expanding AXA Framlington’s fund range and drawing new money in? I think the jury is still out on this question. I also think that the distance of nearly 6,000 miles between Edinburgh and Japan must diminish the effectiveness of the fund manager compared to if she was actually based in Japan.

The number of investors who would benefit from this type of fund within their portfolio is, in my view, limited - as evidenced by the small size of the sector (limited to around a dozen funds). That said, for investors who would like the chance to benefit from the interesting opportunities arising from Japanese small caps, this new fund should certainly be considered, based on the experience of the fund manager and the resources of AXA Framlington.
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This article is from the November 2006 issue of What Investment.