Continued customer demand could result in a growing number of Dynamic funds on the market - and that...
Continued customer demand could result in a growing number of Dynamic funds on the market – and that would be no bad thing according to managers already involved in such products, who say they like the feeling of freedom that comes with being able to pick stocks with fewer limits.
Jonathan Price, client portfolio manager at JPMorgan Fleming says his company's recently launched US Dynamic Fund – a SICAV - has come about because of demand for an addition to JPMF's existing range of UK, Europe and Global Dynamic funds.
"Dynamic funds give a boost to investors' portfolios," he says.
"It's something that will look for the best opportunities without being tied to a particular benchmark."
Despite the higher risks involved, investors are likely to be increasingly interested in Dynamic funds because of the realisation that asset returns are going to be lower in coming years than in the bull market of the 1990s, Price says.
JPMF uses a bar-bell approach, picking extreme growth and value stocks for its US Dynamic portfolio. It also relies on "behavioural finance theory", which holds that humans are "irrational" and tries to quantify that irrationality through signals such as historical and expected earnings growth and price/earnings ratios, Price says.
Neil Pegrum, director of UK equities for Insight Investment prefers to talk about picking stocks in a "non-mechanistic way" when he talks about the company's six-month old UK Dynamic fund, but with the same ultimate objective: greater rewards for backing the best bet.
"I'm looking for companies that can get markets to change their view of them, in the process causing share prices to rise. The trick is to find a big enough gap between the market's view and my own convictions."
Pegrum says his 16 years working on UK stocks has provided him with good background in knowing most stocks across all sectors and capital sizes – and the ability to ask the right questions of company managers at meetings.
Like Price, Pegrum points out that Dynamic funds are firmly on the higher-risk end of the spectrum. Insight Investment's UK Dynamic fund aims for a portfolio of about 40 stocks, JPMF's US Dynamic fund aims for about 100 stocks.
JPMF has no hard and fast targets for its US Dynamic fund, in part because it is being rolled out to European markets at different times. While there are no immediate plans at present to continue expanding the range of Dynamic funds, Price admits that there are two glaring holes that customers may yet demand be filled: Asia and Emerging Markets.
‘Important to have an anchor’
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Lack of innovation for solutions
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