By Jenne Mannion Merrill Lynch is offering a 2% discount on lump sum investments into its UK Dynami...
By Jenne Mannion
Merrill Lynch is offering a 2% discount on lump sum investments into its UK Dynamic Fund.
The fund, which launches on 31 October, is to focus on the pharmaceuticals and health sectors and will have an initial underweight position in telecoms and information technology hardware.
Peter Davies, manager and member of the UK specialist team, said telecoms pricing is under pressure due to too much capacity in the industry, therefore he is underweight in this sector.
Meanwhile, he anticipates the advent of genomics will lead to added Government spending in the healthcare and pharmaceutical sectors.
The portfolio of UK Dynamic is on that of the Mercury Offshore Sterling Trust (Most) UK fund.
Since its inception in 1997, Most UK has outperformed the FTSE All Share Index by more than 14% per year and has achieved an absolute return of 157%, according to Merrills.
This places it first of 86 funds in the Micropal Offshore Equity UK sector, since launch.
Because UK Dynamic fund is modelled on it and run by the same manager as the offshore fund, its recent frAAA rating has been extended to the new onshore fund, one of the first funds ever to receive a new fund frAAA rating from Standard & Poor's fund research.
Minimum investment is £1,000 lump sum or £50 per month. The initial charge is 5.25%. The 2% discount is on offer until 31 December.
Merrill Lynch UK Dynamic will invest in a concentrated portfolio of around 40-60 stocks, with a minimum of 60% in the FTSE 100. Currently 80% is invested in the FTSE 100, with the remainder in UK mid and small cap companies.
Davies said there is no set style in the portfolio, therefore it will add value through stock selection across the whole market.
The investment process will be based on adding value through stock selection, however there are risk constraints to ensure that no stock or sector is weighted too high relative to the index. Active stock positions will be 5% in FTSE 100 stocks, 4% in mid cap companies and 3% in small caps.
He said: "We believe it is vital to accept that market and business conditions can change over time and therefore it is important to have a flexible style.
"By contrast a lot of fund managers stick to their styles, for example growth or value, and will underperform if market conditions aren't conductive to that particular style. The flexibility provides the opportunity to add value."
The 10 largest stock bets are Nycomed Amersham, Glaxo/ SmithKline, National Power, AstraZeneca, Canary Wharf, Royal Bank of Scotland, WPP, Barclays, Johnson Matthey, and Telecity.
Meanwhile, the stocks he is most underweight in include Vodafone Group, Lloyds TSB Group, Cable & Wireless, Marconi and Diageo.
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