Morley Fund Management launches a fund with substance

The launch of the Global Theme fund confirms Morley Fund Management's place in the retail market as they move away from being 'the largest fund manager's no-ones ever heard of' to one they have.

With the majority of global markets experiencing negative returns throughout 2001, there has never been a better opportunity for a global fund to take advantage of a solid global recovery. With this in mind Morley Fund Management (Morley) have introduced a Global Theme fund to complement their existing focus range of retail funds.

However, traditional global investing using a top-down country based approach with a strong home bias has become flawed as many multinationals generate the majority of their revenue from outside the country in which they are domiciled. Two of the largest UK companies, Vodafone and BP each derive less than 16%* of their revenues from the UK, promoting a shift from diversifying a portfolio along geographic boundaries towards global thematic investing.

Whereas many thematic investment funds tend to concentrate on a single global investment theme or industry, Morley's Global Theme fund is not subject to any such constraints. By not only recognising that companies do not always fit neatly into sectors, the fund adopts a trans-sectoral approach to themed investing and is driven by those major global trends Morley expect to lead equity out-performance in the medium to long term. These trends comprise of the competitive advantage, restructuring, deflationary world, and the misallocation of capital.

Run by the head of Global Equities, Michael Jennings, the Morley Global Theme fund essentially seeks to uncover those investment stories that best meet with these 4 macroeconomic driven themes. But with 1,700 companies in the global universe, this inevitably requires a significant research capability in an area where Morley exhibits strength both in breadth and depth.

With no geographic constraints Michael can select companies anywhere in the world with a sustainable competitive advantage, such as companies with innovative research, low production costs or those with new technologies.

Companies that have the ability to restructure and react to changes in the economy and have a strong commitment to shareholder value are also likely to succeed. Furthermore, in this era of low inflation and reduced pricing power through increased competition, profits have come under increasing pressure. This encouraged us to look for companies that offer sustainable earnings growth through market dominance and strong brands such as Coca-Cola.

Our final theme looks at the misallocation of capital in the world economy, as many core industries have been badly under-funded in recent years. This 'misallocation' of capital is expected to be corrected, and those companies with the ability to meet the demand in these key areas will reap the rewards.

Michael is assisted in identifying key global themes by Morley's 8 strong top-down economists and strategy team that interacts with Morley's in-house quant and internationally based research teams.
The effectiveness of Morley's top-down and bottom-up research and strategy teams serve the fund well in its ability to uncover and develop existing global opportunities.

Michael also has access to the Morley SRI team which offer a flexible, pragmatic and proactive approach to investing as they search for stocks that contribute to positive sustainability, or environmental and social criteria.

By holding a maximum of 70, mainly blue chip stocks and adopting a thematic rather than a top-down country weighted approach to investment, the fund is well positioned to outperform its benchmark, the MSCI World Index.

Stock selection will remain the key contributor to out-performance however, with strict sell disciplines in place to protect the fund from the downside.

To manage a fund which such themes requires a substantial amount of support to a fund manager with the undoubted ability to incorporate new and exciting stock ideas, with Michael's track record and Morley's strong in-house research, we believe this undertaking is a strong proposition from Morley Fund Management.

Morley Fund Management is a business name of Morley Investment Services Limited, registered in England No. 1973412 and Morley Fund Management Limited, registered in England No. 1151805. Both are members of the Norwich Union Marketing Group, members of which are regulated by the FSA for life assurance, pensions and investments. Morley Investment Services Limited is a member of the Investment Management Association. Registered Offices: No. 1 Poultry, London EC2R 8EJ. Both are CGNU Group companies.

Four themes driving stock investing

1. Competitive advantage
Companies with a clear competitive edge from exceptional management, low production costs, innovative R&D, quality products, or imaginative use of technology and e-commerce

2. Restructuring
Companies that can release shareholder value through restructuring and developing a clearer focus on their core businesses

3. Disinflationary world
In an era of stable or falling prices, companies with market dominance, strong brands or a powerful niche presence are better placed to withstand pressure on margins

4. Misallocation of capital
Core industries, such as power generation, transport,
housing and education have been badly under-funded in recent years. This is due to change

*Source: Bloomberg, BP Group Results, 2001

Fund Type

UK Open Ended Investment Company

Investment Objectives

To provide long-term capital growth through investment in a well diversified portfolio of international stocks. The Manager will identify core themes that are considered to offer attractive long term investment opportunities to shareholders, and the Fund will be invested in accordance with these themes. The themes will be kept under review and will change periodically at the discretion of the Manager. There will be no restriction by geography or industrial sector. The Fund will deliberately exhibit a relatively high degree of tracking error compared to a benchmark such as the MSCI World Index

Own ISA Wrapper

No

Savings Plan

No

PEP Transfer

No

CAT Standard

No

Initial Charge

5.00%

Annual Charge

1.50%

Minimum Initial

£5,000

Largest holdings

Samsung Electronics, Nokia, AT&T, Lufthansa, Takeda Chemicals, Sanofi-Synthelabo, Anheuser Busch, Tandberg, Capita Group, Lockheed Martin, McGraw Hill

Morley Fund Managers - contact details

Website

www.morleyfm.com/investments

Address

1 Poultry, London, EC2R 8EJ

Tel

0800 587 4563 (info and dealing)

Fax

0870 234 0001

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