The top 10 fund raisers

Sunday 1st April 2001

Got a bit of cash stashed away? Lack the time and energy to decide which stocks to go for? Managed funds are the answer. Here's our pick for the top 10 growth funds of 2001.

Picking winners is never easy, whether it's in the Melbourne Cup, the local rugby game or tech stocks on the Nasdaq. Even if you do your homework, past history doesn't guarantee future success and unforeseen events can dramatically alter the odds just as you've laid your bet.

Fears of a major world economic slowdown make financial markets difficult to read right now, but choosing the top managed funds for this year meant taking a punt on what sort of beating global economies are in for. After sizing things up, Unlimited reckons it would be defeatist to try to maximise returns by seeking more cash and less international exposure. Despite recession fears, we expect global equity markets to lift once the eased-up interest rate feeds through into more visible GDP growth indicators.

What did we look for? Like last year, we've gone for growth.

First, we looked for funds investing mostly, but not exclusively, overseas - let's face it, New Zealand offers limited opportunities to access high-growth companies. We favoured European equities over the US and Japan, which remain comparatively over-valued.

Second, we went for funds investing in growth sectors like high-quality technology, pharmaceutical, health care and financial services.

Third, we subscribed to the view shared by most brokers: quality Australasian growth stocks should shape up to be a good bet as global GDP growth slows.

So how do last year's picks stack up now?

The Tasman Developing Companies Trust has again achieved a place among this year's top 10. And one of last year's best performers, the International Opportunities Trust, retains its ranking. Since last year's selection, Calan Healthcare has withdrawn the Framlington Health Fund in favour of its Affinity Healthcare Worldwide Growth Trust - but that's okay. We like the look of the Affinity fund, and have included it in this year's picks. Here's the full list for 2001.

Fisher Funds: New Zealand Growth Fund
Henderson Ethical Fund
Affinity Healthcare Worldwide Growth Trust
Edinburgh Financial Stock Fund
JB Were Europe Fund
Challenger TransTasman Share Fund
Dresdner RCM: International Opportunities Trust
Colonial First State: Tasman Developing Companies Trust
Finsbury Worldwide Pharmaceutical
Schroder Ventures International Investment Trust

Small can be beautiful

Fisher Funds: New Zealand Growth Fund

Since its launch late in 1998, the New Zealand Growth Fund has attracted $68.7 million in investor funds. The fund achieved a net return of 31.1% in its first year by investing in good-value small companies with growing earnings. For the December year the fund delivered a 15.92% return. "I won't buy into start-up operations, the top 10 stocks on the NZSE or highly cyclical property companies. I also stay away from companies that have a lot of debt," says fund manager Carmel Fisher.

Preferring a "buy and hold" strategy, the fund typically invests in up to 15 stocks. To avoid over-exposure, no single stock can account for over 20% of the total fund, nor can it own more than 10% of any company's issued capital. Key holdings include Baycorp, Frucor, Michael Hill, Sky City, The Warehouse and Waste Management.

Minimum investment: $2000 initially, thereafter $1000 or $100 monthly

Email: enquiries@fisherfunds.co.nz

Virtue pays

Henderson Ethical Fund

Launched early in 1995, the fund is a UK open-ended investment company (OEIC) with $NZ218 million in funds under management. It only invests in companies involved in environmentally and socially sustainable economic activity - companies involved in the arms industry, alcohol, tobacco, gambling or pornography are out. Apart from minor stakes in the US, the bulk of the 128 holdings are based in central Europe. The fund has exposure to high-growth, often highly valued industries linked to the sustainable development agenda. Many are involved in new technological developments, such as alternative energy, and have suffered in recent months due to pressure on the technology sector. The fund's top 10 holdings include: Vodafone Group UK (2.8%), Mediclin Germany (2.3%), Fitness First UK (2.2%), Halifax UK (2.0%), St Microelectronics France (1.9%), First Group UK (1.8%), Guardian IT UK (1.7%), Vestas Wind Systems Denmark (1.6%), Railtrack UK (1.6%) and Kingfisher UK (1.5%). In the 12 months to December 31 2000 the fund returned 8%, and 23% over both three and five years.

No minimum investment. Marketed via AMP advisers or AMP independent financial planners

Email: service@amp.co.nz

Young doctors

Affinity Healthcare Worldwide Growth Trust

Affinity's primary objective is to provide long-term capital growth for investors through focused exposure to biotechnology, pharmaceutical and health-care companies across the globe. Launched in September 1999, the trust invests either directly in health-care businesses or via selected investment managers with specific health industry expertise. The investor's initial funds are placed with the UK-based Framlington Health Fund after carrying out extensive due diligence. Launched in 1989, the Framlington Health Fund has delivered a 34.64% annualised return over 10 years (to September 30 2000). Since its inception, Affinity has returned 104.2%; 74% for the year to December 31 2000.

Minimum investment: $3000, or $1000 and minimum $100 monthly

Email: philippan@calan.co.nz

Canny Scots

Edinburgh Financial Stock Fund

This fund is one of Edinburgh Investment Company's 11 OEICs sold locally through Armstrong Jones. Like unit trusts, OEICs provide access to a diversified portfolio of assets, pooling client investments with others. But instead of buying units, the investor buys shares in a company, and because OEICs are open-ended, there are an unlimited number of shares available. The sector has received support from strong bond markets, where yields have fallen in anticipation of a slowdown in the global economy and less inflationary pressure, suggesting that financial stocks should continue to produce attractive returns. The high level of merger and acquisition activity, a recent feature of the managed funds sector, is expected to generate further consolidation in the months ahead. In the year to December 31 2000 the fund returned 21.42%; it delivered 59.44% and 138.22% over the last three and five years respectively. Top 10 holdings include: Amvescap (3.53%), HSBC Holdings (3.42%), Royal Bank of Scotland (3.25%), Barclays (3.10%), Bradford & Bingley (2.91%), Singer & Friedlander (2.72%), Brewin Dolphin (2.66%), Schroder Venture (2.48%), Provident Financial (2.45%) and BWD Securities (2.43%).

Minimum investment: $4000, minimum additional $2000, minimum monthly $200

Email: invserv@aj.co.nz

European recovery

JB Were Europe Fund

Managed for JB Were by the Boston-based Wellington Management Company, the fund invests in listed European stocks. The portfolio invests in 75 different stocks across 12 European countries; up to 10% of the fund can be invested in Europe's emerging markets. Over a third (33.9%) of total holdings are UK-based, and the fund is currently overweight in health care and underweight in technology, media and telecomms sectors. Top 10 holdings include: Total Fina Elf SA (3.9%), Vodafone Group (3.7%), Glaxosmithkline (3.4%), Shell Trans & TR Reg (3.2%), Nestle SA Regd (3.0%), Nokia OYJ (2.8%), AstraZeneca (2.6%), Aventis SA (2.5%), Aegon NV (2.1%) and BP Amoco (2.1%). With $17.8 billion from investors, the fund returned 8.6% in the year to December 31, 2000, and 12.7% and 21.3% over two and three years, respectively.

Minimum investment: $5000, minimum additional investment $200

Email: funds@jbwere.com.au

Australasian picture

Challenger TransTasman Share Fund

Incorporated in the UK and managed by Global Asset Management (GAM), the fund invests in New Zealand and Australian shares. As a specialist share market manager and local fund adviser, it's Challenger International New Zealand's job to identify under-valued assets with growth at a reasonable price. On December 31 2000, the trust had $NZ17 million in funds under management. Since its inception in June 1998, the fund has returned 10.9%; it made 11.1% in the year to December 31 2000. New Zealand shares comprise 40% of the portfolio, with 54% in Australian shares and the rest in cash. The top five (of a total 25) shareholdings include: Burns Philp (Australia), Portman Mining (Australia), Foundation (Australia), Fletcher Building and Carter Holt Harvey.

Minimum investment: £1000

Email: bellis@challengernz.co.nz

Spreading risk

Dresdner RCM: International Opportunities Trust

Invests in the wholesale Dresdner RCM International Equities fund, plus reasonably valued growth opportunities worldwide. Managed for Dresdner RCM Global Investors (Australia) by its San Francisco office, the trust aims to provide investors with medium- to long-term capital growth from a portfolio invested in high-quality, growth companies. In total, the trust has 105 stocks within 15 countries: US (50.3%), Europe (30.0%), UK (9.2%), Japan (6.5%), Asia (0.3%) and Latin America (0.8%). Key holdings include: America Online (3.88%), MCI Worldcom (2.85%), Cisco Systems (2.24%), AMGN (2.18%), Microsoft (2.14%), SBC Communications (1.90%), Novartis (1.87%), Pfizer (1.76%), Bell Atlantic (1.68%), Nokia (1.60%).

The trust returned 7.06% to investors in the December year. Over the last three and five years it has returned 36.01% and 33.87% respectively.

Minimum investment: $1000, or $100 monthly

Email: peter.rayner@dresdner-bank.com

Tomorrow's blue chips

Colonial First State: Tasman Developing Companies Trust

As Morningstar's top performing unit trust (comprising Australian or New Zealand shares) for the December 2000 year, the fund returned 18.26%. Since launching in May 1999, it has attracted $19.92 million in investor funds. The fund buys and holds shares long term, investing in up to 35 publicly listed Australasian stocks, but excluding the top 50 and top 10 companies (by market capitalisation) on both the Australian and New Zealand stock exchanges. In addition to investing in developing companies, the trust may also invest indirectly via developing company funds, managed by Colonial First State (Australia). Individual company holdings are capped at 15%, to minimise exposure to any one stock. Three-quarters of the present 31 holdings are Australian stocks, but the top five investments are New Zealand-based: Sky City, Fisher & Paykel, Waste Management, Baycorp and Tower. Key Australian stocks include Resmed, Lang Corp and Billabong.

Minimum investment: $1000, with regular minimum contributions of $100 on a minimum balance of $3500

Email: amurrell@colonialfs.co.nz

Health care heavyweights

Finsbury Worldwide Pharmaceutical

Since launching in 1995, the trust now has £230 million under management. As a UK-listed investment trust, it provides exposure to the health-care sector. Biotech companies comprise 24% of the portfolio, with the balance in pharmaceutical. Major holdings include Pfizer, Novartis and Roche. Over half (62%) of the portfolio is in the US, 26% is in Europe and the remainder in the Asia-Pacific region. The trust focuses on large companies, with 65% of the portfolio in large listed companies. It is currently trading on a discount of 1% (568 pence) to its valuation. For the December year the trust returned 195%; 65% and 51.9% over three and five years respectively.

No minimum investment: $5000 recommended or $100 monthly, via Craig & Co

Email: cameron.watson@craigco.co.nz

Tapping venture networks

Schroder Ventures International Investment Trust

Invests globally in 25 funds managed by Schroders Ventures, and functions as a fund of private equity. The company's main aim is to provide investors with a diversified portfolio of global private equity opportunities. It does not invest directly in start-ups, but provides access to venture capital opportunities through company expansion, and management buy-out and buy-ins. Historically, investing in private equity has out-performed most stock markets over the long-term. Since its launch in May 1996, SVIT has reported compound net asset growth per share of 23% annually. With many of the 25 holdings still valued at cost, it's understood that SVIT's net asset value remains conservatively stated.

No minimum investment: $5000 recommended

Email: peter.irwin@csfb.com

Mark Story

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