Portfolio management is no longer the preserve of the very wealthy. But does it really suit the smaller investor?

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The Independent Online
You used to need at least pounds 100,000 if you wanted savings invested for you. But fund managers are now increasingly offering the service to those with as little as pounds 10,000 to invest.

In January, Rothschild Asset Management launched its Private Portfolio Service, offering savers with pounds 10,000 a choice of four investment strategies. New money is coming in at the rate of pounds 1m per week. Mercury Asset Management, which already has the largest portfolio growth fund, has seen its income portfolio take pounds 15m since its launch in August 1994.

Schroders is considering launching an all-encompassing portfolio fund this year. It will include fixed-interest securities and cash as well as equities, and will be aimed at "the investor who wants their savings to be conservatively managed and safe". But can you really get a pounds 100,000 service for one-tenth of the price?

Although private portfolio funds are marketing themselves as suited to the personal requirements of the investor, do not expect a portfolio individually tailored to your idiosyncrasies, or indeed a stockbroker to talk to you every day. What you may be offered, and this varies from fund to fund, is a choice of investment strategies, ranging from simple income/growth to up to four variations on this theme. Your pounds 10,000 is then pooled with your co-investors' savings in a unit trust.

Most of these unit trusts are funds of funds. The investor is exposed, therefore, to a double tier of charges: first, to the entry and annual management fees of the portfolio fund unit trust, and, second, to the same fees for the sub-trusts the portfolio fund has bought into. So the performance of the underlying stocks is trimmed twice. Rothschilds is adamant these charges are easily outweighed by the benefits. "The size of our funds, currently over pounds 100m, gives us significant buying power, which enables us to achieve significant discounts. This makes our performance more effective,'' says William Ramsay. "We are also providing a service. We administer all funds, carrying out asset allocation and fund selection; we handle all the paperwork and provide detailed six-monthly reports for the clients and their advisers, together with a helpline for investors."

Richard Clarke of MAM insists portfolio funds are more than just re-packaged unit trusts. "The Portfolio Fund replicates what would be a typical asset allocation of a UK-based client with assets of pounds 250,000 or more. The range of investments is generally wider than other unit trusts. The Portfolio Fund is aimed at the person who wants to put money in and forget about it. It is lower risk than most other equity funds and, although equities form the core, there is also a cash element. You also get quarterly, and not half-yearly, personal statements."

Rothschilds says its private porfolio service is not a simple fund of funds but a tightly automated investment structure. Each of the investment strategies involves appropriately weighted investment in sub-trusts concentrating on particular geographic investment areas.

Holden Meehan, the independent financial advisers,looks favourably on portfolio funds. "They provide a mini-stockbroker service," says Mark Dear. "You would otherwise need pounds 100,000 to get a sensible spread of investments. If you have got pounds 100,000 or more then you can go for a personalised Rolls- Royce service. If not, then these funds are very useful.''

Graham Hooper of Chase de Vere recommends approaching these funds with a balanced overview. "It is not a good idea to put all your money in one fund. Every fund goes through its good and bad times. A sensible approach would be to invest in two or three funds of this type.

"These funds are re-packaged unit trusts,'' he says. "If you are not following the markets from day to day, then portfolio funds provide bona fide quality management at a reasonable price. You also get the merchant banks' asset allocation, which it is difficult to get hold of otherwise. It is one-stop shopping for the investor."

For example, the MAM portfolio is invested in over 180 different stocks. Even if you could identify the portfolio yourself, which is highly unlikely, dealing charges would go through the roof. The portfolio funds' size means dealing charges are relatively cheap.

Portfolio funds can be a good idea for the big money, as well as the smaller investor. As the investments are in unit trust form, there is no exposure to capital gains tax when moving stocks. MAM has one client with more than pounds 2m invested in its Portfolio Fund.

Before you invest

Make sure you get independent and ongoing financial advice. While you do get regular reports with a portfolio management service, it can be difficult to gauge the fund manager's performance.

The annual report of the fund should show how your money has performed against a typical building society account, inflation and the various stock market indices.But it will not compare the performance with that of competing funds. Unless, of course, you happen to have chosen the best- performing fund.

The main players

Fund Min

Investment

(pounds )

Friends Provident 10,000

HTR 25,000

Mercury Asset Management 10,000

Morgan Grenfell 25,000

Rothschild Asset Management 10,000

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