Investors invited to make their cash with style

Style is not something usually associated with fund management. Admittedly, there are several managers with a flair for investing, but on the whole the words dour and dull come to mind.

Style is not something usually associated with fund management. Admittedly, there are several managers with a flair for investing, but on the whole the words dour and dull come to mind.

So the whole concept of "style funds" seems an odd one. However, Chase Fleming Asset Management offers a handful of style funds in the UK and Schroders is set to become the first manager to really bring us the concept of "style investing". On 1 Decem-ber, it is launching seven new unit trusts covering the big markets in the UK, continental Europe, the US and Japan. Investors can choose between funds offering pure growth, pure value or, as is the case with most equity funds, a blend of the two.

The benefit of dividing your investments between growth and value, says Schroders, is to maximise your portfolio's performance. Growth stocks tend to be companies in high-flying sectors like healthcare or technology. These companies, which include semiconductor designer ARM Holdings, are expected to grow rapidly with a high return on capital.

Over the long term, investors in growth funds will get a greater return, along with higher volatility, than if they had invested in value stocks which produce less in the way of absolute returns but also less volatility. Value stocks tend to be cheap compared with the earnings or assets of the company that issues them and the average for the market. Such stocks - the likes of Boots the Chemist - are often out of favour because they are in a mature or depressed industry.

The difference in returns between growth and value stocks illustrates why it is important for investors to have exposure to both kinds. According to Morningstar, an independent provider of investment information, the average return for large-cap growth funds in the US was 31.3 per cent against 9.6 per cent for large-cap value funds, in the year ending September 2000. So to maximise returns, you should not only invest part of your portfolio in a different market, but allocate between growth and value.

"If you only invest in a blend fund, it has to tilt one way or the other," says Robin Stoakley, Schroders' sales director. "By launching pure style funds we will give people the chance to counterbalance their portfolios."

Schroders thinks style funds give investors another option, on top of deciding whether to opt for equities or bonds, geography or themes. Because funds are clearly defined, investors know where they stand, making it easier to build a port- folio with a set amount of risk.

"These style funds will suit clients looking for something a bit different," says Kay Lowe at independent financial adviser (IFA) Equal Partners. "Those who have been building up a Pep and ISA portfolio will see it as another way of diversifying their investments."

Yet not all financial advisers agree. "I think sector funds will continue to be important rather than style funds, as the concept is far easier to grasp," says Donna Bradshaw, director at IFA Fiona Price & Partners. "As there is no track record for the style funds, I think it is a case of 'wait and see'. They might become useful for advisers because they are more transparent when picking certain funds to fit in a client's portfolio. But how many of us will be willing to take the time to explain them?"

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