Global sector funds may be the flavour of the month for funds management marketeers, but there is a limit to the number of sectors that can be realistically used.
Sector specific funds have been the killer products of 2000. About half a dozen of Australia’s biggest fund managers launched technology funds earlier this year to capitalise on the hunger for these funds by Australian investors. Funds from Colonial First State and BT have collectively raked in more than $400 million from scratch in a year that has seen a marked fall from grace for technical stocks around the world.
Other global sector funds, such as healthcare and consumer brand name, funds
However, Invesco’s UK-based investment director Richard Beggs warns managers contemplating rolling out global funds in sectors across the board that there is often no correlation between a sector in one region and another.
“Retail stocks, for example, have very little correlation across the regions,” Beggs says. “In fact only a handful of sectors can be analysed around the world.”
Other sectors that have low correlation around the world include construction, food and small to medium sized countries.
However, Beggs acknowledges that regional funds are becoming less relevant in an increasingly global world economy.
“The best companies are not in any one country,” Beggs says. “So it is becoming increasingly difficult to add value by making bets on regions.”
And the size of some of the world’s leading companies has blurred the lines between making bets on countris and making bets on sectors or stocks.
“For example, if you buy Nokia, you are buying a large proportion of the market capitalisation of Finland’s stock market. The question you ask is are you buying Nokia the company, Finland the country or Nokia the telecommunications leader.”
However, companies like Invesco will continue to make asset allocation decisions based on regions. At the moment, Invesco is taking a benchmark stance on the US but is slightly overweight in European funds based on recognition of present opportunities.
“The European economy has massive opportunities at the moment if government and business do what they promise to do,” he says.
“Tax reform is not quite there but has started. Earnings growth is not yet robust but is expected to be strong.”
AXA, Thornton deal
AXA has signed a deal with US-based accountants Grant Thornton to offer financial planning services to its business clients. Under the deal, Grant Thornton and AXA Financial will each own 50 per cent of a new entity, called Grant Thornton Advisors. According to US-based Financial Planning magazine, the new entity will use planners from AXA’s US-based subsidiary, AXA Advisors, to provide clients with personal, estate and retirement planning services. Clients will also be provided with insurance and investment products.
E*Trade in Europe
Online broker E*Trade, is in talks with European retailers about opening investor centres within stores. The talks are in line with the US broker’s plan to expand its technology investment in Europe. E*Trade has already started planning a large investment at its new technology centre in Dublin, Ireland. The group is hoping that the Dublin centre, which hosts the technology for its operations in Sweden and Norway, will eventually be used to host all the technology for its European operations.
World first active ETF
DWS Investment has developed the world’s first actively managed exchange traded (ETFs) fund. The German retail funds manager has listed an initial 11 so-called trading funds on the Frankfurt-based Xetra exchange. The funds cover industry sectors including biotechnology and internet industries and regions including Europe and Asia.
News off the street
Popular online financial news service, TheStreet.com, has severed ties with the New York Times and shut down its UK operation. The loss of the UK and US operations is part of the group’s dramatic recovery to save the company a reported $US18 million over the next year. According to a Wall Street Journal report, TheStreet.com has been forced to address problems associated with disappointing volumes of traffic to its site just as it switches from a subscription-based business model to an advertising-driven model.
Egg on their faces
Prudential’s online subsidiary Egg is considering abandoning its Internet-only strategy by setting up a network of branches. The new stance marks a major shift from the days when the group sought to be exclusively internet-based. The move makes Egg the latest in a series of internet-only companies – including most recently US-based stockbroker Charles Schwab – to concede that a mainstream presence is important.
