New vs Established Funds

pmjenkins

I've just been e-mailed details of the soon to be launched New Star European Special Situations Fund. Obviously this fund has no track record and I was wondering why anyone would risk investing in a new fund rather than an established fund in the same sector.

On average do new funds perform better while they're relatively small and the management team fresh ??

Paul

gozomark

OK, talking from experience of being a fund manager

the management team is not usually new, but an existing team given a new fund to manage
a new fund tends to have the current views of markets, rather than an older fund which may be a bit stale
a smaller fund is more nimble, but also typically has a higher expense ratio - being nimble can mean higher turnover, which isn't necessarily good (or bad)

whats important is

whats the mandate for the fund ?
whats the track record of the managers on other funds ?

Seemore_2

As the age old advice goes "a funds past performance is no guarantee of its future success", but how many people (myself included ) like to look at a funds track record as a key part of the decision making process before investing?

With regard to this particular fund however, HL certainly rate it and have added it to the Wealth 150 list.

RayWolfe

H-L often do this - recommend a fund with no track record.
I sometimes wonder what's in it for them - is that totally cynical?

amcluesent

>launched New Star European Special Situations<

I hope they are shorting! All the growth is going to be in the Far East.

Jonbvn

RayWolfe wrote: »

H-L often do this - recommend a fund with no track record.
I sometimes wonder what's in it for them - is that totally cynical?

No! Because I also feel the same. As an example they seem to be really pumping INSYNERGY Odey Fund. From their review of this fund manager, you would think he walks on water;)

gozomark

amcluesent wrote: »

>launched New Star European Special Situations<

I hope they are shorting! All the growth is going to be in the Far East.

markets react to the unexpected, not the expected

dunstonh

H-L often do this - recommend a fund with no track record.
I sometimes wonder what's in it for them - is that totally cynical?

New funds often pay a marketing bonus to large firms to do marketing on their behalf. HL do seem to promote an awful lot of new funds when in reality very few new funds actually offer you something that should interest you to put your money in at launch. A niche fund maybe interesting based on future potential. However, an unknown Euro Spec Sits fund is going to be a punt when you know there are already some running which you can assess with real data.

It could end up being very good or it could end up being average or poor. It will be a total unknown. I cannot see how it could suddenly be put in a top150 rated fund list based on so much of it being unknown.

turbobob

dunstonh wrote: »

However, an unknown Euro Spec Sits fund is going to be a punt when you know there are already some running which you can assess with real data.

It could end up being very good or it could end up being average or poor. It will be a total unknown. I cannot see how it could suddenly be put in a top150 rated fund list based on so much of it being unknown.

Totally agree. A lot of people (esp. new investors) see H-L's Wealth 150 list as an assurance of quality or as a recommendation. Seeing as they don't publish any criteria for inclusion in the list, I think a funds inclusion or exclusion from the list should be taken with a large pinch of salt..

RayWolfe

Yep, I suspect that Citywire's managers history rating is a far better assessment of potential (for the historical aspects). And Dunstonh's revelation about marketing bonuses, whilst not surprising is pretty shocking!!
(I don't expect that etymologically speaking I could be shocked without being surprised.)

Primrose

I'm not sure about new funds. Look at the popularity of Invesco Perpetual's High Income Fund. It's been going for years and personally I like the reassurance of knowing a fund manager has a few grey hairs and some long term experience of the market. Would I knowingly give my precious money to some untried manager with no track record? Right now I'm pondering the merit of putting a modest ISA top-up contribution into William Littlewood's Artemis Strategic Assets fund. I fared well with his Jupiter Income fund in earlier years but I think this fund seems a little riskier and I don't really understand why his profile has been so much lower since he's returned to the investment world.