Managed funds quarterly: miserable 2008 for international funds
1 March, 2009Singapore: Will Temasek change tack?
1 March, 2009ROADTEST
Colonial First State Geared Share Fund – Aussie shares with leverage
Performance
Hideous. When you invest in a geared fund, both the profits and the losses are magnified. That’s great in the good times but these, you will have noticed, are not the good times. CFS says the fund returned a 65.13% loss in 2008; Morningstar says 61.55% in the 12 months to January 31. That’s actually nothing unusual: there are geared share funds from BT, AMP, Ausbil and Perpetual among others and none of them look pretty now. You have to go back five years for this fund to show a positive annualised return, of 5.98% a year.
Holdings
It’s mainly the big blue chips. As of November 30, the last time they were disclosed, BHP Billiton accounted for 14.93% of the fund, with big holdings in all four big banks, Telstra, Woolworths, QBE, Westfield and Wesfarmers, with those 10 accounting for well over half the fund. Above average holdings include consumer discretionary and media stocks such as Harvey Norman, Fairfax and Tatts Group.
Experience
The fund is managed by the Colonial First State team, who between them number 300 investment professionals with Aussie equities a clear area of strength. As for the gearing, CFS says all borrowing costs are met out of net dividends, and that the gearing is reviewed daily.
Fees
In the wholesale version – the one you’d likely access through a platform – the fee is up to 1.03% of gross assets or 2.08% of net assets, in which net assets excludes the fund’s borrowings. If bought through a platform, the platform will levy a fee of its own.
Gripes
Well, the obvious one is that it has tanked. But if you were looking to enter the market today, would this be the way to do so? If we’re past or near the bottom, then very likely – you’d get the whole rebound plus leverage. But if not, you’ll continue to lose even more than everybody else.
Verdict
Performance numbers look terrible at the moment but don’t be surprised if funds like this are at the top of the tree within a year or so.
