IMA Specialist sector: What the papers say

As the price of gold threatens to go ever more ballistic, it is not surprising that among the non UK equity focused IMA sectors Specialist constituents come in a close third after Asia Pacific ex Japan and Europe ex UK as being of interest among Trustnet portfolio users. Two of the most visited fund factsheets on Trustnet are in this sector, focused on gold and natural resources, while the list of best performers across all sectors in the past year include a number of Specialist funds.

However, it is a heterogeneous area, and this month we speak to managers and intermediaries, as well as looking at the performance data of constituents, to seek out comment on the multiple investment ideas on offer.

Adam Lewis, Deputy Editor, Fund Strategy

"The Specialist sector has always courted controversy owing to the various mix of funds it contains. In 2006 and 2007 the sector was the top selling IMA peer group in net retail sales terms, primarily because of the popularity at the time of commercial property funds which at the time were contained in the sector (at the start of this the IMA separated out these funds when they created a separate Property sector). The sales of commodity funds also boasted the sector’s popularity.

The whole point of a peer group is to allow advisers/investors to be able to make a meaningful comparison of funds. So when one sector contains funds investing in agriculture, BRIC (Brazil, Russia, India and China) commodities, financials, gold, healthcare/biotech and Latin America, to name but just a few, you have to question just what you are comparing. It has lead many advisers to brand the sector useless.

The problem is, the IMA cannot makes sectors for absolutely every asset class, so those asset classes with just a few funds tend to get thrown into the Specialist category. It does also often mean that the best performing fund of any year comes from the Specialist sector.

Richard Eagling, Editor, Investment Life & Pensions, Moneyfacts

"In the world of investments taking risks can sometimes bring spectacular rewards as demonstrated by the Specialist sector in recent times. Although analysing the Specialist sector and predicting future trends remains a difficult task due to the diverse range of funds involved it is clear that many of these funds have done exceptionally well in the recent market upturn.
Funds investing in gold, mining and precious metal-related shares or that focus on Latin America have led the way over the past year and delivered excellent performance over a three year period.

There are a number of Specialist funds that centre on a specific emerging market, and of these regions Latin America still merits a closer look. According to the International Monetary Fund (IMF), Latin American companies are already recovering from the global recession, with growth of about 3 per cent forecast for 2010.

In addition, the long-term case for investing in the region remains compelling. Favourable demographics should provide many of the Latin American countries with a larger and more productive workforce in the future, whilst the region is rich in natural resources. Many Specialist funds may have already staged a strong recovery, but there is still further future growth to be realised."

Martin Wood, Senior Analyst, Financial Express Research

"Regrettably, this is something of a "dumping ground" for funds that people are not sure what do with. In this grouping, we can find single-country funds alongside biotech and healthcare specialists, and those that focus on agriculture, natural resouces or infrastructure.

This makes any overall sectoral analysis difficult, if not downright misleading. I would urge the IMA to bring some refinement to this category - after all, the trade body still carries some sector classifications that are all but moribund through lack of members, and would not presumably object to creating a group of smaller sub-sectors to accommodate the disparity that exists in this one.
As it stands, investors would be better advised to start from their specific area of interest and take their researches from there deeper into the individual funds that appear to match the initial criteria."

Click here for IMA Specialist sector: Sector overview

Click here for IMA Specialist sector: Fund Managers' viewpoint

Click here for IMA Specialist sector: IFAs' viewpoint

Click here for IMA Specialist sector: What the papers say

Click here for IMA Specialist sector: First State Indian subcontinent fund