The argument surrounding active versus passive investment funds has raged for many years and shows no sign of abating.
In fact, those in the passive camp are now arguing among themselves as to whether conventional market capitalisation-based tracker funds provide the most effective method of obtaining returns from stock markets.
Rob Davies, managing director of Fundamental Tracker Investment Management (FTIM), runs the Munro Fund.
This tracker fund seeks to deliver the total return of the FTSE 350 index by using forecast gross cash dividends to construct the portfolio.
Mr Davies said: “We ignore the share price and look at the fundamentals, like the financial statements. We look at each company’s total forecast dividends in monetary terms and aggregate them to gain a total for the index, which is circa £70billion. Then we buy each company in proportion to the percentage of the total dividend of the index.”
The Munro Fund was launched in September 2007, which as the manager says was a challenging time to launch an investment fund.
To buy all the constituents of the FTSE 350 index, the fund needs to grow to about £5million. FTIM has attracted £1.5million so far and therefore has exposure to 108 companies in the index.
The fund sits within the IMA UK All Companies sector, but comparisons to other funds are of little merit.
When compared against its benchmark index, the FTSE 350, the fund has grown by 17.45% over the past 12 months, lagging the index by 8.89%.
For more information about the Munro Fund call 0141 931 7645 or visit www.fundamental tracker.com
Barry O’Neill is a chartered financial planner with Thomson Shepherd and can be contacted on 01224 619215