Investment managers Merrill Lynch have launched a new equity fund for charities.
The organisation hopes its UK Focus Fund will woo charities that switched from high-risk equities to safer bonds following the downturn in shares at the turn of the century. The new product invests solely in stocks selected by the fund manager and takes no account of index weightings.
Charles Prideaux, head of equity products at Merrill Lynch, thinks the switch from passive, index-linked funds to the more actively-managed product will appeal to organisations that had their fingers burned by the stock market downturn, but want a way back into equities.
"As a traditional UK active manager, the UK Focus Fund allows us to use the breadth and depth of our research and investment skills to selectively choose a smaller amount of stocks that we believe will significantly outperform the FTSE All Share in the medium term," he said. "Historically, clients have measured performance and risk versus a generic index. This meant that an active manager was not in a position to deviate significantly from the index weightings in order to restrict volatility of returns relative to the benchmark."
Prideaux conceded that actively-managed funds could be volatile in the short term, but said the fund manager's expertise should pay dividends over a three to five-year period.