Disappointed Telecom Eireann investors should consider buying unit funds with their returned monies, the Irish Association of Investment Managers (IAIM) said yesterday.
An estimated £400 million is available for reinvestment by individuals following over-subscription of Telecom Eireann shares and the expected sales of stock acquired, according to Mr Pramit Ghose, chairman of the IAIM retail funds committee. Based on figures provided by Goodbody Stockbrokers, £3.1 billion was committed by individuals for Telecom Eireann shares and £1.8 billion was purchased, meaning that £1.3 billion is being returned to investors.
Other options available include a return to deposit accounts with rates under 3 per cent, using a stockbroker to buy another share - or shares - or spending it, said Mr Ghose.
The negligible returns on deposit accounts mean investors are looking elsewhere, according to the association. It says the risk associated with investment in a single share is prohibitive and unit funds reduce this risk through diversification. Unit funds are pooled investments that diversify monies over many shares, sectors and geographic regions. Unit funds offered by IAIM members sometimes include more than 100 or more stocks, says Mr Ghose.
These products are also efficient in terms of stockbroker commissions, banking transactions, dividend collection and taxation, according to IAIM. Tax is paid at the lower rate of 24 per cent, which greatly benefits those in the 46 per cent tax bracket, said Mr Ghose.
Irish fund managers have outperformed the local index and have a good investment record in international markets, he says.
To illustrate returns on various investment instruments, IAIM compared five-year representative returns to July 30th. With profits funds had a 9 per cent annualised return; managed funds 14.5 per cent and equity funds 16.7 per cent. Deposit based products returned considerably less on an annualised basis, with building society deposits at 2.4 per cent and post office deposit accounts at 5.6 per cent. All figures are net of tax and management charges.
The IAIM believes the Telecom Eireann IPO and low-interest rate environment are stimulating demand for unit funds.
Unit funds are available from authorised insurance and investment brokers, bank and building society branches and IAIM members. Members involved the retail savings market are: AIB Investment Managers, Bank of Ireland Asset Management, Canada Life, Eagle Star, Friends First, Guardian, Guinness Mahon, Hibernian, Irish Life, Irish Progressive, Montgomery Oppenheim, New Ireland, Norwich Union, Scottish Provident, Standard Life and Ulster Bank Investment Managers.
