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Boutiques are in fashion with IFAs

ABN Amro is the new champion of the IFA sector, having unexpectedly trounced fund giant Fidelity in a survey conducted by Keydata.

The survey, carried out among more than 500 IFAs in August, asked them to list the top five Isa funds they are currently recommending. Keydata then took the top recommendation from each IFA to compile its Isa provider rankings.

While Fidelity, which topped the previous survey in February, had slightly increased its share of the vote, ABN Amro almost doubled its share to claim the top spot.

Over its short existence, the Keydata survey has become the poll that the UK&#39s biggest fund managers love to hate. Major names such as Threadneedle, Gartmore, Schroders and M&G all fall well below their expected positions, while smaller players such as ABN Amro, Newton and Artemis have all made it into the top 10.

The Keydata rankings may bear little resemblance to the Isa sales tables but they are without doubt a useful guide to which fund firms are in favour and which are not. With fund managers reluctant to release “commercially sensitive” sales figures, the survey is one of the few indicators as to how firms are really faring.

It is clear that some or even most of the shifts in favour have resulted simply from changing market conditions. Predictably, sales of fixed interest and equity income funds rose relative to more aggressive growth funds during the six months between the February and August surveys. So fund houses with expertise in the right sectors will have fared better.

Figures from Autif show that UK equity income was the fourth most popular sector in August, up from eighth in February. This will undoubtedly have been the reason why Credit Suisse Asset Management was propelled from outside the top 20 to 10th in the latest survey.

Its flagship income and monthly income funds, managed by Bill Mott, have been among the best performers over the last 12 months and have taken over £100m between them in 2001.

Yet the global economic outlook in August was not a million miles apart from February. Interest rates and equity markets were falling and investors were wary of the possibility of an imminent recession. As a result, the shifts in favour demonstrated by the latest Keydata survey cannot be blamed solely on changing market conditions.

Perhaps the Keydata tables are showing the first indications of which fund managers are successfully weathering the longest bear market for almost two decades and which are not.

Invesco Perpetual is perhaps the survey&#39s biggest casualty, registering only 7.4 per cent of the vote in August. Perpetual, once known as the king of the Pep market, received 3.8 per cent of the vote in February while Invesco took 6.95 per cent. But with the two companies now fully merged, the combined share is down 3.35 per cent.

This must in part reflect a bad six months for the firm in terms of news flow and an increasing concern among IFAs it is in danger of losing several managers once its lock-in clauses expire next year.

At the start of November, one of the UK&#39s biggest investment IFAs, Hargreaves Lansdown, put the firm&#39s entire fund range on hold for new business and it would seem that many other IFAs share these concerns.

Gartmore and Norwich Union are two other providers which have fallen sharply out of favour since the start of the year, both losing more than 2 per cent of the vote in the Keydata poll. Other giants such as M&G and Schroders are still lagging in the mid-teen rankings.

Hargreaves Lansdown head of research Mark Dampier says: “M&G&#39s position shows that, once you lose market share, it takes a long time to get it back. It is the same with Schroders.

“I think Schroders has had quite a good year but it will take a long time before that starts to work back through into the IFA market. Once you lose it, it can take three or four years to get it back again.”

For the smaller firms, there is a lot of encouragement to be found in the results. Having achieved £1bn under management, ABN Amro is reported to be taking as much as £1m a day and has now long shaken off its reputation as a boutique investment house.

Newcomer New Star has shot straight in at number 11, while Exeter, which has only £50m of Isa money under management is once again just outside the top 10.

Exeter marketing director Philip Thitchener believes the landscape is slowly starting to change in favour of the smaller houses. He says: “This goes to show that if you are big, you are not necessarily going to get a lot of support this year. IFAs are thinking carefully about where they put their clients&#39 money.

“In years gone by, a lot of marketing clout was given by the big firms to the funds in fashion but I think IFAs have learnt their lessons from those days.”

While it is not yet certain that there will be much of an Isa season this winter, it would seem that the uncertainty of the bear market has not sent investors seeking the safety of the bigger names. What money does flow into the market may well head to some of the smaller providers.

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