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F&c faces a fight against the flow

IFAs are concerned over F&C after a Morgan Stanley report predicted an outflow for the firm of 3bn in assets under management this year after it saw an outflow of 4.7bn last year.

A 25-page Morgan Stanley report says F&C has suffered following its merger with Isis last October when it cut managers in a bid to achieve savings of 33m – 20 per cent of the combined group’s costs.

On the retail side, the Morgan Stanley report says unit trust sales have moved from an 85m net inflow in the first half of 2004 to a 44m net outflow in the four months to October 2004.

The report comes as F&C appoints Brian Larcombe and Philip Moore to the board as non-executive directors.

Larcombe joins after recently retiring as chief executive of the 3i group. Moore is group finance director and a member of the board of Friends Provident, F&C’s majority shareholder.

F&C has lost managers such as Mike Felton, the group’s UK equities star performer. The firm says it cannot comment on outflows until March when its results are published.

Hargreaves Lansdown head of research Mark Dampier says: “The competition is huge and it is no good being in the top quartile. They do not have what I would call a knock-out fund or a killer application. I do not need to buy any of their funds.”

Alan Steel Asset Management joint managing director Alan Adam says: “I would not be surprised if morale had gone down following a few high-profile defections.”

F&C director Jason Hollands, said: “It is pretty difficult to name any company that has a must-buy fund. Currently, however, we offer very strong propositions in the areas of ethical investment, venture capital, bonds and multi-management.

“I would say that morale has improved significantly in the last three months. In any takeover, people are going to be made redundant and that will colour their views.”

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