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Firms pin retail market hopes on the long term

Even before the terrorist attacks in the US this month, analysts across the globe were warning of the distinct possibility of an imminent recession.

But while retail investors have clearly heeded their warnings – with investment sales continuing to fall month on month – the number of pro-viders making a serious play for the UK retail market con- tinues to increase.

Following the launch of John Duffield&#39s New Star Asset Management in July, foreign or institutional providers have since been queuing up to announce their imminent launch or relaunch into the UK retail market. Here are just a few:

Friends Ivory & Sime is to rebrand as Isis and launch a range of new retail funds over the next two quarters.

Colonial First State Investments has rebranded under the First State name using resources from parent Commonwealth Bank of Australia. Consolidation and new funds are all on the cards for the next six months.

Institutional giant Philips & Drew has recruited Graham Kane of Morgan Grenfell to head its move into the retail sector.

US fund giant Massachusetts Financial Services has set up a London office for its launch into the UK.

As revealed in Money Marketing two weeks ago, institutional player Orbitex says it is to enter the retail market this autumn.

In a market which most people see as already inundated with providers and their funds, the short-term logic of the new entrants is hard to see. However, most are gambling on the longer-term restructuring of the UK retail arena.

With the UK pension industry undergoing a full-scale review, the hope is that something along the lines of the US&#39s 401k plan will emerge, bringing retail investment to the forefront of everyone&#39s minds.

Certainly, consultations such as the Treasury&#39s Savings & Assets For All, look set to result in further moves to promote an equity savings culture in the UK.

Orbitex chief investment officer Robin Geffen says his firm&#39s retail offering will be aimed to suit more sophisticated UK investors.

He says: “I think the retail market is going to become much more sophisticated and we are very keen to bring the level and depth of analysis which has been seen on the institutional side – particularly in terms of risk reporting – to the retail market.

“Bringing more clarity to the retail market is a worthwhile cause. The 401k plan has focused people on investment performance and manager ratings and people have got a lot more savvy because of it. I think that is the way it will go over here as well.”

Orbitex has reasonably modest short-term aspirations in the UK market and has the added comfort of knowing that its launch was partially driven by calls from IFAs to open up its strong institutional performance to retail clients.

But most of the new ent-rants or re-entrants are by no means so modest in their aims. New Star, First State, Isis and Rothschild are all aiming to become big-name players in the retail market over the next few years although surely they will not all succeed.

Simpsons partner Andrew Merricks says: “I cannot stand all these companies that redesign themselves, give themselves a new name and pretend they are something different to what they were before. I am also sceptical about all the overseas companies that all say they are the biggest in their industry back home.

“Something like New Star, I am happy with. There is a reason behind it, a rationale and a history if you are willing to look for it. We just try and take a look at all these new firms and see if there is anything different.”

Plan Invest joint managing director Mike Owen says: “In this market, there is not room. No matter what people are saying about sitting tight, there is obviously a buyers&#39 strike on at the moment, as the Autif figures show. But these companies are taking a much longer view. Aas the pension market expand over the next few years, fund management companies are going to be the main beneficiaries.

“In the short term, how-ever, it is going to be indigestion. Surely there are too many people chasing not enough money. There is going to be a lot of work for these new entrants to do and I do not think it is a trend that is ending. I think the life companies will be looking at the success of CGNU and Royal & Sun Alliance and will be thinking that they want a bit of the action as well.”

While pension reform is likely to play a big part in expanding the UK&#39s equity investment culture, there is one other major factor which could completely change the whole picture and yet most fund managers seldom mention it – polarisation.

The introduction of a fully multi-tied environment would make it increasingly difficult for new players to take a grip on the market and would inevitably lead to much more consolidation in the UK investment industry.

The smarter ones are alr-eady making efforts to befriend the bigger distributors, with New Star having instantly linked up with Skandia, and others making an effort to get their funds on the new supermarkets.

If the adage that you have to be big or niche to survive holds true, then some firms which look likely to be neither are going to have to do a lot of work to find a place for themselves.


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