Scotland's fund management industry is increasing by the minute and it is
now one of the biggest centres in Europe. Which investment houses do you
rate and why?
MD: Britannic have been my long-term favourites. They have an excellent
track record across a range of funds. A genuine team approach seems to have
paid dividends for them. The other two I also like are Ballie Gifford and
Martin Currie. All three are pure investment houses. I am far less sure of
the major insurance companies in Scotland who still seem not to have got
their act together.
GH: My favourites include Britannic, Aberdeen and Scottish Equitable. They
all have consistent performance, good management and risk control.
SD: There is certainly an interesting mix of investment houses based in
Scotland. We respect firms such as Baillie Gifford, particularly in the
investment trust area, Glasgow Investment Management for their
income-oriented funds and Aberdeen for their fixed income and technology
Last April, the banks and building societies got ahead start on IFAs on
selling Isas. Why do you think IFAs got off to a slow start and do you
think they will be quicker off the starting block this year?
MD: I think IFAs initially thought them very complicated and waited for
things to settle down. At the time, Cat Isas were only just coming out so
IFAs also had to wait to see what the full range would be.
I think it will be different this time. Both investor and IFAs are now far
more familiar with the product. In addition most of our clients wish to do
a maxi Isas, which are effectively the same as Peps but with a wider
GH: I think IFAs were over-concentrating on the end of the Pep season and
thought Isas were going to take longer to establish then they did. Having
seen how well Isa sales have done this year, I think most IFAs will be very
well aware of the opportunities, even allowing for recent market
SD: The banks have huge distribution capability at a product-selling level
that is still growing. They will continue to capture market share in Isa
sales, however, while many IFAs still feel the product is unnecessarily
complicated they are stuck with if for the moment and I am sure sales will
The old v new economy argument is flavour of the month. But do you think
the old economy stocks' recovery can be sustained over the long term and
not just in the next six months?
MD: Perhaps real economy stocks would be a better phrase. Many of there
stocks will actually benefit from the internet once they get their act
together. However, in a low-inflation and lower-growth environment, a
premium will usually attack the quality growth stocks. So although I feel
that value/ real economy equities should bounce back, possibly when we see
internet rates peak. I still firmly believe the long-term story is in the
GH: I think they both will. The old because they have been oversold and
there seem to be some bargains out there. The new because short-term
sell-offs have been swiftly followed by partial or full recoveries. There
will be casualties and the last minute.com situation should serve as a
lesson to all.
SD: Financials and pharmaceuticals are strong medium-term sectors that can
adopt new economy technology and make their businesses even more
profitable. We believe they can deliver sustainable recovery from current
We are much less sanguine about the prospects for transport, engineering
and basic utilities where the basic lack of earnings' growth will hold back
The likes of Jupiter and Aberdeen (with the Boat Race) have poured money
into big advertising campaigns. Do you think that advertising pays?
MD: Jupiter was unheard of six years ago. Great investment performance
coupled with advertising has definitely helped. Name-awareness is extremely
helpful but takes long periods of advertising to achieve. Sponsoring the
Boat Race should help, after all, it was watched by over six million
One of the most successful groups has been Scottish Widows, its brand name
was what made it so attractive to Lloyds – a long-legged widow can be
GH: Yes, but not by itself – ask Perpetual. Advertising only pays
commercial gain if the rest of the provider's proposition stands up to
scrutiny – that is, performance, brand, charging structure, the actual
proposal being advertised, name awareness, etc.
SD: Mutual funds are increasingly commoditised products that can be sold
into a massive retail market. As such, brand and name awareness are king
and advertising is essential if you are or wish to become a major player.
Major groups do not make annual seven-figure advertising commitments
without measuring the success rate very carefully.
Fidelity is starting to flag its forthcoming fund supermarket. Are you
gearing up to use a supermarket which pays commission and do you think it
may take time before IFAs embrace the technology?
MD: We believe we are a supermarket in our own right. We don't need to
become a tied agent of Fidelity. GH: Supermarkets will play a significant
role for investors in the future. The only way ahead for most IFAs will be
to use some else's technology. I think they will take longer to establish
than some optimists think and how many fund supermarkets can the UK
SD: We believe the major buyers of funds have a very simple requirement –
a one-stop e-shop where we can buy and sell units of any fund offered by
any management group electronically. The engineering of such a system will
be the challenge, not the technology to access it.
Autif believes 20 per cent more people are buying direct equity Isas. Have
you seen a shift in attitude and if so, why?
MD: We have seen a big shift into our self-select Isa.
I believe this is because more people are buying equities and, given the
huge gains seen in tech stocks, it makes sense to buy them under a
GH: We haven't but it could be that investors have become more confident
as a result of more bullish markets in the recent past and have decided to
invest in direct equity Isas.
SD: I am sure that direct equity Isas are more popular and suspect there
are two key reasons for this. The retail investor in the UK is maturing
from buying a series of funds within their Peps to understanding the equity
market sufficiently and having enough money to want some direct equity
exposure. Furthermore, the bull market in technology has created a new
generation of investors who are using equity Isas to access new
Mark Dampier, Head of research, Hargreaves Lansdown
Graham Hooper, Investment director, Chase de Vere
Simon Davies, Investment manager, Berry Asset Management