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Gartmore loses focus

When I was a reporter, press day at Money Marketing was a fun-packed affair. It helped if we had a ready-made splash by the time we arrived at the office on a Tuesday morning – a decent story that financial advisers did not know about and one that would beat our rivals hands down.

But one day in the autumn of 1999, we were struggling. Our lead fell through at the last minute and we had a gaping hole. We manned the phones and a couple of my colleagues bagged a story, which topped the front page. The headline read “Gartmore poised for £450m MBO to keep staff”.

The MBO failed to materialise but the story was about Gartmore and that was an excuse to put it on the front page.

Here was a firm whose ownership was in doubt and one that was a huge favourite with financial advisers. It was right up there alongside Jupiter, Invesco and Fidelity as one of the leading lights in the fund management industry.

But Gartmore has long since lost its aura and you wonder whether the Gartmore name will soon disappear and join other fund management brands that have been consigned to the dustbin of history – names such as New Star, Mercury Asset Management and Johnson Fry.

The company has endured a rollercoaster decade, undergoing a number of changes and losing key personnel. But perhaps the only reason for its survival so far has been the loyalty of Roger Guy, its formidable fund manager. Most groups can withstand losing the odd decent fund manager but Guy is to Gartmore what Neil Woodford is to Invesco Perpetual. His forthcoming departure could be the straw that broke the camel’s back.

It had all looked so different in 2006 when an MBO did actually take place. It had been hoped the change in ownership would re-energise and stabilise the company – it has done anything but. A disastrous float and the investigation into fund manager Guillaume Rambourg this year rocked the outfit and you wonder now if there is any way back.

But perhaps we should not read the last rites just yet. Let’s not forget, Gartmore has had its moments of inspiration. It put focus funds on the map and, long before Ucits III came of age, introduced a performance fee, hitherto the domain of the investment trust world.

It was not an ideal fee structure – the annual management charge was lifted from 1.5 per cent to 2 per cent if its focus funds deliver first-quartile performance – but it was a step in the right direction.

It also offered the fund that can boast the best return out of all funds over the past 25 years – China opportunities. Remember that Gartmore was punting China long before any of its rivals and it has returned more than 4,000 per cent since 1985.

But herein lies the problem for Gartmore and why it has such a mountain to climb.

Its China fund is no longer top of many advisers’ recommended lists despite its stellar performance. And with Guy now departing, there is little incentive for advisers to recommend Gartmore. Many have already ordered a sell on his European absolute fund.

The group’s overall performance has not been the worst but neither has it been spectacular, which it needs to be if advisers are to overlook all the uncertainty.

Just two months ago, Phil Wagstaff, Gartmore’s head of distribution, was reported as saying the company was increasing its advertising, marketing, event and public relations spend in order to “restate its positives” of “talented managers and good performance”. Given the circumstances, you wonder whether it is money well spent.

Paul Farrow is personal finance editor at the Telegraph Media GroupMoney Marketing

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