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Investment view

Last week was an IFA sort of week really. I had attended, admittedly at the end of the week before, one of Graeme Caton&#39s excellent mini seminars where four investment trust managers are invited to explain about – and plug a little – their own trusts. It was heartening to see the level of support this particular event enjoyed – and there were plenty of IFAs as well as private client stockbrokers in the audience.

Then there was the last of this year&#39s AITC forums. It was a memorable event in more ways than one. Next year the association will be a little less visible in its mission to promote the investment industry&#39s oldest collective product. Gone are the television advertisements (for which at least some will be thankful) and there will be just five forums around the country – half this year&#39s total. If you have never attended and have the chance, do go.

And last, but by no means least, IFA Events held one of its conference/exhibition extravaganzas in Edinburgh. I am a great fan of Geoff Chown, IFA Events boss. He has an energy and enthusiasm which, if translated into an investment fund, would surely deliver first-quartile performance.

These events are not only about investing but I am usually heartened at the level of interest my world attracts. Investment question time was more sparsely attended this time but having needed to spend time bringing myself up to speed for the new compliance regime which looms just over the horizon, I wonder at anyone seeking to embrace the world of investment advice.

Markets are so volatile that investment managers are kept on their mettle all the time. Fund marketing departments are under constant pressure to come up with new ideas or themes that will grab the attention of the investing public. One recent interesting proposition – put forward not by a fund manager but by a broker (presumably seeking fund managers&#39 business) – was the coming mergers and acquisitions. You only have to read about the lay-offs in the investment banking world to realise that a M&A boom is something we most definitely do not have at present.

There is some activity around – indeed, the profile of some of those engaged in corporate snakes and ladders is sufficiently high to suggest that the value of current takeover bids is greater than it really is. The truth is we are a long way from the bonus-enhancing wheeling-and-dealing days of the 1990s.

But they will return, according to this report. They looked to the last recession, back at the beginning of the 1990s, and the way in which the bull market developed then. Restructuring was the name of the game and it led to a bonanza for the corporate finance departments of the investment banks. The corporate reasoning behind the boom was clear. In recession, margins come under pressure. Restructuring – through that wonderful word synergies – is a way of rebuilding profitability. Buy your competitor or supplier and see if you can cut costs and deliver shareholder value.

As yet I am not aware of any funds specialising in corporate restructuring but no doubt someone will find a way of bringing one to the market. Back in the old days, when volatile was a word used in school textbooks to describe the behaviour of sulphuric acid, we used to say you should never buy a share purely on takeover speculation. “Where there&#39s a tip there&#39s a tap” was a popular expression – someone tipping shares on bid rumours may well have stock to sell. Investors are more sophisticated these days, so fooling them is not so easy. It is not impossible, you merely have to try harder. And I have little doubt that we will see increased M&A activity. Indeed, some of it may well occur among investment trusts and fund managers. Now, there is a thought to conjure with.


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