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Investment view

It had not been a good year for the chairman of Beetlegeuse Investment Funds. Markets in the UK, US and Europe had fallen since the beginning of the year, so the outlook for management fees was worse than it had been for some time. The fact that Japan had gone up was irrelevant as the Japanese fund manager had left to set up a hedge fund operation, taking the bulk of the money he managed with him. Even worse, two of his other star managers had been poached by a rival with a similarly galactic name.

Why, he wondered, did fund management houses choose such celestial titles when they set up in business? Mercury, Jupiter, Neptune – even New Star. There will be a Uranus before you can blink, he thought. Wearily, he slumped back in his chair, reaching for the bottle of 10-year-old Glen Nasdach he kept in the bottom drawer. He needed a reviver.

Of course, if he had set up that buy-to-let Oeic when he first conceived the idea, the money would probably be streaming in. But, no, he succumbed to the ministrations of his chief financial officer, who pointed to the carnage associated with other residential property funds in the past. True, some had succeeded and prospered, but others had found the liquidity constraints too great to continue to operate successfully. Anyway, as his financial guru had pointed out, property had already risen by 50 per cent over a comparatively short period of time. But that was more than two years ago. It was probably up another 50 per cent by now.

Of course, he could always set up a hedge fund operation. Everyone was doing that these days. It was not so much a ploy to sell more investment products, more a means of retaining the loyalty of managers who looked at the opportunity to participate in performance fees as a road to riches. But not all managers were up to running hedge funds – and the best he had employed was already doing that on his own account.

No, it was about as difficult as he could remember in the retail fund industry. True, redemptions were not high but, equally, there was no real flow of new money. Friends in the portfolio management business were telling him that the only client wins they were making were transfers from other managers. Clients were proving less loyal than in the past. New money was staying in cash or chasing property and alternative investments. This was not the sort of background that promised high profits for his company. He was even thinking of no longer entertaining at any of the industry awards dinners he knew would be coming up in the autumn.

On the other hand, by the autumn, perhaps, shares could be on the up. After all, the economic numbers were not at all bad. Looking at forecasts for earnings&#39 growth, both in this country and in the US, analysts were predicting a modest recovery by the end of the year. Next year, they were even more optimistic. In the US, the rebound should be significant – admittedly from a low base. As for Japan, well, with money supply expanding by 30 per cent, Koizumi at last seemed to be pulling his finger out.

Draining the last of his Glen Nasdach, the chairman pushed his chair decisively away from his desk. These were testing times but they were interesting, also. The increasingly open architecture of the retail financial services industry was favouring those who were nimble on their feet. The leviathans of yore were threatened by smaller boutiques, able to adapt to circumstances that were changing ever more swiftly. It was the same in the stockmarket, too. The traditional heavyweight sectors were eroding value but smaller industrial groupings – and many smaller companies, too – were still providing profits for astute investors. The game was not over yet. Perhaps he would book those tables for the autumn, after all.

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