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Julian Gibbs

At the time of writing, the Sandler report has only been out for an hour, so I have not read it thoroughly. My first impression is, however, that if these proposals are implemented in full, the financial services industry in this country will contract to such an extent that it will be difficult for people to get proper advice and competition will be much reduced.

There is certainly a place for tracker funds and, on the whole, they have performed above average over a period over five years or more. However, as a recent Citywire survey pointed out, the best fund managers outperform both their benchmark index and the sector average. For example, I would rather be invested in Roger Guy&#39s Gartmore European select opportunities fund than the Gartmore PSF index fund.

Over 10 years, Guy has achieved a return of 426 per cent compared with 232 per cent for the tracker fund – although that is still above average.

So, Ron Sandler is quite right in saying that the likelihood of above-average performance is clearly there. It must be remembered, however, that because of their charges, albeit low, funds which truly track an index – and many of them do not – are guaranteed to underperform the index over a longer period.

Over 10 years, Gartmore&#39s index fund produced a return of 141 per cent compared with the FTSE All Share return of 154 per cent and the average return of 134 per cent.

I believe that following the best investment management teams is likely to produce much better returns, especially if investors&#39 money is allocated between geographical areas and different sectors of industry. While I agree with Sandler that simple products should be available, I do not believe that these will be the best.

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