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Moore&#39s code

Holland has been one of the few dark clouds on CGNU&#39s horizon since Norwich Union and CGU surprised many by pulling off their nil-premium merger.

CGNU&#39s Dutch fund management business looked to be going well and promised much for the future. But a cursory glance at the company&#39s recent figures shows sales of equity-linked products in the Netherlands have all but collapsed.

This was prompted by the pronounced bear market hitting share prices some time before the recent stockmarket plunge caused by the aftermath of the World Trade Center atrocity on September 11.

The equity culture in the UK is rather more developed than on the Continent, however. Margaret Thatcher&#39s wish for a “share owning democracy” may not have taken off as she hoped but the British consumer has been saving through stocks and shares for some time. They have been through shakes and wobbles before, notably the 1987 crash, but while the country has not been immune from panic selling, the majority appear to have accepted that shares are a long-term investment and temporary blips can be shrugged off. Until now that is.

Many will not have seen a situation like this since the Opec oil crisis of the early 1970s. While people may have become accustomed to volatility, the true scope of the current situation was not really envisaged by anyone.

Consumers, and their advisers, have been cushioned by a relentless bull market for so long, they appear to have been treating the risk warnings that appear with every equity-linked product in the same way that a 20-a-day smoker treats the health warning on the bottom of a packet of cigarettes. As any patient in a lung cancer ward will sadly relate, it is no good saying “it won&#39t happen to me” because it invariably does. The question for the industry is how to respond.

There is no doubt that the stockmarket will recover from its current malaise. In fact, the last week of September saw it put in its best-ever performance.

The only law the FTSE ever really obeys is Sod&#39s law so that when the vast majority of experts say they are bulls or bears it invariably does the opposite. But they are professionals and tend to have enough cash to enable them to weather storms.

The average punter does not have either their resources or their knowledge of the markets, however shaky, to cushion them through the current crisis.

One thing those experts tend to agree on, and I am with them on this, is that while the market will recover, we will not be seeing for a long time, if ever again, the sort of relentlessly rising stockmarket that we all loved so much in the late 1990s.

That means lower returns are likely, combined with a great deal of volatility. Theoretically, this is where the active manager should win hands down.

Within the current climate, some stocks, and some sectors, will outperform, some will tread water and some will be dogs. Active managers did poorly during the bull run. A monkey could have made money during that time, and most active managers did. They were just made to look like monkeys by trackers which did better, most of the time, particularly when charges were factored into their performance.

Virgin irritated everyone by smugly crowing about this fact every five minutes while trying to sidestep the fact that Legal & General&#39s tracker cost half as much.

Active managers now have the opportunity to stuff Virgin&#39s talk down its throat and prove they deserve the often exorbitant fees they charge. The fund management industry has a challenge to restore public confidence in what still is, fundamentally, a good, if expensive, way of saving.

It is a shame it took the FSA to start making bellicose noises about the ridiculous statements often made in many fund managers&#39 ads. We will know in a few years time whether the industry is up to the challenge that the market conditions are currently presenting.

On a side note, maybe companies such as Credit Suisse and Jupiter might like to take a little look at what “active” actually means.

Neither of these two is prepared to comment, either on or off the record, on individual stocks under any circumstances. This meant that Jupiter was not prepared to justify its decision to wade into Independent Insurance shortly before it collapsed.

I must declare an interest here as some of my cash was with Jupiter when it made that particular investment.

It is still there because, on the whole, Jupiter has been a good home for my cash.

But I cannot help but contrast its behaviour with the way Friends Ivory & Sime made a public protest about the ridiculous share-option schemes granted to directors of Woolworths after it was spun off from Kingfisher. That, to me, was what active management should be all about.

James Moore is a financial reporter at The Times

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