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Moore&#39s code

Regulators, politicians and consumer groups have spent the last 10 years knocking the stuffing out of the life industry and with some justification.

After all, it has spent the last 20 years selling – or should that be misselling? – some decidedly shaky products which seem to have been designed for the 19th Century rather than the years leading up to the 21st Century.

At the same time, the fund management community has been left largely unscathed, looking down its collective nose at those grubby oiks who work in the insurance industry. Well, you would expect those scruffy so and sos to foul up, wouldn&#39t you?

As the IMA breezily pointed out to me last week, fund managers&#39 charges are clearly defined, the investment objectives of their products are spelled out and, in marked contrast to insurance-based investments, most of the time the consumer knows what they are getting when they buy. So why is that nasty Ron Sandler is preparing to lob a grenade at an industry which is such a paragon?

Everybody knows the life industry needs reform and that is what it is going to get but retail fund management is clean, is it not? Until you look at the figures, that is.

According to fund res-earch company Lipper, over the last year, just 135 funds grouped together in the 326-strong UK all companies sector managed to outperform the FTSE All Share index.

Over three years, the performance is slightly better – 132 funds out of 278 outperformed. But when you take charges into account, the figures look much worse.

If you take the Legal & General tracker, which char-ges 0.5 per cent a year, as a benchmark, just 86 funds out of 326 beat it over a year while 93 funds out of 278 managed the same feat over three years.

Given that active managed funds charge up to three times what L&G does each year, not including those chunky initial charges and commission that IFAs are so beloved of, that is pretty pitiful value for money, particularly when we have been in a bear market for so long.

The market has been eit-her falling or flat for most of the three years covered by the figures. Yet, while the FTSE has been treading water, some companies, and some sectors, have done very well, thank you very much.

At such a time, you would think an active fund manager, able to pick and choose the companies with the best prospects and avoid the overvalued, the overhyped and the just plain dodgy propositions, would come to the fore.

You would expect trackers to be in the fourth quartile or in the lowest part of the third quartile at the very best if the active managers were doing their jobs even halfway properly.

Yet L&G&#39s tracker, and others with similar charges, are comfortably second-quartile and knocking on the door of the first quartile, which is nothing short of a damning indictment of the active fund management industry.

I hate to say this but it seems that Mr Branson was right. The figures show that the vast majority of consu-mers really would be better off in trackers although they would be advised to opt for offerings with rather lower charges than Virgin Direct offers these days.

The question that has to be asked of all those failing active managers is, what the hell do they think they are doing? The question that the industry ought to answer is why there are so many funds which are failing their investors while scalping them for unjustifiably high charges.

The question for IFAs is how can they justify putting their clients into these funds while claiming they are not swayed by the high levels of commission they offer.

I rather suspect these are questions they will find difficult to answer. The fund management industry has escaped the type of punishment suffered by the life industry for too long.

Much, much better at PR than the life industry, it has grown fat while its clients have suffered. Retail investors do not have the type of power enjoyed by big pension schemes such as Unilever, which took Merrill Lynch to court over its poor handling of the scheme&#39s assets and forced the latter into a painful settlement.

That is what Mr Sandler is there for. Many people have viewed the Sandler review with trepidation and some of the things which the report will say carry considerable risk. However, taking action against the poor service provided to retail investors by the fund management industry is not one of them. Mr Sandler is quite right to be preparing to put the boot in. All power to him.

James Moore is insurance correspondent at The Times

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