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Split sits and stars in orbit

Matt Davis rounds up a year of strong investment performance

The ghost of Christmas past will be haunting many this festive season as those who failed to get into the stock-market last December have missed out on an average 20 per cent rise in the UK all companies sector over 2005.

Aside from strong performance, how will this year be remembered by the investment sector?

Fidelity’s realisation that Anthony Bolton’s special sits fund, at 5.4bn, was getting too big for its own good and needed splitting in two was arguably the biggest story this year. The move drew scorn from some quarters for the staggered manner of its communication, particularly asking people to vote on the move without knowing who would take over the half that Bolton is relinquishing. But there was a degree of understanding from some people questioning how long even Bolton could continue juggling so much money successfully.

Splitting the cash may not be pretty but the consensus reached seems now to be that Fidelity were damned if they did, and damned if they did not act, given the fund is the biggest in its sector by some way. Investors are now impatient to know more and Fidelity would do well to communicate quickly before rival special sits managers attract disaffected investors’ money. Fidelity’s decision to slash the charges on its tracker fund to 0.1 per cent was also controversial in cutting commission out of the equation but a win for direct investors.

Axa’s move to buy Framlington in July prompted questions over how long star managers George Luckraft and Nigel Thomas would stick around. It has emerged that the firm’s top names are tied in until 2010 although that is more than can be said for some of Axa’s senior sales staff who have since left. Framlington CIO Jeremy Lodwick is also leaving.

Despite the positive performance of equities, one fund that failed to deliver was DWS Ratebuster, which was launched amid a huge fanfare and aimed to lure cautious investors back into the market. However, wrong-footed by a surprise upturn in the dollar against the euro, ratebuster failed to deliver more than a nominal return and closed within a year after taking over 50m by offering investors 3 to 4 per cent above cash. Innes Reid senior adviser Jim Turner says: “This product was aimed at cautious investors wanting some sort of assurance but it was too complicated and it did not work. The situation does not do anything for the industry as a whole and I think that people might have been better diversifying their portfolios than trying to get all their equity exposure through such a complex product.”

Aberdeen’s move to buy DWS certainly caught the eye. Churchill Investments head of research Warren Perry says: “At the beginning of this year, you really had to question where Aberdeen was going with all the scandal it had absorbed over split-capital investment trusts but I think it has turned itself around and secured its future by doing this deal.”

The Investment Management Association says net sales of unit trusts and Oeics this year up to the start of December were 5.8bn net, a significant rise from 4.9bn for the whole of 2004.

Venture capital trust sales were also strong. Chelsea Financial Services VCT specialist Matthew Woodbridge says business soared by tenfold compared with 2004 – up from 55m to 550m on the back of Gordon Brown’s generous tax relief. Sales at present are lower than last Christmas but Woodbridge expects a rally before the tax breaks end in April.

He says: “I think that many advisers have been waiting on the Chancellor’s pre-Budget statement before advising their clients to see whether he would mention continuing the tax breaks. With people now expecting them to be cut next year, it looks like there will be a last-minute rush on venture capital trusts.”

New Star’s market flotation in November was the industry’s worst-kept secret. Chairman John Duffield had been teasing IFAs for months about when the firm would go for the IPO, guaranteeing maximum publicity when the Aim float was completed on November 11- Remembrance Day – fitting for a man whose views on Germans have been well documented.

Making a millionaire of the firm’s receptionist was Duffield’s publicity coup de grace, although it is hard to find anybody to knock New Star’s fund performance and the firm has established itself as a major player on the retail scene. Hargreaves Lansdown founder Peter Hargreaves earned 50,000 from the float but says it is up to the industry to decide whether that will have a considerable impact on his wealth.

The fund manager merry-go-round kept on spinning. Credit Suisse income manager Leigh Harrison went to Threadneedle, Jupiter’s Leon Howard-Spink to Schroders, replacing the departing Adrian de Mol van


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