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The year in investment

Where to start in a year that has been exceptional by any standards but particularly in the investment world?

The year started as it meant to go on with the FTSE 100 dropping below 6,000 for the first time since August 2007 amid fears of a US recession.

Friends Provident announced that it was looking to sell its 53 per cent majority shareholding in F&C. Further falls in the commercial property market led to Aegon temporarily stopping investors from withdrawing their money from the Scottish Equitable £2bn property fund. Scottish Widows also imposed deferral periods on withdrawals from its property vehicle.

The first signs of trouble at New Star emerged as it announced UK mutual fund outflows of £500m in the second half of 2007 after taking hits on the back of the credit crunch. Standard Life launched a discretionary investment management business called Standard Life Wealth.

Across the pond, the Federal Reserve cut US interest rates from 4.25 per cent to 3.5 per cent in a shock move to improve market confidence. Good news for with-profits investors in February as Norwich Union announced a special bonus of £2.3bn to 1.1 million with-profits policyholders.

First State star manager Angus Tulloch passed the management of his two global emerging funds to Jonathan Asante. Meanwhile, unsurprisingly cash funds emerged as the dominant asset class in 2007 with money market funds accounting for 39 per cent of assets invested.

Aviva announced it would be combining its asset management businesses to create a single global integrated asset manager called Aviva Investors. Axa Framlington UK smaller companies manager Roger Whiteoak left the firm at the end of February.

In March, Scottish Widows chief executive Archie Kane made a last ditch attempt to persuade the Government to revise the planned changes to capital gains tax rules by writing an open letter. But this did little to change the Government’s mind and the Budget confirmed what many feared as Chancellor Alistair Darling stuck to his guns over the 18 per cent flat rate capital gains tax.

JPMorgan Chase bought Bear Stearns at the knock-down price of £116m after the bank received emergency funding from the US Federal Reserve. Bear Stearns saw 98 per cent of its share price wiped off in the market.

Veteran fund manager Nils Taube passed away at the age of 79. The Fed continued aggressively cutting interest rates with a further 0.75 per cent rate cut in a bid to boost markets. Former FSA chief executive John Tiner joined New Star Asset Management as a non-executive director.

Unfounded rumours that HBOS had been forced to seek emergency funding form the Bank of England led to a mass sell-off of HBOS shares. In April, more New Star news as it announced a tie-up with Tata Asset Management.

Meanwhile, Threadneedle announced its expansion into the US market.

Several moves in April saw Gartmore head of multi-manager Bambos Hambi replaced by his deputy Tony Lanning in a restructure of the product range while Schroders co-head of structured investments Richard Lloyd quit the firm after 11 years. Another Gartmore departure was announced later in the month as European growth and focus fund manager Tim Callaghan left the firm. Skandia UK business unit chief executive Brett Williams quit his role to head up the firm’s new wealth management Unit.

It was all about fund manager moves this month as F&C Asset Management multi-manager co-head Richard Philbin left the firm after seven years to join Axa.

Oil prices hit record highs in May pushing through the $125 a barrel mark. Openwork and Octopus said they would be launching a new investment firm called Omnis Investments. And HSBC rebranded its asset management business to HSBC Global Asset Management.

In June, Midas Capital Partners unveiled its seven-strong UK fund range following the acquisition of iimiaMitonOptimal in March.

Old Mutual extra income fund manager Leonard Klahr announced he would be retiring in March 2009 and will be replaced by Michael Gifford. Meanwhile, Prudential managing director of UK retail life and pensions Gary Shaughnessy left to head up Fidelity’s UK retail arm as a replacement for Richard Wastcoat who took a six-month sabbatical.

In the same week, Invesco Perpetual UK growth and aggressive fund manager Ed Burke stepped down from his position to take early retirement. This was a big blow to Invesco as Burke had often been touted as a replacement for income guru Neil Woodford. It was also announced that chief executive of Invesco Bob Yerbury would be stepping down from his role in September and would retain his position as chief investment officer. He will be passing the executive role to head of technology and operations James Robertson. Later this month, Tenet Group launched its new investment business, Sinfonia Asset Management. Towards the end of June, Bank of England governor Mervyn King wrote his second letter in just over a year to Chancellor Alistair Darling, prompted by inflation breaking through the 3 per cent barrier. Skandia axed the Selestia brand and said it would be developing its platform into a full wealth management wrap under the name Skandia Investment Solutions. Keydata ended the month by setting up a lobbying committee to educate IFAs about the benefits of structured products. The firm said it would be working with four banking institutions and four providers to dispel doubts over the credibility of structured products – ironic given what happened to these products just three months later. July brought confirmation that Skandia’s Brett Williams was to join Cofunds as chief executive office by the end of the year. Sad news as legendary fund manager Sir John Templeton died aged 95. In mid-July, the Government launched a new industry-led group to focus on keeping London globally competitive as a financial centre. The financial services global competitiveness group is jointly chaired by Chancellor Darling and Citi chairman Sir Win Bischoff.

Unicorn Asset Management chief executive Peter Webb resigned from the firm to pursue other interests. Changes were afoot at New Star too as Charles Deptford replaced Stephen Whittaker as manager of the group’s equity income trust following concerns over the fund’s performance. In August, the Investment Management Association’s decision to launch a strategic bond fund sector was welcomed by bond fund managers. Abbey failed in its attempts to challenge the Financial Services Compensation Scheme’s legal authority to sue the firm for £21m for alleged precipice bond misselling. The FSCS is suing Abbey as part of its attempts to recover claims the scheme has paid out to around 1,800 investors who were missold precipice bonds by IFAs who have since gone out of business. Norwich Union revealed it was going to cost £84m to outsource its Lifetime wrap to Scottish Friendly while Credit Suisse appointed David Norman from Morley Fund Management to the new position of CEO Asset Management for the UK and Ireland.

A difference of opinion with cru chairman Jon Maguire over the future strategy of the business led to chief executive Stuart Anderson quitting the firm. More moves as Threadneedle Asset Management head of equities Dominic Rossi joined Gartmore Investment Management as chief investment officer and F&C appointed Frank Henze as head of product development from Barclays Global Investors. And Henderson chief executive Roger Yates stepped down after 10 years passing the role on to head of equities Andrew Formica.

New Star revealed a 44 per cent drop in operation profits for the first half of 2008 at the tail-end of August. But this year was all about September and October and the previous eight month’s events paled into comparison with the market turbulence experienced on a global scale in the Autumn. Lehman Brothers posted a loss of £2.2bn in its financial results for the three months to August which saw its share price tumble as concerns were raised about its financial position and firms refused to trade with it. Meanwhile, it emerged that Merrill Lynch and AIG were also in trouble and while the US Government bailed out AIG, Bank of America came up with a $50bn buyout deal to save Merrill Lynch. However, the US Government refused to bail out Lehman which filed for chapter 11 bankruptcy protection. Hundreds of Lehman employees arrived at work to find they were out of a job. The fallout from the collapse of Lehman was massive as banks around the world announced huge exposure to the firm. UK bank shares dropped on the back of these events with HBOS shares plummeting by nearly 40 per cent in one day. The FTSE 100 drops below the 5,000 mark for the first time since June 2005. Meanwhile, HBOS and Lloyds TSB announced they were to merge which helped both banks’ share prices to recover slightly. The FSA announced a ban on the short-selling of financial stock due to the market conditions on 18 September. Barclays stepped in to save part of Lehman by acquiring its US investment banks and capital markets operations. Later in the month Nomura acquired the UK and European investment banking and equities businesses of Lehman.

And the Bank of England extended its special liquidity scheme until 2009 in view of the turbulent market conditions. The knock-on effect led to the structured products scare with many investors trying to withdraw their money as the counter-party guarantees provided by Lehman and AIG proved to be worthless. The investment bank became extinct in late September as both Morgan Stanley and Goldman Sachs became holding banks. Closer to home, Resolution Asset Management announced it was to rebrand as Ignis Asset Management. Resolution also unveiled plans to launch a quoted company with former FSA chief executive John Tiner at its head. Moves included Threadneedle appointing John Devine as chief operating officer from Merrill Lynch where he was global head of operations and senior vice president. While Jim Sutcliffe resigned as chief executive of Old Mutual following the company issuing its third profit warning in three months. More bad news as Barclays Wealth chief operation office Frank McGarahan died after intervening in a street fight in Norwich city centre at the end of the month. HSBC decided to launch a Middle East and North Africa fund under the management of Andrea Nannini in October despite the market meltdown. Fortis took a sole shareholding position in Artemis, increasing its 67.1 per cent stake in the business in a £317.2m deal. Surprise news as Bestinvest chief executive Andrew Barnes left the firm after two years, having told Money Marketing earlier in the year that he would be with the firm in the long run. AIG announced it would be selling AIG Life UK parent Alico following concerns over the closure of AIG Life’s enhanced fund last month. It emerged that over £1bn of withdrawal requests were made from the AIG enhanced fund in one day before the firms was rescued by the US Government. Icelandic banks became the latest casualties of the credit crunch as the Icelandic Government moved to nationalise its three largest banks – Landsbanki, Kaupthing and Glitnir. This not only had a knock-on effect for UK savers with money in Icelandic accounts, but local councils and charities also lost hundreds of thousands of pounds. The dreaded ’R’ word started to look inevitable as an increasing number of high profile commentators began to say Britain was on the verge of a recession and the FTSE seemed to grow increasingly unpredictable as a result. Relief came in mid-October as the Government injected £37bn into Royal Bank of Scotland, HBOS and Lloyds TSB which meant the FTSE rallied slightly. But the relief was short-lived as the index then slumped more than 7 per cent a mere two days after the bailout was announced.

Amid the turmoil, Dragons’ Den panellist James Caan and ex-Skandia sales and marketing director Spike Hughes announced they were joining forces to launch Insynergy Investment Management. Bestinvest saw further changes as a number of the investment management team departed but on the plus side, founder John Spiers returned to the role of chief executive less than 18 months after selling his stake to private equity firm 3i. The currency markets were also affected by the stockmarket volatility as sterling dropped to a five-year low against the dollar while the FTSE fell below the 4,000 mark.

Insynergy announced the appointment of Crispin Odey and Gulf Finance House’s Ian Lancaster to manage the firms’ first two fund launches in November. The Treasury announced the launch of two new Government industry groups that will look at the insurance and asset management sectors. The groups will be co-chaired by the Chancellor Alistair Darling and Aviva chief executive Andrew Moss and IMA chairman Robert Jenkins. The IMA announced it would be launching a new property sector covering both direct and securities funds in the new year. New Star renegotiated its banking covenants and embarked on a cost cutting regime after revealing a £3.1bn loss in assets under management in the third quarter of 2008. Ignis Asset Management formed by the merger of Resolution and Axial Investment Management officially launched in mid-November. The new firm manages around £70bn of assets. Sales of investment bonds received a hammering due to the capital gains tax changes in 2007’s pre-Budget report. The Association of British Insurers said that sales plunged 64 per cent in quarter three of 2008 compared to the previous year’s third quarter. More redundancies as Fidelity said it would be cutting several hundred jobs across its UK business by the New Year and Gartmore also confirmed it would be making 60 to 75 job cuts. New Star took another blow as it was forced to suspend trades on its £470m international property fund as a result of increased investor redemptions. December did not get off to a good start for the firm either as New Star?s attempt to temporarily suspend its ordinary shares failed. This followed news that it was in advanced discussions with its bank syndicate and shares plummeted 68 per cent on the back of this. This led to expressions of interest from the likes of Aberdeen and Neptune. But in the end, New Star revealed that it would delist from the stockmarket as part of a restructuring that would see a syndicate of banks take a 75 per cent stake in the business. The gloom continued as New Star suspended trading on its Heart of Africa fund in mid-December due to the impact of the credit crunch which saw an increase in redemptions from investors. Meanwhile, Aberdeen Asset Management looked set to buy all or part of Credit Suisse?s traditional fund management business after the firm put the division up for sale earlier in the year following a strategic review. Caledonia Investments chairman Peter Buckley died. Buckley joined Caledonia?s board in 1976 and served as chief executive from 1987 to 2002 before becoming chairman in 1994. Fidelity fund guru Anthony Bolton cheered everyone up by saying he believed the new year would usher in a fresh bull market for investors. Bolton called the bottom of the market and said a bull market was likely in the first quarter of 2009 followed by a period of consolidation. And New Star ended the year with the news that it would begin a management buyout of its institutional business led by Mark Beale and Richard Lewis, head and deputy head of the firm?s institutional fund management arm.

The FTSE 100 ended the year around the 4,300 mark boosting investors hopes for a fresh start in 2009. Well surely it can’t be any worse than this year?

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