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Three funds for every firm on All Share

There are nearly three retail investment funds for every company listed on the FTSE All Share index, according to the Consumers&#39 Association, which it says is untenable and must be corrected through consolidation.

The CA calculates that at July 1, 2002, there were 2.7 retail funds for each of the 709 companies listed on the index.

Senior policy adviser Mick McAteer says there are 1,999 retail funds defined as unit trusts, individual pensions, investment trusts and unit-linked insurance funds which invest completely or mostly in UK shares. Taking away the 165 funds which specialise in smaller companies, 1,834 are left which, when divided by 709, equals 2.7.

McAteer says this proliferation of investment vehicles is ridiculous and damaging, given that many of the funds cannot outperform their benchmark on a regular basis.

But the IMA says McAteer is double-counting, as many of the unit-linked insurance funds and personal pensions are wrappers which would in turn invest in unit trusts.

McAteer says: “This is a crazy state of affairs. In most markets, when there is oversupply, prices come down but in this market it leads to price increases. More to the point, the majority of fund managers cannot outperform their peers on a consistent basis.”

IMA chief executive Dick Saunders says: “So what? If there were too many funds for the market, then the market would sort that out through mergers and consolidation. I do not see why the CA or anyone else should be able to say how many funds is optimum.”

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