Autumn chill

This autumn has been the quietest since I started reporting on the retail funds industry. It’s hard not to see it as symptomatic of the economy at large.

Nick Rice
Nick Rice

By their usual standards, investment houses are announcing almost no major new fund launches. Hiring, to senior positions at any rate, seems limited. Groups are spending on acquisitions which could cut jobs as well as create them, rather than experimenting with new projects in-house.

Retail money is continuing to push into the market, but into lower-margin areas like investment-grade bonds, which many fear are due for a pull-back in any case.

The investment climate in Britain is broadly similar. Companies are spending money on bolstering balance sheets, including through mergers and acquisitions, or on maintaining low-risk ventures.

“In the economy at large, inhibiting factors are more complex, but it and the retail funds industry have one problem in common: regulation”

Even the autumn of 2009 seemed more exciting. In the funds world, groups such as Jupiter, Cazenove and Artemis were launching new Ucits III funds capable of riding market volatility. New multi-manager ventures such as Armstrong and Apollo were forging ahead. Bonds were already selling faster than ever.

Admittedly, many of the new Ucits III funds were designed to replace money withdrawn from hedge funds. The multi-manager launches coincided with aborted multi-asset plans such as Ignis Asset Management’s joint venture Maia Capital or Threadneedle’s agreement to hire the Armstrongs. (article continues below)

But during that uncertain time, the industry exhibited signs of new life, which are now hard to come by.

In the economy at large, inhibiting factors are more complex, but it and the retail funds industry have one problem in common: regulation.

The government is now embarking on necessary re-regulation of key areas of the economy, such as banking. But regulation generally imposes restrictions on productive activity and should be accompanied by prudent deregulation in other fields, especially given the overcast climate for business.

“It turned into a costly bureaucratic exercise which sowed paralysing confusion among advisers and the retail funds industry”

The coalition has so far given few signs of grappling with this problem, but the retail funds industry could provide it with its first major test in the form of the retail distribution review (RDR), which is currently under scrutiny by the Treasury Select Committee.

The committee now has the correct impression that the retail distribution review is far from fulfilling its original aim, which was to help advisers improve voters’ financial decisions.

Instead, it turned into a costly bureaucratic exercise which sowed paralysing confusion among advisers and the retail funds industry.

Even clarity on regulation like this would help the economy, let alone the deregulation which many industries crave.

Since the financial crisis, deregulation has been characterised as preying on consumers, whereas it can also raise consumer choice and cut cost.

Let’s hope the autumn chill gives the country a more balanced perspective.