It has been an eventful week or two in HM fund management industry, what with the Fidelity quiz night, the European bank stress tests and a crisis of faith linked to BP’s annual results.
“Who was that man and what was he doing at the annual Fidelity quiz night?” asked the chairman of the implausibly-sized investment company Second Coming Asset Management as we looked to dim the memory of our dismal performance with a couple of pints of What Sort Of Person Knows The Name Of The World’s Largest Flawless Canary Yellow Diamond at The Golden Eye.
“Oddly enough, I overheard him asking exactly the same thing about you,” I replied. “Possibly with more justification too since he was Roy Walker, the former presenter of TV’s Catchphrase and the host of the Fidelity Quiz.”
“Never heard of him, or that friend of his ’Mr Chips’ he kept referring to,” said the chairman. “What was that all about?”
“Loosely speaking, I think it was supposed to be banter,” I shrugged. “As for who Mr Chips might be, I’m afraid I have only the vaguest idea.”
“To be fair, you only had the vaguest idea what any of the answers might be,” said the chairman.
“Hey, I wasn’t the only one,” I protested. “That was a really hard quiz.”
“True,” nodded the chairman. “It would certainly have been better for my ego if it had been set by whoever was running those European bank stress tests. I mean, even Scam Bank sailed through – and it’s only got three depositors.”
”There’s little we fund managers find harder to resist than a good bandwagon”
“It was all a bit bizarre, wasn’t it?” I agreed. “Presumably those stress testers are the same people who administer this country’s GCSE results. Anyway, it’s been a busy old week or two, what with the stress testing and the government’s cunning new plan to replace a three-headed regulatory authority, which failed because areas of responsibility got lost in the gaps, with a two-headed regulatory authority, which presumably runs almost exactly the same risk.
“And then there was BP reporting one of the largest losses in British corporate history and the attendant lack of a dividend, which has caused me to question one of my most fundamental beliefs about the wonderful world of investment.”
“Oh, I am sorry to hear that,” the chairman sympathised. “Crises of faith can be terribly disconcerting. So which belief are we talking about exactly?” (Scam continues below)
“The one that maintains that when fund providers start singing from the same hymn-sheet and launching or promoting similar funds, it is time to be afraid – very afraid.”
“Words to live by,” observed the chairman. “There’s little we fund managers find harder to resist than a good bandwagon – I think it has something to do with safety in numbers.
“Either that or we don’t want to miss out on the chance of some extra inflows in the unlikely event somebody else’s product developers have stumbled on to a hit. So am I to understand from all this you’re having to confront the possibility that there is a trend within our industry that might have an element of validity?”
“That’s exactly my problem,” I nodded. “A lot of your competition have been using BP as an excuse to flag up the joys of overseas equity income and, despite my aforementioned fear of bandwagons, I have to admit I am finding it very difficult to disagree with their conclusions.
“Naturally the groups doing this are also the ones with European, Asian and global income products to flog, but that doesn’t of itself invalidate their thesis.
“Even Darius McDermott, the Sage of Stamford Bridge, has been getting in on the act and, while the plugging of two overseas equity income funds on the Chelsea Financial Services recommended buy list was shameless, the central argument crafted by his team of backroom Chelves—basically that it’s time to consider equity income sources beyond the UK—is pretty persuasive.
“All in all, the mere possibility that fund providers might actually be fulfilling a genuine investment need is making me question my whole world view.”
“I admit it’s a rather shocking turn of events,” said the chairman. “But I really wouldn’t attribute too much significance to it – the law of averages says we had to get one right sooner or later, but I’m sure we’ll be back on form before you know it.”