But also he needs to be bolder than Mr Smith, and a touch more conspicuous.Eurobanks’ home truthsThe three banks asked by the European finance ministers to explain why there aren’t more cross-border mergers are an interesting mix. Indeed, in the six-and-a-half years since Labour rejected the proposals from Frank Field (who was asked to “think the unthinkable”, but what he’d thunk was found unpalatable), three successive pensions secretaries have vacillated while the crisis has got worse.Is Mr Johnson a nettle grasper? He pushed through tuition fees when he was an Education minister, so he can’t worry about being unpopular. And if interest rates have now peaked, the liabilities may starting rising again.While Mr Smith never seemed blas?bout this crisis, he appeared in no rush to act. Morgan – or rather, JP Morgan Chase Manhattan Chemical Manufacturers Hannover Texas Commercial National Bank of Detroit Bank One First Chicago, to give any Caz readers of this column the full pedigree – is no stranger to takeovers. JP Morgan and Cazenove are forming a joint venture, with 50 Morgan staff being parachuted into the midst of the Caz squirearchy. Caz will get fresh capital, and access to Morgan’s strength as a bond house. As an approach from Lehman was dismissed, one wag quipped, “It would appear that Gentlemen Prefer Bonds.”Some suggest this rather peculiar arrangement is a recognition of the problems JP Morgan has had in the past in preserving “unique cultures”.
It is also expected to obtain competition clearance from the European Commission this week.Last week the Spanish bank raised £1.25bn from selling half its holding in Royal Bank of Scotland. Its two directors on the board of the Scottish bank are also to step down.The RBS sale has raised the prospect that Santander could raise its bid or add a cash element in response to any offer by HBOS. The Spanish bank refused to be drawn on whether it would sweeten its offer terms.. Lurking in the shadows behind the Centre Court at Wimbledon, I come across a very important gentleman, and bow in recognition. It is easy to forget that the City kingmaker at the Queen’s broker is definitely not a household name. And yet he is a mighty power in this land.A meeting in the offices at Cazenove is like nothing else in the City. The visitor encounters liveried flunkies padding around wood-panelled halls, and perfectly dressed public school boys, who somehow contrive to be polite and condescending at the same time.
All this is a million miles from your standard US investment bank, red in tooth and claw.But it now seems clear that the last independent UK house is raising the white flag to Wall Street. Caz itself is keeping its stiff upper lip firmly closed, but from others there appear to have been more behind-the-scenes briefings than in Downing Street, and the press is full of Mr Mayhew’s attempt to preserve a “unique culture”.It is this that dominates the current, leaked, compromise plan. These are funds that purport to be actively managed and charge an active management fee of up to 1.5 per cent per annum, yet in practice run portfolios that differ only marginally from the market index they are ostensibly seeking to outperform. In statistical terms, these are funds that display a tracking error of less than 1 per cent per annum relative to the FTSE All-Share index.
It is no surprise to find that the actively managed funds with the ten lowest tracking errors are mostly offered by the high street banks and life companies.These are traditionally the firms that offer the worst value in fund management, largely one suspects because of their captive customer bases and their (dare one suggest?) willingness to extract as much as they can from that source.In an ideal world, customers would recognise that most funds are merely tools for capturing the returns that are on offer from different types of asset class, and choose them as they would any other consumer product, on the basis of cost and value for money. The vast majority should be regarded as commodities, and purchased accordingly.It would still be worth paying a little more for the handful of funds that are run by the most successful and genuinely talented investment managers around. But this is not the way the business works at the moment, as the industry’s agitated response to Ron Sandler’s report into savings has made clear. The last thing the fund management business needs right now is millions of educated customers.jd intelligent-investor.co.uk. Investors have been obliged to endure an uninspiring summer. Although shares have displayed a little life in the past few weeks, their overall performance has offered some support to the old stock market adage – sell in May and buy again on St Leger Day.
Well, the famous horserace is due to be run today and, at the time of writing, the Footsie is approaching its May Day level.
