Rothschild goes for the private investor

Unit trust investments are becoming popular, and the City is responding
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The Independent Online
Further proof that the City is once again prepared to court the private investor came with the launch last week of Rothschild Asset Management's private unit trust portfolio management service.

The growth in the market for retail investments is being felt throughout the City. The move reflects the growing enthusiasm among the public for unit-trust-based investment.

Net retail sales of unit trusts jumped from £5bn to £6bn in 1994, with sales of PEP unit trusts up from £3.3bn to £4.6bn. The increases came in a year when the FT All Share index slumped 6.6 per cent and the FT-SE 100 index of leading companies dropped by more than 10 per cent.

Moreover, market research suggests that it is younger people from social groups not traditionally linked with unit trust investment, including the lower income C1 category, that are becoming increasingly attracted. The research also showed that new investors are more interested in taking out savings plans rather than investing lumps sums.

Rothschild says new technology has allowed it to offer its service, formerly known as Libra Portfolio Service, to anyone with a £10,000 nest egg. While it is still unlikely to attract the man or woman in the street, it is a move in the right direction. The service was previously open only to those investing more than £50,000.

Last year saw the largest increase in the number of unit trust accounts to 6 million, overtaking the previous peak of 5.05 million, which was achieved in 1987, before the stock market crash.

The unit trust PEP is now the dominant product in the market, accounting for an estimated 60 per cent. According to Inland Revenue figures there were 1,230,000 unit trust PEPs taken out in 1993/94, up from 640,000 in the previous year and 120,000 in 1988, the tax year they were created. Since September 1991, funds under management have risen from £1.7bn to just under £12bn at the end of 1994.

While the total number of unit trust investors is still small - between two and three million - the growth predictions are impressive.

A report from Datamonitor, the management consultancy, published last week, predicted a 46 per cent increase in the sales of unit trusts over the next two years as consumers continue to move money out of building society deposits because of their comparatively low returns.

The report, UK Unit Trusts 1995, predicted that while independent financial advisers (IFAs) would benefit most from the boom in unit trust sales in the short term, there were doubts over their long-term role as pressure increases on management and distribution costs. With more than 160 unit trust companies competing in the UK, direct selling would erode the share of the intermediaries, it claimed.

At present only £2.5bn of the £12bn managed by Rothschild Asset Management comes from private investors. But already it contributes about half the company's profits.

Savings can be invested in any one of four stategies with varying risks and various returns. The Rothschild managers research and pick the unit trusts with best potential and allocate client money on their behalf.Favoured funds in Britain included the Prolific UK Blue Chip fund, Fidelity UK Growth and Mercury British Blue Chip.

The aim is to take the strain of choosing individual funds off the investor. The charges include an effective initial charge for new money entering the service of 4 per cent, reduced to 3.5 per cent for investments of more than £50,0000. A management feeof 1.5 per cent is charged each year.

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