The high street is no place for top performance: Christine Stopp notes a trend to buy investments over the counter

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The Independent Online
SINCE taking over the Key range of funds early last year, National & Provincial Building Society has increased their size from pounds 50m to pounds 140m.

The Woolwich unit trust operation sold pounds 28m of units in its first year of operations, pounds 55m last year and pounds 35m to date in 1993. Two-thirds of Woolwich unitholders have never bought units before.

Marks & Spencer has more than pounds 180m in its two funds. It has the fourth-largest number of regular savers in the industry and half its investors are female, compared with an industry average of 44 per cent.

This is the new generation of unit trust managers. People are beginning to buy units again, and many are doing so on the high street.

Are investors getting good value from high street units? The table shows details of a number of high street funds, with a three- year performance figure to 1 April 1993.

On this evidence performance does not look exciting. The standard philosophy for high street unit trust companies is 'play it safe'. A society would rather have customers' money invested in a range of unexciting blue chip stocks than in 'boom or bust' special situations. 'Good, consistent long-term performance' is the watchword as expressed by David Holcroft, of the Woolwich.

High street unit trust managers do not aim for the top of the performance charts. 'I don't believe customers want top quality performance one year and bottom the next,' says Guy Whiting, managing director of the new NatWest unit trust company.

The trouble with this philosophy is that it often leads to poor performance. Huge funds are managed within large institutions according to an over-cautious investment brief.

Investments have to be made in tranches of pounds 1m or more, which will rule out exposure to small companies with exciting growth prospects. Those responsible for the unit trusts have no clout with the huge investment department, for whom the unit trusts may be a low priority.

There is little incentive to perform, as the audience is a captive one made up largely of smaller investors who may not even be aware if their money is badly managed. Too often the decision not to go for top performance seems to rob the fund of the will to live.

It is wrong to say that high street performance is uniformly bad. In our figures Halifax Standard Income Advantage, Lloyds Bank Balanced and Midland Bank British perform significantly above the average.

The Woolwich Stockmarket fund has had a better record than our figures would suggest, Mr Holcroft says. Funds investing in large blue chip companies have been left behind recently as the market has tended to favour smaller company stocks. Figures for two-year performance to 1 March show the Stockmarket fund 11th in the UK general sector, up 27.3 per cent.

In the same ranking both Barclays Unicorn General and Lloyds Bank Balanced are in the top third of the sector, though Marks & Spencer UK Select Portfolio is 88th out of 95 trusts. Marks & Spencer, whose funds were contracted out to different managers for different parts of the portfolio, has made management changes to its two trusts, whose performance has not held up as reliably as the firm's underwear.

The ability to change managers is supposedly an advantage. In practice it is a costly and disruptive business, which can badly affect performance.

The new providers have mostly started only one or two funds with a catch-all blue chip investment objective. This may be acceptable for the very small, risk-averse investor, but anyone who is saving long-term will probably have greater investment demands than a single fund can provide.

National & Provincial was brave enough to buy an existing unit trust range, some of which offered a more specialist slant. The former Key funds have an excellent long- term reputation for performance under the management of Capel-Cure Myers, which continues to manage them for N&P, though performance has been down in the past year or so.

Leonard Klahr, the fund manager, says performance has been good against the FT- SE 100 index, but the index itself has underperformed in comparison with smaller companies. The fund will stick to blue chips, hoping to even out performance dips for long-term unit holders rather than venturing into short-term opportunities.

For new unit trust companies such as the Woolwich and Halifax Standard, performance to date looks promising, though the record is really too short to indicate long- term consistency. Woolwich has revolutionised unit trust dealing by treating its funds almost like a building society account - you can buy units over the counter, make partial withdrawals using a plastic card and get your money back on the spot.

This reduces the mystique, and the paperwork, of unit trust investment, though Woolwich is emphasising to customers that a unit trust is not designed for frequent withdrawals.

A general fund such as Woolwich Stockmarket is a good first investment for someone new to share-based investments. For someone saving seriously over the long term a wider range of funds will be necessary. Managers like Woolwich offer unit trusts hoping to hold on to your money when interest rates are low. This is all right if the fund maintains good performance and is a suitable investment for you.

High street unit trusts are not all duds, but investors should remember to choose a good fund, not a convenient fund manager. Compare the fund with others in its performance sector and look at results over several periods to find out whether the claim to consistent long-term performance has any substance.

Money Management magazine, available from larger newsagents, carries unit trust statistics monthly. The Independent on Sunday also carries regular reviews of unit trust performance.

------------------------------------------------------------------------ High Street Unit Trusts ------------------------------------------------------------------------ Charges Min. inv. Performance % (lump sum/ 3 years initial/pa monthly to 1.5.93 saving) pnds (sector ranking) Barclays Unicorn General 5.25/1 500/30 140.80 (14/95) Income 5.25/1 500/30 126.60 (61/108) Halifax Standard Global Adv'tge 5.5/1.5 1,000 17.80 (129/156)* Income Adv'tge 5.5/1.5 1,000 110.20 (39/114)* Lloyds Bank Balanced 6/1 1,000/20 134.90 (34/95) Income 6/1.25 1,000/20 127.30 (66/108) Marks & Spencer Investment Pfo. 5.5/1.5 500/25 130.30 (9/14) UK Selection Pfo. 5.5/1.5 500/25 127.40 (65/95) Midland Bank British 6/1.5 1,000/50 135.60 (39/136) Income 6/1.5 1,000/50 127.80 (63/95) N&P UK Growth 5.5/1 500/25 128.10 (71/136) UK Income 5.5/1 500/25 133.00 (41/108) NatWest UK General 5.25/1.25 1,000 UK Income 5.25/1.25 1,000 Woolwich Stockmarket 5/1.25 500/25 16.20 (27/105)* ------------------------------------------------------------------------ * performance over 1 year Source: Unit Trust Industry Review/Finstat ------------------------------------------------------------------------

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