Outlook: Going mental at Consignia for plural Leighton

Oil bid muddle; Past performance; Unhelpful NatWest
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The Independent Online

When Allan Leighton famously decided to "go plural" after quitting Asda, a job running the country's postal service probably didn't rank high on the list. Compared with the task of turning Consignia around, his other day jobs, which include bringing lastminute.com to profitability and keeping the Greens under control at BhS, look like a positive breeze.

A stint at a big publicly run institution can look good on the CV and there's always the upside of having a grateful government in your debt. Sir Alan, perhaps? But Consignia is a basket case. In the good old days when it was still called the Post Office, had an absolute monopoly and didn't have e-mail to worry about, the organisation was a licence to print money.

Thankfully, those days are gone, but although Consignia may have lost its monopoly, it hasn't lost its outdated working practices or its swollen cost base. The response of the most militant workforce in the country to the management's attempts to get to grips with burgeoning losses is to threaten a national postal strike. Nor is just the unions Mr Leighton needs to worry about. The regulator PostComm, is also beginning to flex its muscles at last. A third of the Royal Mail's postal monopoly is to be put out to competition.

It would take a full-time chairman working 18 hours a day seven days a week to sort that lot out. But beggars cannot be chosers and instead Consignia has got Mr Leighton on a part-time interim basis while he juggles with his portfolio career and his eight other company directorships. Mr Leighton reckons he will have to man the breach for about six months while ministers search the land for a permanent replacement, seemingly having clean forgotten that the previous incumbent, Neville Bain, was leaving at Christmas. Just as well Mr Leighton was already on Consignia's board.

Mr Leighton will be charging no more than his current non-exec's fee for this, his fourth chairmanship since forsaking Asda. Going plural is one thing but Mr Leighton may well be going mental by the time he is allowed to step back down again.

Oil bid muddle

Just as you thought you were beginning to understand what the Government's competition policy was all about – well vaguely anyway – along comes Brian Wilson, the Energy minister, to pour another bucket load of confusion over the whole thing.

Mr Wilson was quoted at the weekend as saying that a bid by Eni, the Italian oil giant, for Enterprise, would be "counter productive", since there is "no guarantee" that North Sea development Enterprise finds attractive would interest "a state owned oil giant with a worldwide range of projects to chose from".

It's true that the number of North Sea independents has been shrinking. It is also true that the smaller fry tend to be hungrier and more entrepreneurial in making use of what assets they've got. Bigger oil companies can afford to take a more relaxed approach.

But you could make the same argument for almost any industry, and carried to its logical conclusion, Mr Wilson's approach would mean almost no merger activity at all. The argument in any case works both ways. The bigger an oil company is, the more it can spend on marginal oil development, and the trouble with the North Sea is that the maturer it becomes, the more commercially questionably most further development becomes as well.

Past performance

Is past performance in fund management any guide to the future? The Financial Services Authority thinks not and has stated as much on several occasions. This has got the Association of Unit Trust and Investment Funds (Autif) terribly hot under the collar, as you can imagine it would, for if it were true then what would be the point of all those highly paid fund managers?

Investment, according to the FSA, is pretty much a lottery. As a consequence, the regulator's own website assesses funds only by virtue of what they charge and their comparative risk. There are no performance tables, and if it were legal, the FSA would ban their use for marketing purposes too. In a lot of cases, past performance can indeed be misleading. For instance, some funds can reasonably claim to have outperformed the index over 10 years even though they may have underperformed in each of the last five.

It is also true that funds which do fantastically well one year tend to do fantastically badly the next. Few fund managers consistently outperform, and even those who manage it for more than a few years, tend eventually to attract far more money than they can sensibly invest, and therefore begin to underperform.

All the same, can it really be right to think past performance of no use whatsoever? Yesterday Autif published its own research into the matter. Many studies in the UK and most in the US have found evidence of persistence in investment performance, Autif insists. Interestingly, however, the strongest evidence of persistence is among poorly performing funds. The dogs, it would seem, remain consistently as dogs.

It is not clear how helpful to the Autif case this finding really is, since most investors are looking for consistent outperformance. Obviously some kind of public service is served by exposing the poor performers, but if the effect is only to accelerate the shift to low cost index tracking, then the FSA would seem to have won the argument anyway.

Investing in funds is like investing directly in stocks and shares. It pays to dig deep, not just into past performance, but right into the mind and current thinking of the individual fund manager. And even if you are lucky and diligent enough to get to these innermost thoughts, it's still hit and miss.

Unhelpful NatWest

How Natwest and Alliance & Leicester chose to lend their money is their business, and if they think it is becoming dangerous to lend in the property hot spots of London and elsewhere, then they are perfectly entitled not to. In any case what's proposed are relatively minor restrictions. NatWest is going in for some selective post code rationing of mortgages while Alliance & Leicester has reduced the amount it will lend on a £100,000 to £250,000 purchase from 95 to 90 per cent.

All the same, to claim, as both organisations do, that they are trying to protect customers against a fall in the market is a bit rich. Most banks base their lending decisions on affordability – that is a multiple of income combined with some kind of assessment of security of income – which is how it should be. To try to choke off demand by putting in place arbitrary catch all restrictions, doesn't seem right or fair.

In London in particular, it is in this first-time buyer market that demand is at its most intense, and where, as a consequence, prices have been rising most strongly. These restrictions will make it harder for some to buy, but they are not going to stop the demand. It is already hard enough for first-time buyers in London. Many young people are being forced to live with their parents longer, or to commute long distances. This kind of nannying is going to make it harder still.