Outlook: Morgan Grenfell

AS CITY comebacks go, the one being achieved by Morgan Grenfell, the fund management group, takes some beating. Little more than three years ago it was being written off as dead in the water, condemned to a slow and possibly terminal decline by the antics of a half-crazed young fund manager called Peter Young. Not so today, as our news analysis on page 14 demonstrates. Morgan Grenfell is winning new mandates at a rate not seen since its heyday in the mid-1990s, and in terms of investment performance, it is once again beating most of its peers.

How was this achieved? One thing is for sure; had it not been for the decision of its parent company, Deutsche Bank, to take the Peter Young affair full on the chin, admit full responsibility and bend over backwards to compensate investors, Morgan Grenfell would indeed have been finished. The whole thing ended up costing Deutsche well in excess of pounds 500m, a sum that will take many years to earn back. In most respects, however, the gamble has paid off.

Morgan Grenfell lost some business, but given the scale of the negligence involved, surprisingly little. Most pension fund trustees took the "one bitten, twice shy" view. The group also managed to keep many of its key fund managers in place, notwithstanding a spirited attempt by Nicola Horlick to lead them off to pastures new. That, too, has paid off with a performance that has left many rivals looking askance.

Everything in the City is relative, and in truth Morgan Grenfell hasn't hugely outperformed the market as a whole. However, set against the extremely poor performance of other leading active fund managers, this is impressive. Unlike others, Morgan Grenfell remained bullish. It didn't go overweight in cash and it backed the hot sectors of telecommunications, IT and pharmaceuticals at an early stage. The approach has paid off handsomely. Morgan Grenfell deserves its comeback.