Indie fund managers lead the way
Savers with Scottish Widows Investment Partnership (SWIP) should be better off due to the £650m takeover by Aberdeen Asset Management - and the reason why may be of interest to investors in many other unit trusts. While it is tempting to think that this Caledonian carve-up does not matter much, it illustrates wide variations in the value delivered to investors.
SWIP was owned by Lloyds Banking Group, which aims to strengthen its balance sheet through the sale. Sad to say, unit trusts run by subsidiaries of high street banks rarely perform as well as those provided by independent fund managers - such as Aberdeen.
The explanation is simple enough. If any bank's UK equity fund persistently fails to perform, the bank will continue to have many other sources of income and profit - such as current accounts, credit cards and mortgages. By contrast, independent fund managers live or die by their performances - so there can be no question of tolerating failure for long.
To be fair to SWIP, it has one of the better fund management records among bank subsidiaries. But Alan Steel, founder of the independent financial adviser of that name near Edinburgh, told me: "Most SWIP funds have given poor returns compared to Aberdeen. If you invested in the SWIP £2.4bn property fund, you'll be scratching your head wondering how it's up only a dismal 11% in five years, compared to a 49% increase in the benchmark and a 106% return from Aberdeen's equivalent."
He added that a wider point for unitholders in any bank-run fund to consider is whether they are victims of investor inertia and these institutions' marketing muscle. Doing your own homework or seeking financial advice is far more likely to produce satisfactory results than trusting your bank manager