Merryn Somerset Webb talks to Hargreaves Lansdown?s Mark Dampier about effective investing, the markets in general, and active and passive funds.

Merryn: Hi, I?m Merryn Somerset Webb, editor-in-chief of MoneyWeek magazine. Here with me today is Mark Dampier, the head of research at Hargreaves Lansdown, which is the UK?s biggest online stock broker and probably its most successful.

Mark has just written this book, Effective Investing, which I suspect really does tell you everything you need to know about effective investing. So we?re going to start by talking a little about that and then talk about the markets in general and move on to talk about some of Mark?s favourite funds, because if anybody knows funds, it?s Mark.

Right. So you have decided to pass on your many years of investing wisdom to the general investor.

Mark: Well, I tried.

Merryn: Which is generous of you, obviously. But if someone was going to be encouraged to read the book, or perhaps not make it through the entire book, what would be the two or three things that you would say are absolutely vital for an investor to bear in mind all the time? An individual investor, not an institutional investor?

Mark: An individual investor?

Merryn: Because they have possibly different priorities.

Mark: Well, actually, I think the most important thing to bear in mind if you?re investing at all is just to be patient. And actually not to read too much, believe it or not.

Merryn: Except for this book and MoneyWeek, right?

Mark: Apart from MoneyWeek and my book. That?s all you really need to read. And actually I do actually think people can read too much. I did try and write it almost from a beginner?s angle, and it was quite interesting because it makes you sit back and look, when you write it, and think, god, this is actually quite hard. Because investment?s simple, but it?s not easy.

And there is almost an information overload. Technology?s been wonderful, but it?s created so much confusion in the market that people just turn off. 3,000 funds, and I?m not counting offshore funds, and I think, well, where the hell do I start with that? As you know, at least 90% of them are useless in the first place. So I think many people are turned off to begin with.

One of the things I do try and get people to do and say, is you have got to read. I think we?re a lazy society basically. And we just want it on a plate. And that?s the problem. And you can?t do that in investment. Everything in the UK is pushing you towards doing your own thing and you?ve just got to be able to pick up and read something. If you don?t, you?re going to be poorer for it come what may. And most people don?t.

Merryn: Yes, and most people don?t, do they? Most people stay slightly in denial.

Mark: Yes.

Merryn: They?ve got the money, they open the account, and then they don?t really want to take the action. Yes.

Mark: Yes. It stays in cash, because actually, I think, they?re partly confused and partly because they just don?t want to read. And they?ve got to. I mean, if you?ve got a computer nowadays, you need to read.

Merryn: Well, read and take the responsibility.

Mark: It?s true.

Merryn: And investing is tough. You know, you move out of cash, everyone gets cash, you have the cash, you feel like it?s safe ? of course it?s not.

Mark: No.

Merryn: Because there?s opportunity cost and you?re not getting interest, etc.

Mark: Well, you can give other people the responsibility, but, in my view, that?s quite dangerous and fraught as well.

Merryn: You mean moving to a wealth manager, as opposed to a fund manager?

Mark: Well, a wealth manager is a bit of a funny term sometimes, as far as I?m concerned.

Merryn: Or a losing wealth manager.

Mark: A losing wealth manager, yes. That?s why I think you should try and do as much as possible yourself. And I think actually you can mix DIY-ing with advising. I think you can do the work, a lot of the work, yourself, and then you can probably go to an adviser and get what I would call a sense check, I think. So you present what you think you should be doing to an adviser.

In fact, I?ve done it myself recently just to see and experiment. And I think it?s really useful, because then they can say, well, have you thought about this? I mean, most advisers really are professional planners now, rather than investment people. But they might say, if you?re old enough, you might think deferring a state pension, you might think this, you might think that, but you?re then at least armed with the questions. Even you go to an adviser for the first time, haven?t got a clue what to ask anyway.

Merryn: Yes, well, this is interesting, most financial advisers are no longer really investment advisers. They offer you all sorts of advice on various things?

Mark: Well, I don?t?

Merryn: But when it comes to the investment, they tend to contract it out anyway.

Mark: That?s perfectly true. Well, I don?t think they?re advisers in the first place. When I first started 32 years ago, of course, there was no compliance, anyone could call themselves a financial adviser. And the advisers that had come up were all from Allied Dunbar. So actually all they sold was managed investment bonds because they paid 5% or 6% commission.

So they didn?t even sell unit trusts. Because unit trusts didn?t have managed funds in those days, so they couldn?t deal with that. And I would say, that?s stopped pretty much through. But good financial planners now are very good at the planning side. But they?re not really good necessarily at the investment, because that in itself is a whole field.

Merryn: Yes, but the planning side is very important though too.

Mark: It is, very.

Merryn: But for these purposes, this is more important. So, number one: be patient. Number two: read. Accept that you must have some knowledge of this. You have to learn something before you start.

Mark: Yes, you have to learn something.

Merryn: You have to know the basics.

Mark: But you also need to be in an investment frame of mind, or actually not be a spender.

Merryn: Well, what is an investment frame of mind?

Mark: Well, I divide people up to spenders and savers. And there are lots more spenders than there are savers.

Merryn: But aren?t we both at different times of life?

Mark: Not the sort of people I know.

Merryn: No?

Mark: They just like spending all the time. Well, I?ve always been a saver, but then I?ve been a bit old fashioned. Because my parents ? well, my mother?s still alive ?I have a devil of a job getting her to keep the central heating on, because she?s of that ilk from the Second World War, where things were rationed and you fought for things.

Merryn: Yes, but this is a mistake, isn?t it? There can be too much saving. I mean, we want your mother to be warm.

Mark: I do, yes. I do, exactly.

Merryn: And we want her to have a nice convertible car at some point before the end and we want her to have nice holidays. So?

Mark: It?s a, it?s a combination of the two.

Merryn: So there are two problems here, aren?t there?

Mark: Yes, there are.

Merryn: Some people save too much and some people won?t save at all.

Mark: It?s not, it?s not in my view many people save too much. And they don?t start early enough either.

Merryn: Yes. How early do we have to start?

Mark: As soon as you can. As soon as you?ve got any money. So basically, in your 20s.

Merryn: Well, for young people today, that?s 50, right?

Mark: Yes, well, that?s what they say. But I reckon most people can save something if they really want to. Of course, in my day, you only had an endowment savings plan; there wasn?t anything else. You?ve now got unit trusts, investment trusts, savings plans, which is cheap and cheerful, which you can start for roundabout £25 a month.

And I know people say, oh, I can?t afford that. But actually once it goes out of your account, you forget about it. And it?s amazing how much that totals over the years. So just start. For god?s sake, just do something. Don?t just sit there, do something.

Merryn: OK. So save, start, then be patient ? by patient you mean, remember that investing is a long-term game. This is something that if you?re going to put money into a stockmarket, you need to know that you?re there for ten years.

Mark: Yes. You?ve got to think of ten years-plus. Unfortunately, I think someone told me that the average holding period for funds is more like four years now, which is absolutely ridiculous. It?s way too short. And someone actually suggested that the industry should change because of that. But I actually think that?s wrong.

Merryn: The industry should change the way they manage the money?

Mark: Yes, that was what was suggested to me by someone in the industry. And I said, well, that?s completely ridiculous.

Merryn: Well, because we know you can?t successfully invest?

Mark: You can?t?

Merryn: ? over a four-year period, don?t we? It just doesn?t work like that.

Mark: It doesn?t work. So that?s just a nonsense. It can?t, it can?t work like that. So you?ve got to look over ten years-plus. And because you also know that you?re going to have some pretty bad times, but you don?t probably know when they?re going to come around as well. And that?s when your real?

I mean, in a way, you?re battling yourself, because you?re your own worst enemy usually. And reading and seeing the newspapers ? you look at 2008, you think, my god, it?s the end of the world. How many people sold out of investments? Even regular savings plans? At a time when anything? If anything, you should have just stuck tight. And actually if they do the savings plans, they would have made a lot more money.

Merryn: Did you see that at Hargreaves Lansdown? People stopping saving into their regular savings accounts during the crisis?

Mark: We saw a few people doing that.

Merryn: Yes.

Mark: Not hundreds, because actually the great thing with regular savings plans is people do tend to forget them. It?s actually when they get the damn statements, you see. And very early stage people get put off; they say, oh, I put £2,000 in over three years and it?s worth £1,500. Oh, this is no good.

Merryn: I?ll take it out.

Mark: OK I?ll take it out.

Merryn: OK, interesting. So do you think that one of the things perhaps that the government could do to help would be to stop with all this transparency and reporting nonsense, and just not insist that brokers send out statements? Let people send the money in, send them a statement every five years or even every ten years.

Mark: Well? No, that would be great, but it wouldn?t work. It?s a bit like quarterly reporting for companies. it?s ridiculous, quarterly reporting?

Merryn: Yes, why should we care every quarter.

Mark: But in a way, technology?s made it worse. I mean, Hargreaves Lansdown, you can check your portfolio 24 hours a day on the other side of the world.

Merryn: Who does that? What percentage of Hargreaves Lansdown clients look every day?

Mark: Well, quite a few people look every week.

Merryn: Do they?

Mark: Yes, they do.

Merryn: Interesting. I can never remember my password.

Mark: So you don?t look very much. But you?re right. You shouldn?t, you shouldn?t actually be looking very much, because that?s what makes you start making decisions.

Merryn: Yes, well, this is, this is the other thing that I thought you were going to say when? Which is included, I suppose, in be patient, which is don?t look, don?t trade.

Mark: Yes. I think masterly inactivity. But that is in itself incredibly hard to do when? Especially when you switch on the news and? you think of 2008 of all the things, Bear Sterns, Northern Rock, Lehman?s, all those problems. And the diet of ghastly comment coming from everyone and you just think, Oh, I just can?t stand this any more.

I think you should just turn the screen off and go and play golf or whatever takes your fancy. And just don?t look. But that is the hard thing to do. And I think people have just caught by their own emotion too much.

I mean, Warren Buffet actually didn?t sell anything. He was buying, if I remember, in 2008. I?m not saying he bought everything right, but he didn?t sell. He wouldn?t crystallise a loss. Why are you crystallising something you don?t need? If you?ve got enough in cash, you don?t need it. I?m telling things that are very obvious, but people just don?t seem to do it.

Merryn: But being reminded of the obvious is a very good thing. That?s what we?re trying to do here. So, OK, let?s say we?ve started reading.

Mark: Yes.

Merryn: What?? You say, we must read. We must have basic knowledge. When you say that, you mean about valuation techniques? You mean about what?s going on in the investment world in general? You mean about how funds work?

Mark: I think, I think almost all those things are a help. And some history as well of where you are in the stockmarket, history and valuation, whatever your valuation metric might be, but just looking at the past performance of funds might help. If you?ve suddenly gone up to 500% in two years, it might just suggest to you that something?s really been overcooked. So just some very, very basic stuff like that would be, would be a, would be really helpful to people. Rather than just looking at past performance.

Merryn: OK. Yes. Let?s say that I?m a young person ? well, I am a young person, obviously ? let?s say I?m a really young person and I?m just starting to invest, I?ve got a small pot and I?m going to set up a regular savings scheme from now on. And I?m going to indulge you by doing it at Hargreaves Lansdown. What should I be buying now? What am I looking at?

Mark: Well, in a way, you?re buying for the next 20 years, hopefully.

Merryn: Well, yes, although let?s say I?m buying for the next ten years. I?m not that young. Let?s say ten years.

Mark: All right, ten years, fine. I?d look at things like emerging markets and I?d look at things like UK smaller companies, because they?re slightly more volatile, but I think you?ll make the better gains over those years. And because you?re investing monthly anyway, they?ll iron out those fluctuations over time. And in fact, I can tell what I did, because when my son was born in 1990, that?s exactly what I did for him.

Merryn: And you just left that there?

Mark: And I left it. And I?ve only just given him the money at 25 actually. I wouldn?t have given him the money at 18, so I?ve broken, probably, all the rules.

Merryn: OK. And what was the, what were the average?

Mark: I have to remind people, in 1990, interest rates were at 15%, I could barely pay a mortgage. So I was putting about £20 a month away. Can?t remember. I think I gave him, I think it was worth about £19,000 when I passed it over to him.

Merryn: Have you got any idea what the return was compounded over that period?

Mark: I haven?t actually worked? I?m sorry, I should have sat down. What I can tell you, was the first four years were really good in emerging markets and then it really fell like a stone, from 94 to about 2000, which is just what you want from a savings plan. It really just plunged about 80%. And then, of course, over the last ten years, it?s been brilliant; it went up 500-600% over that time. Emerging markets have been great. So it?s good.

Merryn: But you?ve just told us not to buy funds that had gone up 500%.

Mark: Hey, but they hadn?t when I accumulated them all at very? lower rates.

Merryn: You just told us you would do the same today.

Mark: Yes. But emerging markets have had a really rough ride over the last four or five years. But I?m looking at I?m looking at it long term. And I think if you do monthly savings plans, you just pick a reasonable asset class and that?s what you should go for.

Merryn: Would you still go for Aberdeen? Hasn?t done that well recently.

Mark: No, it?s had a tougher time. I don?t know whether I?d be put off? I?d probably still stick with Aberdeen, yes.

Merryn: OK. So here I am, young person, and I?m going into Aberdeen emerging markets. And what am I doing small-cap wise?

Mark: Small-cap wise? Well, I could probably take someone like Marlborough without too many problems, or Standard Life. There?s a lot of good smaller company funds out there. Good fund managers out there. They should be fine over that time period.

Merryn: Who are your favourite fund managers to invest with for the long term?

Mark: Well, of course?

Merryn: And you know them all. Right?

Mark: Yes, I know. But, of course, because over the long term, it depends whether they?re going to retire nowadays.

Merryn: OK, let?s?

Mark: I?ve grown up with, I?ve grown up with some of them, but, I mean if I was going?

Merryn: Choose? Let?s choose ones who are under 60. OK? Under 50.

Mark: Under 50? No, that?s really tough, because most of the good fund managers are over 50, in my view. If I took a young fund manager out, I?d probably take someone like George Godber, who?s at Miton and he?s not very well known. He?s not actually on my list. He?s only got about a five-year track record, at the moment. But I think he shows all the promise of doing well.

Merryn: And what?s his fund?

Mark: It?s Miton UK Opportunities. But then I?m?

Merryn: OK. So that?s mainly small, medium cap?

Mark: It?s small- mid-cap. Very much a value play as well, which I like because value over the years?

Merryn: Value rather than growth?

Mark: Well, percentage-wise, if you want to play a percentage game, value tends to outscore growth over most timeframes, so that seems to work well. So he?s probably one that I would notice of that younger age. The problem with active managers is they have careers and they retire and they move or whatever.

Merryn: And they move, yes.

Mark: That?s the real?

Merryn: Particularly the young ones, they?ll move, right?

Mark: Yes. They?ll probably move in a couple years or so. That?s within the first few years. That?s just a problem of active management. If you don?t want that, then you just have to pick a passive and just go. But then even that?s a decision.

Merryn: Yes. Well, there?s no such thing as passive, is there? Because there?s always allocating it.

Mark: There?s an active decision no matter what you buy. Look, if you?ve just bought the FTSE 100 over the last ten, 15 years, you wouldn?t have done particularly well. But if you?d done the 250, you would have done remarkably well. So big, huge differences. So people who think that passive is easy are wrong as well. That?s? Even that?s quite a tough decision.

Merryn: Yes. Well, let?s go for the, for the older fund managers. If we must take one of these over-50s, who?s bound to retire any day?

Mark: No, I don?t think, I don?t think Neil Woodford is about to retire?

Merryn: Well, he?s just set up; it?d be embarrassing for him to retire now.

Mark: And I think he?d be one of the people that will probably die at his desk or whatever.

Merryn: He?s going to have to go a decade. Now, he?s done all this, he?s got to go a decade, right?

Mark: It?ll be more than a decade, because I think with Patient Capital, I think he?s over? I think his ambition is to take a company from start-up to FTSE.

Merryn: Patient Capital, just to be clear to readers who don?t know, it is his new investment trust.

Mark: Yes, that?s his investment trust. And I think that?s a real ambition, to take something all the way through. So I think he?d be around for 15 years or so at least. Actually Patient Capital investment trust would be fine for younger people because they?d got that sort of timeframe in mind, I think, which is great.

And people like Nigel Thomas, who?s at Axa Framlington, but he?s 60 years old now. Mind you, I did see him the other day and he?s?

Merryn: Looks all right?

Mark: He?s all right. He?s no plans to retire. And I go fishing with him all the time. It?s OK.

Merryn: But he wouldn?t say so, would he?

Mark: Oh, he would actually.

Merryn: Really?

Mark: Yes, people at that age and people like Neil have so much money, they don?t need to work.

Merryn: Well, that?s what I was going to say. I mean, these aren?t people who are going to care one way or another about the pensions regime, stuffing another 40 grand into their pension before April, etc.

Mark: No, they?re not going to worry about that. Exactly. They?d be more? Niels Torby [?] died at his desk at, what, 82 or 83 or something? Well, I?m not sure they?d do exactly that, but while they?re still enjoying it? It?s an intellectual challenge; that?s the way that a good fund manager will look at it. It?s a lot like being back at school. They like being top of the form, if they can. And so, why would they pack it in? You?d go to ruin.

It?s only those who can?t take the pressure and maybe just think it?s too stressful. People like Ashton Bradbury, who, sadly left the industry a year or so ago. Who I thought was one of the best fund managers I?ve ever met.

Merryn: And he what? Just had enough?

Mark: He worked really hard. He was very diligent. And he just said, I?ve had enough. But I tried ever so much to get him back in because I thought he was probably one of the most underrated managers but he would be in my top three UK fund managers. And then he retired. So those are all the problems with active management.

Merryn: Yes. Are you seeing good new fund management companies starting up? New boutiques?

Mark: Well, there?s one or two, but they?re not new because boutiques are set up by older fund managers, aren?t they?

Merryn: Yes, OK. But, older fund managers setting up good new companies.

Mark: So you?ve got people like Sanditon, which is Tim Russell; obviously you?ve got Woodford, and Richard Pease, and Crux as well. So there?s still plenty of things coming through.

Merryn: Yes, because it always seems that these small funds, when they?re starting out ? run by good managers at newish companies ? tend to do rather well.

Mark: Yes, I think they do. Well, they normally smaller funds as well.

Merryn: Yes, exactly. Smaller funds, slightly more nimble.

Mark: But with experienced fund managers. It?s actually quite a nice mix; in fact, it?s probably my favourite mix. Experienced fund manager, who then is in charge of his own destiny, not likely to leave, because it?s his company. So that?s the best you can probably go for. And Richard Pease, when we last looked, a year or so ago, not that you would have identified him from day one, but he?d made 36 times your money over his period. So that?s not bad.

Merryn: That?s not bad at all.

Mark: If you can follow those sort of people, you don?t do too badly, which is why we don?t spend too much time on asset allocation. At Hargreaves Lansdown, we try and pick what we think are really good fund managers and pretty much stick and hold with them, rather than saying, well, is America slightly better than the UK or whatever and try and do a lot of heavy asset allocation in that way. Because we think that you lose more money through that way than any other.

Merryn: Through asset allocation? Through trying to guess the future?

Mark: Yes, trying to, trying to guess. Trying to guess the future, really, is what most people end up doing and it?s just, it?s just not worthwhile.

Merryn: Yes. Now, it?s almost a pointless question, because the answer is so obvious. But you are a great believer in active management.

Mark: Yes.

Merryn: Is there a role, do you think, for passive investment? I know we?ve said there?s no such thing.

Mark: Yes, but?

Merryn: At asset allocation where you?re always taking?

Mark: No?

Merryn: But is there a role in a portfolio for using passive funds and long-size active funds?

Mark: Yes, there is where you can?t find a decent active manager. It?s really hard to find good active managers in the States.

Merryn: Really? Why is that?

Mark: I have no idea. But I?m sure there are in the States, by the way, but we have a real struggle. And if you ask other groups, they have the same struggle of finding someone? Where is the Neil Woodford in America? Where?s the Nigel Thomas? We find that really hard. A tracker might be a better route there. You can see, on our list, we have one fund at the moment and that?s done really poorly of late as well. It?s a really, really tough market.

Maybe it?s a very inefficient market. It? Maybe that?s the? Where you should track. So I?m not really, I?m not against a passive in that way. And actually from a beginner?s point of view, that might be the place to start. And our view?s always been? Well, my view in the book is to just get people investing, and that means passive.

I think the industry spends too much time bickering. You know, so we have a passive and active; we have the investment trust and the unit trust debate. And if you?re a beginner, you?d be looking at all this, thinking, well, these experts, even they don?t know what?s best. So what do I do?

Merryn: Yes, and a lot of this is the same. A lot of active funds aren?t that different to the trackers, etc, just a tad more expensive.

Mark: Yes. No, exactly. So we all end up arguing. But then to the beginner, they just go, ?forget it, I?m out?.

Merryn: Of course, the big upside to passives over actives is the cost.

Mark: Cost. Yes. I can?t, I can?t possibly argue. And costs have really plummeted on passive, unlike active.

Merryn: Well, that makes sense because these are, these are commodity, so they?re all the same.

Mark: Yes, they?re? Yes.

Merryn: So it?s just that there?s no way to argue about differentiation, so you can only differentiate on the price.

Mark: No.

Merryn: And obviously, the active, you can always pretend that this one is different to that one is different to this one, which is often not the case. You look at the top ten holdings of a lot of these big funds and they?re basically the same fund.

Mark: Yes, they are.

Merryn: They should be competing on price as well, but, of course, they?re not.

Mark: Well, that?s where my 90% comes from. To be a proper active manager, you have to be doing something that?s not benchmarked at all, really. And that?s where people like Nigel Thomas and Woodford come in: they do that.

Merryn: Yes. Now, we?ve talked about this a lot before, you and I, about what brings fees down in the active part of the sector. What is it that suddenly brings those costs down to make it look satisfactory from a MoneyWeek investor?s point of view?

Mark: Well, they have been coming down.

Merryn: They have.

Mark: So let?s start with the positive anyway. I felt it was going to be a bit quicker, but it?s not. And that?s partly because of legacy businesses that they?ve got. You?re actually asking them to knock a huge percentage of profits off, and I just don?t think that?s realistic. You might like to, but it?s not very realistic, so you just gradually grind it down.

Merryn: Yes they?re used to making super-profits, right? So why would they want to stop doing that?

Mark: Exactly. And?

Merryn: It takes a while.

Mark: It takes a while. But the good news is they are moving down. And the interesting thing is the new entrants, people ? I mean, Woodford?s an example ? he could have actually charged a lot more. But we?ve got him at 60 basis points. And what we do to try and beat managers up is say, well, if we can get him at 60, why can?t you do it at 60? So we can?t always get exactly that sort of price, but we?re getting prices between, sort of, 60, 65. And in fact, we?ve got a couple that are coming in under 60.

Merryn: So just for readers who aren?t in the industry, 60 means 60 basis points which is 0.6%.

Mark: Yes, exactly.

Merryn: Yes. I have this theory, I want to know what you think. That the thing that will really change the fund management industry and really change the way fee structures work is pensions freedom. Because we have all these people coming through, who, in the past? I mean, people don?t pay that much attention to the fees on their, on their investments when they?re saving, because you?re not really looking at them very much.

And in the old days, of course, they would reach retirement age and then they?d end up with a final salary pension, or more likely an annuity, right? So, again, what it costs is by the by. Someone else is managing it, it doesn?t affect them at all. They just get the money every month. They?re done.

But now, you?ve got a wave of people coming through who are very computer literate, very savvy about costs in every other part of their life ? you know, they spend hours on Which? looking for washing machines or whatever it is ? and they have a chunk of money, which they know has to last them for 30 years. So what are they going to look at? What is this costing me? And if they?re doing what you say people should do, which is use the equity market as nature?s annuity, have it pay you out a yield every year, and live on that.

Mark: Yes, that?s the safest way of doing it?

Merryn: And if you?re doing that, and you see that your costs are 1%, and your yield is 3.6%, 1% used to look like a tiny number, now any idiot can see that?s 25% of your returns going straight into someone else?s pocket. And this seems to me to be the cohort that will start putting pressure on the fund management industry to say, hang on a tick here; we?re all in this together, we?ve got 30 years to live. I can?t live on 2.5%. I need 4%. Your share?s too big. And that seems to me to be something of a consumer turning point for the industry.

Mark: It might be. I can see that? yes, but you?re assuming that all consumers are looking at it like washing machines. But they don?t on investment?

Merryn: Ah, but that?s my point. I think that they will.

Mark: Well, they may do in the future. I?m not saying that. You do in the press. You spend a lot of time on it, far too much time because?

Merryn: That?s because fund managers get paid more than journalist and it irritates us.

Mark: I know, I realise that ? in particular young journalists as well, who get paid next to nothing. And, yes, the fees could definitely come down. I think you might be right. But that?s still a very gradual thing. And they could switch to more passive, if they want to do that. They could get there now. But I?m not sure you?d get a really good natural yield type portfolio, diversified just through passives, in my view.

Merryn: No, I don?t think you would either.

Mark: I think that?s the problem. But you could reduce your fee down to some extent. And, yes, I think there?ll be more pressure.

Merryn: Yes, And when I think, by the time I retire, which sadly is many years away no one will be chucking 60 basis points at me. It?ll be, it?ll be 30.

Merryn: You know, if Baillie Gifford can do it for 40, right?

Mark: Well, that?s true.

Merryn: Why can?t everybody else?

Mark: Well, Baillie Gifford are a good example, because we?ve got one of their funds coming in at that sort of price for? actually it might be below, I can?t remember. So the pressures coming from people like us as well, because we?re saying, well, this group can do it at this, so why are you 20??

Merryn: Why can?t you?

Mark: Why are you 20? why are you 31 basis points higher in some cases? And one or two groups have got huge expenses on top. So they come in? This is where it gets complicated, but you?ve got a price at 75, but then there?s this other thing called expenses and some of the times, these are over 30 basis points. So we?re arguing with them where in fact, we don?t buy those at the present time. So we?re putting a lot of internal pressure, if you want?

Merryn: So you?re looking at their ongoing charges, really, as well as the management feel and say?

Mark: We don?t just look at the management fee. I want to know the expenses as well. And we?re saying, it?s no good coming in at a super 50 basis points, and then I find that I?m paying another 40 basis points of expenses. That?s no good to me at all.

Merryn: Backloading it or? Yes.

Mark: So I want an overall price. Neil?s is 60. So I?m looking at 60 and saying, is that the price? And that?s the price I want. I don?t want another 20 on top of that. And the good news is they are moving down. And the groups know they?re under pressure. The public quoted ones, it?s just to take a bit longer.

Merryn: Well, yes, they?ve got competing interests, of course.

Mark: They?ve got competing interests, but it will get there.

Merryn: OK. One last question. You know, my dream, my fund dream, is one large fund, really, unit trust fund or investment trust ? probably an investment trust, long term capital, etc ? that is a one-stop shop for readers who don?t want to do too much of the reading that you think they should do and don?t want to focus very much. They want one great fund?

Mark: Why don?t you just buy a big tracker?

Merryn: For all their money. No, they don?t want to buy a tracker.

Mark: Don?t you just buy a worldwide tracker?

Merryn: No, they don?t want to buy a tracker.

Mark: They want to buy a passive fund??

Merryn: No, they want to buy an active fund run by a clever asset allocator, who?s going to do everything for them for 20 years.

Mark: They won?t do that. No one will get that right over that time period.

Merryn: 30?

Mark: Asset allocation?s so difficult to do. You know, it probably would be an investment trust. You?d probably buy one of the international trusts.

Merryn: And what personal assets does, right?

Mark: Yes. It?s?

Merryn: Except for they don?t go into emerging markets and so on. So they?re not? It?s not global.

Mark: So I don?t think they?re wide enough, so you?d have to end up looking at something like Scottish Mortgage, one of those sorts of companies. But I don?t like those because they?re trading at a premium.

Merryn: Yes, you don?t want to pay for a premium.

Mark: I don?t want to pay a premium for things.

Merryn: So this is, sort of, like an old-fashioned balance managed fund, sort of, thing?

Mark: Yes.

Merryn: One great one. There must be something you can think of for our readers.

Mark: Well, actually, no, not off the top of my head. I?d have to come back to you. There isn?t very much. It?s really hard to find that sort of thing, because they have their moments in the sun, as we call it, and then, sort of, crash and burn. Because the trouble with asset allocation is fund managers get themselves blinded and then they think they?re more powerful than the market and more right. So I can think of some few good managers who?ve blown up in the last few years.

Merryn: OK. Will you think about this for us?

Mark: Yes. No, I?d be delighted. No.

Merryn: Will you think about this for us? And if you can think of one. And viewer, if Mark comes up with a good answer, it?ll flash up on a screen now.

Mark: Very good.

Merryn: Mark, thank you very much.

Mark: Cheers, thank you.

Merryn: And finally, Mark?s book, Effective Investing by Mark Dampier.

Mark: Thanks, Merryn.