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Pensioning-off truly independent judgment

Evening Standard
23 February 1999, 12:00am

When I started in the City, the name Ross Goobey was synonymous not with the institutional activism of Hermes, the pension fund management group run by Alastair Ross Goobey that looks after the money of Post Office employees, but with the Imperial Tobacco pension fund, which in those days was run by his father.

George Ross Goobey was famous way beyond the confines of pension fund management because he decided shortly after the Second World War that equities were a better bet than gilts. He then invested the fund under his management according to that philosophy.

It is hard to imagine now what a radical step this was and how it flew in the face of conventional thinking. One did not do that in those days and Ross Goobey senior met considerable opposition from the City, which clung to the belief that pensions meant safety and safety meant gilts. But he did it anyway and over time delivered a performance no one could ignore. He then watched as the rest of the industry was forced to follow his lead.

Relevant to this is a report that the current trustees of the £2.3 billion Imperial Tobacco pension fund have decided to ditch their in-house management team, heirs to the Ross Goobey inheritance, and put out the bulk of the money they control to be run by City fund managers. The trustees are said to have become disenchanted by the in-house investment performance, and reckon that carving up the fund into smaller lumps and placing them with several managers will expose it to a range of management styles, and presumably deliver a more acceptable performance.

They may well be right, but given Imperial's history this is particularly momentous. Ross Goobey's genius was to ignore the herd, which the current trustees are now so anxious to join. If all the in-house pension management teams are ditched - and Imperial is not the first to take this route - with all the money given to one or more of the identikit fund management

groups, where will we turn for original thinking? Who is going to do the unconventional, go against the trend and exercise genuine independent judgment? Who will be free enough from the quarter-by-quarter commercial pressures to insist that 20,000 lemmings can be wrong?

City fund managers these days are so anxious not to be left behind that they are interested only in a handful of the largest stocks. Whole acres of the market are ignored.

If Ross Goobey were around today he would probably think the investment scene is going seriously off the rails. The difference is that he would find it very much harder to get a job where he would be allowed to prove how right he was.

Meanwhile, it seems like only yesterday that Enterprise and Lasmo, the two leading lights of Britain's independent oil sector were both members of the FT-SE 100 index. In recent weeks, with both companies struggling to come to terms with an oil price at devastatingly low levels, they have been exploring the possibility of a merger. It is a sign of how valuations have changed in recent years that even if the two were to do a deal, the combined company would still not be big enough to get back into the Footsie.

Not that it is likely to happen. The odds against a merger were always going to be long given the bitterness of the battle four years ago when Enterprise launched an ultimately unsuccessful bid. Now the formal abandonment of the talks is being widely predicted in advance of publication on Thursday of poor trading figures and extensive write-offs by Lasmo.

Time was when such bad figures would leave Lasmo vulnerable to a bid. But with the oil price near $10, there may be no one willing to try it.