Correspondence: 29/12/2000 - to Messrs J. Sclater and C. Headdon, ELAS 38, Swains
Lane Messrs J. Sclater
and C. Headdon Dear Mr. Sclater and Mr. Headdon, I have been
asked by the Committee of EMAG to express our concern about the press reports
about disposals of sections of the Equitable's business. While we have no concern
about the disposal of the Permanent Insurance Company, which was not core to
the Society's main business, nor of the sales force who no longer have their
traditional role, we are very concerned to read about proposals for disposal
of the investment management function. Although it is not clear from press reports
what exactly might be sold, we are concerned that responsibility for managing
the main with-profits fund might be contracted out before there has been an
opportunity to review the extent to which it may be advisable to switch to cheaper
and possibly more beneficial passive investing, rather than the more expensive
active style of the past which may not have performed particularly well. (We
believe that there should be a thorough and objective review of past investment
performance compared with what could have been achieved by passive management
where there are indices and tracker packages available on the wholesale market).
We are primarily concerned that part of a sale may be a contract to manage the
with-profits fund, and this contract might lock in high management fees which
would be to the long term detriment of the members. As a subsidiary point we
are concerned that the Society's rush to sell this and that may look like a
fire sale, and consequently may not raise as much money as a more measured approach. |