Scots in the big game

The Scottish financial community is responsible for managing more than £225bn and Edinburgh is the fourth biggest equity management centre in Europe behind London, Frankfurt and Paris.

Scottish fund management groups have been particularly successful in the US, where companies such as Baillie Gifford, Martin Currie and Friends Ivory & Sime have been active. Most of the money managed by these groups is institutional pension fund cash, but there has been little retail penetration. This is not so much a sign of weakness but more of regulation and marketing muscle.

It is perhaps a step too far for an £8bn organisation to begin promoting retail funds against the might of companies such as Fidelity. It is far more sensible to employ more focused tactics with the intention of providing specialist skills to larger retail companies and pensions funds that are content to provide third party management to others.

It is difficult to say just why Scottish fund management groups have had significant success in the US but only limited results elsewhere. Many will attract revenue through surrogate vehicles such as offshore portfolio bonds.

In addition to fund management groups, Scotland is host to a number of large life assurance companies, many of which have been at the forefront of innovation in the UK, which itself has driven product development in many countries around the world. Edinburgh is home to Standard Life, Europe's largest mutual assurance company, which has assets under management of £70bn and runs operations in Canada and Europe and is believed to be considering developments in China and India. Several of these life companies have launched successful offshore subsidiaries as the relative attractiveness of that sector has grown in recent times.

From within the EU, Scottish Equitable International has achieved success in Italy from its Luxembourg base, while Scottish Mutual International has spread its wings a little further from Dublin. Scottish Amicable named its offshore subsidiary 'European' before its foray into Latin America resulted in an important name change to 'international'. The subsidiaries of Scottish Life and Scottish Provident are based on the Isle of Man, the leading offshore centre for life offices, and have achieved success in the Middle East, South East Asia and Africa.

All these companies have, in their own way, produced products that have broken new ground. Although Scottish Life International was only launched in 1996, it has already won 11 major awards for product design and marketing. Scottish Provident has also featured regularly in award tables.

The most interesting distinction in the geographical strategies of these companies is the tendency toward or away from regulated markets. Generally speaking, the offices based in the EU tend to focus more on countries where regulated status is necessary, whereas many of the other offices are content to operate in 'grey' markets such as the Middle East and Latin America.

Although seeking a license to operate under a regulated umbrella can be a costly and time-consuming exercise, it can also provide significant rewards as the company is likely to find itself able to offer far more modern solutions than the local suppliers.

For many years, the business mix of an average Scottish life office has resulted in more than 90% of the business coming from distribution elsewhere in the UK.

It is likely that the success of Scottish companies will continue as cross-border barriers are removed. Just as the innovation will continue, people will still believe in the good management skills of the Scots. Even in the internet age, there will always be room for the personal touch.

David Ferguson is director of product design and marketing consultancy at The Abacus E-mail: [email protected]

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