Edinburgh loses another investment trust mandate

Hopes of a deal to save the troubled Edinburgh Fund Managers were dwindling yesterday after the company revealed it had lost another investment trust mandate.

Shares in EFM fell more than 11 per cent to close at 74p after the announcement by the Edinburgh Smaller Companies Trust, worth £42m, on Friday that it was taking its business to the rival fund manager Standard Life Investments, "as a result of a sustained period of poor performance".

EFM announced last month that it was in talks with an interested party, but no bid has yet come forward. Isis Asset Management, majority owned by Friends Provident, was thought to be behind the approach but its sights may now be turning towards a bigger catch. The Britannic Group is also rumoured to be interested in EFM.

The loss of the Smaller Companies trust comes on top of the defection of two of EFM's senior fund managers last week. Robert Waugh, its head of UK equities, and Peter Cockburn, its UK equities investment manager, have both resigned to join SWIP.

"It would be better if the company could broker a deal as soon as possible instead of it lingering on, at risk of the business shrinking further," Sarah Horder, an analyst at Teather & Greenwood, said yesterday.

EFM's assets under management have halved since 2001 to £3.5bn. It suffered a major blow last July when it lost the contract to run the £1bn Edinburgh Investment Trust, which accounted for a third of EFM's funds under management. It has also now lost the £720m it manages for the Bank of Scotland and the £288m it managed for the British Coal pension fund.

Matters came to a head in November last year when a bloody boardroom battle between shareholders and directors forced its chief executive, Iain Watts, and four non-executives to resign.