Brian Tora, investment director of stockbroker Greig Middleton, for example, recently admitted to having half his pension money in Standards Life's unitised UK managed and equity funds, as well as 25% in fixed-interest stock and corporate bonds, with the balance mainly in investment trusts. Not exactly a racy portfolio.
The problem is that few professionals have an overall view of the investment market. You may be an absolute whiz at Japanese warrants but do you know a zero-dividend preference share from a guaranteed growth bond?
Private client stockbroker Peter Hargreaves of Hargreaves Lansdown confirms that many in the investment industry are prepared to take risks professionally. 'But when it comes to their own money, they are pretty cautious,' he says. 'They seem to take the view that since their income and bonuses are dependent on the stockmarket doing well, they don't want to double up on the risk and put their savings into the equity market.'
This is hardly surprising with the FTSE 100 hitting new highs. At 6,000 plus, the downside risk in equities is far greater than any prospect of short-term gains, and it makes sense to be careful.
Marc Gordon of Close Fund Managers, specialists in 'protected' mutual funds, agrees. 'There are a lot of people looking for low-risk, secure investments. We have a lot of the investment community as clients.'
Cynics might point out that this could well be because only the professionals appreciate just how bad fund management is.
When you take into account that the average UK growth unit trust actually lost money for investors over the past year, turning a 1,000 (€1,490) investment into 994, the index-tracker approach looks eminently sensible. Richard Branson has a valid point.
For the 36 months ending March 22, 1999, the top performing UK index-tracker was safe old Marks & Spencer's UK 100 Companies, turning a 1,000 investment into nearly 1,800. Not bad when you consider that the average UK growth fund showed a return of 1,500 over the same period.
Since four out of five fund managers never outperform the relevant index, a tracker fund will always be better than average and if you want to remain in equities, this is a perfectly sensible route to take.
There are 52 index-tracking funds on offer, mirroring the performance of a variety of indices from the FTSE 100, FTSE 250 and FTSE 350 to the Dow Jones, Nikkei and various European indices.
The table (left) shows the top 10 tracker funds over the past three years (to March 22 1999) with their one- and five-year performances and ranking alongside. Investors in HSBC'S American Index fund have doubled their money in 36 months.
If you are truly risk averse, an alternative is Close Brothers' range of Escalator funds which offers capital security, plus returns linked to the performance of various stock markets.
'Most stock markets are characterised by periods of outstanding growth, maybe 20% to 25% in a short period of time, followed by a collapse. What we aim to do is capture normality,' says Gordon. 'Our investment strategy reduces risk and smooths out volatility.'
The Close UK Escalator 100 fund offers the opportunity to eliminate the downside risk from equity investment. The return of your capital is guaranteed.
In addition, a proportion of any gains made by the index is locked in each quarter, the exact amount depending on the cost of the guarantees.
Over the past year the FTSE 100 is up only 2% or 3% (although during the period it has been up and down by 25%). The Close UK Escalator 100 fund (which offers 100% capital protection) has shown a return of 5% on the year.
Close also has a World Escalator fund, a US Escalator fund (denominated in sterling) an American Escalator fund (denominated in US$) and European and Far Eastern (including Japan) Escalator funds.
Close promotes its funds as an alternative to with-profits bonds which have a similar profile - no downside risk and smooth returns from equity investment.
With-profits investments have been much maligned in recent years because insurance companies have been reducing their bonuses. But this diverts attention from the fact that bonus rates were historically high during the 1980s when investment managers were sitting on vast tranches of gilts, bought in the late 1970s, yielding as much as 15%.
And although bonuses have been reduced, they are still good. Lump-sum single premium investments, which appeal to the risk-averse investor, have done rather well.
A recent survey (see table below) of actual cash-in values shows that the top performing with-profits bond over the last five years (to January 1, 1999) was from CGU Life.
It has shown a return of just under 59% over the period. CGU Life turned an original investment of 25,000 into 39,748 - not bad for something with no downside risk. It has also done well over three- and four-year periods. So has the Norwich Union With-Profits bond which has been the top performer over the past two years, showing a return of 23%.
But if you feel safer out of the equity markets, what are the alternatives? Gilts are yielding just under 5% gross with the very real possibility of capital losses if interest rates move upwards. So what else is available?
Zero-dividend preference shares, which have a pre-determined rate of capital growth, are a low-risk option. Huge interest in recent months has reduced returns - gross redemption yields are down to around 6% or 7%.
But there are still some attractive opportunities around. The entire sector has a negative 'hurdle rate' which means firms have already achieved sufficient growth on the underlying portfolios to be able to meet their commitment to zeros at redemption.
Richard Howell, investment trust specialist at Greig Middleton, makes the point that, 'there has never been a zero-dividend preference share that has not paid out the full redemption value. This is a safe investment.'
'We like Aberdeen Preferred, Gartmore Preferred Income and Growth, Henderson Geared Income and Growth and Geared Incomes zeros, because they have good asset cover and a reasonable gross redemption yield.'
Aberdeen has a gross redemption yield of 7.4 (as at March 19, 1999) with asset cover of 2.73% Gartmore British Income and Growth yields 6% with asset cover of 1.9% Henderson Income and Growth yields 6.7% with asset cover of 2.17% and Geared Income and Growth is yielding 7.3% with cover of 2.64%.
Average return on zeros over the past five years has been around 10% per annum. But the sector has been very active and prices, yields and cover are changing quite dramatically on a week- by-week basis. Howell says: 'The market is a little over oversubscribed at the moment.
'Zeros are ideal in situations where individuals cannot afford to take risks, such as school fees planning, pension planning and anywhere people need certainty.'
Peter Hargreaves takes a more speculative view. His zero recommendations are BFS Income and Growth and Gartmore British Income and Growth. Both have higher-than-average yields to redemption of 8.5% and 7% (as at February 28, 1999). The Association of Investment Trust Companies publishes a monthly table of zeros, with current yields, asset cover, hurdle rates and redemption dates.
A relatively new Enhanced Zero trust run by Aberdeen Asset Managers was launched in February and invests in a portfolio of other zeros.
Its yield-to-redemption on launch was 10% but it has proved so popular that the price has risen to 115p and the yield fallen to around 7%. Some 70% of the portfolio is in zeros purchased at an average redemption yield of 8%. The fund has 40% gearing.
There is also a useful facility to enable investors to get out with full value. The trust offers investors the opportunity to redeem shares at net asset value each year starting in 2001, which should prevent the share price slipping to a discount to NAV. If interest rates keep falling there should be some useful capital gains here.
The continuing fall in interest rates and gilt yields have focused attention on the corporate bond sector too, where higher yields of around 7% to 8% are still on offer.
There are over 70 funds available with varying risk profiles. But for those with short memories it is worth being reminded that 'the global bond default rate last year of 3% was at a 50% increase on the previous year,' warns Chris McGinty, head of fixed income at Murray Johnstone. In other words, there is a good reason why corporate bonds offer a higher return than gilts.
'High-yield funds should only be used within diversified portfolios and investors considering corporate bond funds should look carefully at the risk profile of some of the funds,' he warns.
Independent financial adviser Baronworth specialises in analysis of corporate bonds and produces a free information sheet listing all the funds on offer, current yield and a risk rating.
It also produces up-to-date quotes for guaranteed growth bonds, currently yielding around 4.5% to 5% a year, net of basic rate tax, on one to five year bonds - with a guaranteed return of capital at the end of the chosen term. (Higher rate tax payers may have a further liability).
This is equivalent to a gross rate of 5.8% to a basic rate taxpayer - better than gilts with no downside risk. Rates change on a daily basis.
The stock market collapse of 1987 produced a new breed of investment - the stock market guaranteed fund. Typically they offer 95% or 100% of capital protection over a fixed term, usually five or six years, plus returns linked to stock market performance.
This can range from 60% of gains made on the FTSE 100 or similar index, to 125% depending on the terms of individual bonds.
Largely offered by life companies, they are sold almost exclusively through independent financial advisers and tend to be on offer for relatively short periods.
Stock market guaranteed bonds achieve their aims by investing around 95% of your capital in bonds and fixed interest investments, using the balance of 5% to buy derivatives to cover the stockmarket guarantees.
'You have to look at every investment in terms of comparable alternatives,' says Martin Laverick of independent financial adviser Chase de Vere. 'If you put 10,000 into a four-year guaranteed growth bond, you will get back 11,793 at today's rates,' he explains.
'If you look at the AIG stock market bond, the structure of it would allow the stock market to fall by 17% before the return is below what you would get back from a guaranteed growth bond.'
The range of bonds on offer changes daily so you will need to contact an independent financial adviser for details of what is currently on offer. For example, Birmingham Midshires had one available last week offering a guarantee of 100% return of capital after five years, plus a return linked to growth in the FTSE 100 capped at 50%, equivalent to 8.45% a year compound.
There have been better bonds than this available but, even so, the return is still potentially much better than gilts and with no downside risk. You can't have everything.