Bankers have had a bad press. You may have noticed. Their vast rewards for sticking risks on the rest of us have caused widespread revulsion, producing vague promises to behave better in future. Yet one corner of this gold field remains unaffected. The fees paid for advice in contested takeovers remain as fantastical as ever.

When Severn Trent was attacked in May, the directors reached for Rothschilds and Citicorp. We don’t know the details, but we do know that the cost of repelling boarders was £19m, and that most of this went to the banks which organised the defence. The top bankers at Rothschilds and Citi are Crispin Wright and Simon Lindsay, respectively.

The £22 a share indicative offer valued Severn Trent at £9.5bn, and the advice from the banks plus lawyers at Herbert Smith was good enough to see off the attack, even though the bid price was 25 per cent higher than anything us shareholders had ever seen. The directors argued that the offer still undervalued the business, while unease about the disappearing water businesses of England also helped sentiment.

But the fee, for a month’s intensive work, is grotesquely out of proportion to the effort – and since the shares have rattled back to where they were before the approach arrived, it can’t be justified by the value added for shareholders. One day, maybe, those Severn Trent directors will be able to show why £22 a share was too low, justifying the £19m fees, and their own continued employment. By then, the bankers will have long since departed with their Lottery-sized winnings.

No prizes for Manny

Man Group’s website boasts that 132 investment professionals beaver away for its AHL flagship fund “looking for market trends and other inefficiences using heavily researched systematic trading models.”  It doesn’t say that despite a new CEO in the shape of Manny Roman, the recent performance following all this Oxford brainpower has been dire, and that capital has been gurgling out of AHL like  water from a bath.

From a peak of $24bn, the funds in AHL have halved, and the picture that Manny of Man will paint with the results on Friday will not be pretty. Man shares are effectively a bet on the performance of the AHL fund, and after shooting the lights out for several years, it has demonstrated that following market trends can seriously damage your financial health.

While other fund management groups made hay from the equity heatwave,  Man is gasping. Peter Lenardos of RBC Capital Markets reckons that $5.8bn left AHL in the first half of 2013, and expects a further $1.4bn to go in the second half. His forecast of a curiously-precise 77 per cent cut in the dividend – better, surely, if things are that bad, not to pay one at all – follows his calculated return on Man’s capital of just 4 per cent.

At some stage (presumably) the rot will stop, and AHL will make money for its investors again. But there will be fewer of them and its gruesome run will remain on the record, to remind us that even the clever-clogs in Oxford only beat the market by luck.

Dear Central Banker…

Please give us more forward guidance. The further ahead, the better, as far as we’re concerned.

It sounds wonderful, this forward guidance stuff. It takes so much of the risk out of investing, it’s a wonder we never thought of it before. Once upon a time, those fuddy-duddies at the Bank of England never offered their views on interest rates. They just posted the new rate when they thought one was needed. That’s all changed now; Mark Carney and his fellow central bankers are falling over each other to promise lower for longer. Yet for each number-cruncher in the Bank there are scores elsewhere, working with essentially the same information and trying to predict the future. The outsiders may not have the ability to print (or destroy) money, but the market is bigger than the Bank, and just as bad at forecasting.

As the excellent Andrew Smithers puts it: “Forward guidance raises the risks of poor judgement, but no major central bank seems to have modest assumptions about their fallibility. Sadly, there is no evidence that arrogance is associated with competence.”

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