The bosses of Alliance Trust Savings have a vision. They believe they can build a valuable business by charging a flat fee for administering portfolios. The fund management/admin business has waxed fat on percentages, that magic carpet of growing income whenever share prices rise or more money arrives to manage, so it’s hardly surprising that others take a dim view of flat fees.

ATS claims that an investor managing his own portfolio saves money once its value passes £100,000. By £200,000 it’s half-price, and so on. In a presentation to analysts, ATS projected annual revenue growth of more than 20 per cent, driven by increasing consumer resistance to percentage fees, and falling costs thanks to new technology. That looks plausible, and quite valuable.

ATS is a small part of Alliance Trust, once the biggest investment trust, but whose recent performance has been disappointing enough to claim the scalp of its head of equities after just two years. Last month Winterflood Securities, in the genteel understatement of investment trust research, described Alliance as a “jam tomorrow story.” The management reshuffle, the broker added, changed little.

Onto the share register, despite steady share buy-backs by the company at double-digit discounts, has crept the awkward squad in the shape of Elliott Associates. Investment trusts are notoriously impervious to hostile approaches, but Wins’ comments indicate growing unease with the leadership of chief executive Katherine Garrett-Cox. With its holding now 12 per cent, perhaps Elliott will find a way in.

All of which presents a dilemma for us ATS clients and Alliance shareholders. If today’s 12 per cent discount to net asset value could be eliminated, we’d be pleased. However, we’d be much less happy should some future board change strategy, and turn a flat fee into a fat fee.

They can’t both be right

A year ago, calling the turn in bond markets looked easy. Lending to the British government on fixed terms had been highly profitable, but last January an investor with a sense of history might have decided that buying a 20-year gilt on a redemption yield of 3.5 per cent was too risky.

Bad call. Far from falling, prices have carried on up. The 4.25 per cent 2036 stock, for example, has risen by a fifth in a year, to the point where it returns just 2.4 per cent to a buyer prepared to wait 21 years. The price is signalling that inflation really is dead, not merely taking a decade off.

In that case, you might argue, those once-fashionable inflation-proof stocks must be way out of style. Well, wrong again. They have joined in the fun, with the price of the 2 per cent index-linked Treasury 2035 rising by almost as much as the conventional issue. At today’s price it guarantees that a holder will lose 0.76 per cent a year of the spending power his money over the next 20 years. That looks an expensive hedge against inflation.

When the Bank of England first issued linkers, they were expected to go up when conventionals fell, and vice versa, as views on future inflation changed. It hasn’t worked that way. It seems that if inflation  expectations are high, buyers demand a higher return from both types of bond, and will accept lower returns all round when inflation expectations are also low.

Both types of bond are now priced for the perfect world that official projections always show is just a few years away. Experience teaches that it never arrives. Unlike a share price which can be supported by rising profits, bonds cannot keep going up indefinitely; the higher they go, the more exposed they become to the inflation that has always devalued paper money in the past. They look pretty exposed today.

Not here, not yet

Local authorities are constantly tempted to build new sports stadia. A higher profile, a boost for the local economy and all that fashionable infrastructure spending; never mind that many become white elephants thanks to maintenance costs. Now an analysis from Vice Sports concludes that in America it’s cheaper for the city to buy a football team than to subsidise a new stadium. Well, perhaps we’re not quite there yet, but we know where these things start…

This is my FT column from Saturday