Brian Tora column

I WENT sailing in the English Channel last weekend. The weather was hardly conducive to the type of gentle sea-born trip which I seek. Rolling waves thundered on to the shore, driven by the south-westerly wind. Venturing into the forecabin to retrieve a pair of waterproof trousers gave me such an up-and-down experience that I was put off my food for the rest of the day.

The stock market has had much the same effect this week.

A 200 point shift in prices is nothing these days. With still more gloom from the Far East, Wall Street had a seriously nervous day at the start of the week, only to have the position reversed when US Treasury Secretary, Robert Rubin announced a support package for the Yen.

Our own market merely trailed in the wake, taking quite a buffeting as a consequence. I know how it felt. We have seen some retrenchment, with the markets proving even more unforgiving than usual when companies err.

Yet after a set-back, prices can rally at the slightest excuse, demonstrating just how much liquidity has been building up and proving that not only can "pinstripe sheep" appear an accurate epithet for institutional fund managers, but that the risks of being out of line with the rest of the crowd has not been worth a candle.

Recent pension fund management statistics have shown many of the big houses under-performing their smaller rivals. This appears due in no small part to the cautious approach taken by a number of firms -1,000 points or more lower on the FTSE-100 index.

If you are managing tens of billions of pounds of pension fund money it is quite difficult to turn on a sixpence. The beneficiaries have been the index fund managers, like Barclays, but I remain concerned that these products have yet to be tested in a real bear market.

Meanwhile, we are faced with the dilemma of where to invest money. Moreover, problems in Asia and the emerging economies remain - and are perversely driving money into our own and other developed markets.

Last week, I wondered whether utilities would prove quite the defensive sector they have in the past. Since then it seems they have done nothing but hog the headlines. Electricity, in particular, has come in for considerable publicity, with further speculation on the Government's stance towards gas fired power stations and the regulator calling for more competition in power generation.

As with so many investments, good arguments exist on both sides. Utilities offer high yields and less demanding share valuations than elsewhere. On the other hand, they are subject to regulatory interference and could have a conflict between customers and shareholders - or so the consumers associations would have you believe.

In practice it is hard to see the Government intervening to force prices down. Such a move would be artificial, with the result that price rises might be needed later - perhaps just ahead of a general election. There are other issues - such as how to keep capital expenditure up for the water companies and to accelerate the restructuring of the electricity industry.

I am inclined to add utilities to the list of defensive sectors I believe private investors should conside it. United Utilities gives you a taste of both - with a high yield to boot. But there are others worth considering. Even Scottish Hydro, which must be worried about its pounds 200m planned investment in the gas-fired power station at Peterhead, has its attractions. One thing you can say for privatisation - it has sharpened up management. And good management is often the best reason for choosing a share.

Brian Tora is chairman of the Greig Middleton investment strategy committee