'I ALWAYS thought I would be in Glasgow, that I would never end up in London, and never end up working for a bank - and it's great, it's fantastic, I wouldn't swap it for anything."

So speaks Douglas Ferrans, who after 20 years running investment divisions for Scottish Amicable and Britannia took the high road to London in June 2001 to take up a key role in the newly-merged Halifax Bank of Scotland.

Markets were crumbling, and the bank merger was sealed five years ago this month on September 10, the day before the attacks on the US.

Banks around the world were retrenching in fund management, and HBOS could only boast a ragbag of operations in Yorkshire (Halifax) and London (Clerical Medical) and a contract to run the dwindling funds for Equitable Life.

The new recruit began a weekly commute from his Newton Mearns home, which meant he might even miss the odd game at his beloved Rangers, in his mission to build a credible asset management brand that could compete with the City's giants.

However, five years on Ferrans, 51, says he was, after all, in the right place at the right time, enabling him to mould what is now a GBP96bn manager into one of the handful of leaders in delivering the new holy grail of fund management - liability-driven investing.

HBOS's need to catch up meant it was prepared to invest in its newly-named Insight Investments, giving Ferrans the firepower to take a short-cut to growth.

The result was an acquisition in January 2003, as the market was approaching final meltdown, of which Ferrans says frankly: "Without it we wouldn't be anything like what we are today."

HBOS pounced on Rothschilds Asset Management when prices were low, and outflanked Schroders, Investec, Mellon and Societe Generale in picking it up for GBP61m, or 0.4-per cent of assets under management. That bought it 121 investment professionals, strong City connections, and a platform to build a strong business in fixed income.

"It must have looked from the outside pretty horrific, " Ferrans says. "But the reality is it was relatively visionary of HBOS to make a significant investment in a new start-up fund management business at a time when other owners of asset managers - 80-per cent are in the ownership of insurance companies and banks - were effectively heading for the hills."

Half of the Rothschilds managers are still with Insight, including key executives led by Ferrans' deputy Abdullah Nafal. "He was the investment brains of the Rothschilds business, previously with Schroders, " Ferrans says. "The heads of all the fixed income areas are ex-Rothschilds, including Andrew Giles, MD of financial solutions, who had spent many years developing embryonic tools for modelling liability driven investing. That was a little nugget we found when we bought the business and had not appreciated was there."

That nugget has grown into Insight's "LDI + absolute return" strategy for pension funds, which has put it up alongside Merrill Lynch and Goldman Sachs in a fiercely-fought new market for the growing number of funds looking to reduce equities and to match their assets with their long-term liabilities.

"I believe that will translate into the retail market in the years ahead, " Ferrans says. "Index funds were an institutional phenomenon before they took off in the retail market. Now many assets are indexed, particularly those bought through bancassurance channels."

In other words, Insight is wellplaced to develop a new breed of bond-like retail funds aimed at ordinary investors buying through their banks, and seeking lower risks than equities. "Structured products will become much more the norm in the UK- predictability and stability will be the buzz words of the future. That is not to say equity investment is dead, but this model would be ideal for the National Pension Savings Scheme. I would be surprised if the government wanted a scheme that would produce the volatility and unpredictable returns of equities."

Another ambitious rival in the emerging LDI space is Standard Life Investments, which boasts its expertise in actuarial science. Ferrans comments: "I don't think a life background is necessary to be successful in that arena. The biggest competitive threat is going to come from investment banks." He also notes that SLI this month publicised a US survey ranking it sixth among global managers in assets accumulated outside the US, in a six-month period, with GBP1.3bn. "We have won GBP7bn of net new funds in that period, " Ferrans says keenly. "We don't subscribe to surveys which means we are not on their radar . . . we like to see ourselves as one of Europe's best-kept secrets."

It took Insight three years to claw its way onto the pitch lists of the all-powerful consultants, but the fixed income mandates have now begun to arrive.

The new brand has found it harder to build a presence in equities, with some well-publicised departures from its team in the past year. Ferrans says: "The trade press focus was on the six who left rather than the 20 we have recruited over the last 20 months." But he admits: "The core equity piece has been the hardest for us to fix." The group's GBP100bn of funds include GBP30bn of equities, of which GBP1bn is "high performance" funds aimed at the new market for specialised "alpha return" mandates, where Ferrans says he is optimistic of further growth.

Three years ago Ferrans targeted property, poaching two property boutique entrepreneurs to head up a new operation for Insight in the market's hottest asset class. This month the business is to be f loated off on the Alternative Investment Market as Invista, 55-per cent owned by HBOS, having grown its assets by 80-per cent to GBP8bn. On the effective loss of 8-per cent of Insight's assets, Ferrans says HBOS is happy with majority ownership of several assets (such as the St James Place wealth manager). He will be on the board. "We have outperformed our targets and we are the biggest investor in property at the moment - in 2005, we actually invested GBP1.7bn and in the first six months of this year it is GBP1.8bn." He says that when listed, Invista will rank close behind British Land (GBP12bn) and Land Securities (GBP9bn) in property assets. "This is what we believe will be the new way of managing

(property) in future . . . being listed gives us access to capital markets at times when we think it is appropriate."

Five years on from its creation, Insight Investments is holding its place as the third-largest manager of mutual funds in the UK (its Halifax bedrock still helps) with GBP19bn, behind Scottish Widows (GBP20bn) and Fidelity (GBP30bn), and it employs 525 at one City headquarters. "We have all our people working in London, " Ferrans says. "Other fund management businesses that have offices throughout the world and throughout the UK are running different companies with different cultures, different compensation schemes - we are trying to maintain a unified culture."

It makes the commute bearable. "I have many colleagues who spend 15 or 16 hours a week commuting, and I spend six hours, " Ferrans says. Back at Newton Mearns, the weekend emphasis has switched from watching Rangers to watching his teenage son playing football. The man who took the high road insists it was "the best decision I have taken".

Main assets

Born 1954 in Paisley.

Married with daughter (21) and son (13).

Graduated from Glasgow University.

Joined Scottish Amicable as actuarial student. 1983: Fellow of Faculty of Actuaries. 1987: Head of UK Equities.1995: Managing director, ScotAm Investment Managers.

1997: Negotiated sale from Pru to Britannic. 1999: Managing director, Britannic Asset Management 2001: Joined HBOS as chief executive, Insight. Board member, Investment Management Association.