THE strong performance of unit linked managed funds in the first half of the 1980's generated a sense of security among savers and as the decade passed it wooed an increasing number of savers away from bank and building society deposit accounts.

These traditionally secure, if relatively low yielding, deposit havens also lost ground to An Post's Saving Certificates and the various guaranteed bonds issued by the insurance companies. These proved themselves to be ideal products for truly risk averse investors because interest rates were so high that they provided real returns for depositors.

But in the second half of the 1980s there was a strong warning shot across the bows of equity based unit fund managers when Black Monday in 1987 toppled share prices on stock markets throughout the world. In Dublin the Irish market lost almost 48 per cent in value between October 19th and December 11th.

The crash sent shivers of concern through the investing public, and drew some attention to the whole question of unit fund pricing and refocused investors' minds on the whole concept of risk and reward.

In fact, the 40 per cent recovery in the price of Irish shares over the following nine months showed that professional investors, at least, had not lost their nerve. By the end of the decade the managers of unit linked managed funds were still able to report an impressive 87 per cent average growth over the previous five years - black Monday notwithstanding.

Nevertheless, the 1987 crash had sown seeds of doubt in many savers' minds by reminding them that share prices could indeed go down (and quite spectacularly) as well as up. A further series of mini crashes and recoveries in markets in the early 1990s further undermined people's confidence about stock market related savings products.

As interest rates continued to decline, savers began to long for the sort of returns usually only possible through risk investments, such as equities. This time, however, savers did not just want their cake, they also wanted to eat it!

They wanted good returns, but with a significant minimisation of the risk. Given the continued attraction at this time of An Post's extraordinary non market related returns on its certificates, this set a real challenge for savings product engineers.

Competition in the market benefitted consumers because it squeezed margins and, to an extent, led to increased transparency on in built charges. The strong attractions of the single premium with profit endowments diminished when the assurance companies scaled down their reversionary bonuses and investors began to consider more carefully the implications of effectively tying their savings up for a full 10 year term.

The most recent development to have taken the fancy of investors and marketeers has been the tracker bond, already an almost universal product throughout the financial services industry which enables deposit takers and insurers to compete on pretty well level terms for the same customer with the same product.

Trackers have their undoubted strengths, giving stock market linked returns with guarantees on both capital and interest. But they have their limitations, too. In particular they lack flexibility, in that they have a fixed term and the investor's access to his or her money is usually severely restricted or simply not possible - both disadvantages which do not apply to unit fund investments.

In the future an increasing number of savings product engineers will recognise the real attractions for customers of offering well structured "combined products", ones which offer the higher potential growth and access to funds provided by a unit fund, but are also supported by the guarantees of a tracker fund. EBS, for example, has recently launched such a fund which has received a warm reception in the marketplace.

One of the central issues for financial institutions, and not just their product designers, is the key issue of who they really believe their customers are. There is a high level of intermediary participation in the savings market and this has influence institutions' perceptions of the needs which should be met by their products.

Unit funds, with high entry charges and lack of guarantees, are a case in point for many institutions. It is unlikely that such funds will play a major part in any saver's portfolio in future unless these problems are property addressed. There is certainly considerable pressure on fund managers to tackle the fees and charges issue and much continues to be done.

There are, however, many investors still effectively locked into what are now "closed" funds. If no new business is coming into these unit funds, what incentive is there for the fund managers to perform to the best of their abilities?

There is potentially a huge market of dissatisfied customers who would dearly like to find alternatives. Product engineers will find it time well spent to develop alternatives which help people to switch between fund managers without incurring the usual heavy penalties for so doing.

In effect, that can only be achieved by further tightening of margins on the "replacement" products. One thing above all others is clear. Savers and investors want transparency, to know precisely what fees and charges there are and when and how they are applied.

They have a healthy distrust of small print in an industry which has traditionally been notorious for devising ways of hiding its charging, fee and commission structure.

There is also the small additional requirement for superior performance and curtailment of the risks that go with it. In the past the savings industry has, perhaps understandably, smiled politely at such unreasonable demands and continued to sell products designed to suit their own needs and those of their agents. But the tide has turned and the future lies with those organisations prepared to listen, to be innovative and to forego margin in order to deliver genuinely superior products which will win them market share.