Those in the investment industry need to focus on providing service to the customer rather than on ever more new and exotic products, Michael Bloomberg advised 900 delegates at a hedge fund conference yesterday.

The downturn in the world's markets and new technology have made investors more able and willing to search around for other providers who can give them what they want. A new investor activism is awakening.

"Everybody is discovering that they have customers, and that for the first time customers are starting to consider alternatives,'' Mr. Bloomberg said in a speech. He is the founder and principal of Bloomberg Business News, the financial analytical and media company used by many investment analysts on the Island and around the world.

In the past the investment industry focused on producing innovative products such as hedge funds and derivatives, using new techniques such as leverage, and entering new emerging markets such as Russia.

Due to the good markets it was easy to sell investment products that were constantly being manufactured by the industry. In fact, some managers didn't even bother to put their telephone contact number on their brochures.

Returns were good, and promises abounded. Then, with the downturn in the market, the products weren't as reliable as promised. With the advent of better communications and the Internet, investors are not able to compare performance and products more easily. Suddenly the competition has increased.

"Because the applecart has been upset the customer has become disenchanted,'' he said. ".. .For the first time in a long while the key word is service.

We have got to service our customers. We are going to have to provide that service we have been unwilling to provide in the past. We are going to have new relationships between buyers and sellers.'' That relationship includes a new customer activism. Investors are using the Internet to communicate with each other and share information.

"For the first time the customers are starting to get together, and that's scary,'' Mr. Bloomberg said. "For the next few years you have got to focus on the guy on the other side of the transaction.'' Others called for reform in the way hedge funds are being run, and the types of investors they cater to, so as to protect the long term growth of the industry.

Mr. Bloomberg was speaking at The MAR/Hedge 5th International Conference on Hedge Fund Investments which ended yesterday at the Southampton Princess.

BUSINESS BUC