Reflections from a Trainee Gadabout

One year in or one year out – I’m feeling shaken all about!

I am approaching the first anniversary of my retirement and like everything it’s a journey. (Sorry to use that tired cliché but it feels appropriate to me!). ?Excited by the prospect of being free of any corporate responsibilities and deadlines I initially defined my new status as “Trainee Gadabout”. By this I meant that I was hoping to occasionally have the opportunity to stick my nose into other people’s business as and when I fancied and more seriously to genuinely cheer on so many brilliant former colleagues, contacts and friends as they pursued their careers with all their different employers and hit new personal development milestones etc.

It would be disingenuous if I said I didn’t miss any of the buzz that I’ve left behind after a 36 year career amongst many of the nation’s smartest minds in my old industry. What a fantastic experience I enjoyed. I am still very thankful for that.

So it’s hard not to consider “what ifs” as you pick a different path to follow your instincts and dreams but right now, in this moment (as I return from a third wonderful “overseas adventure” this year) I think my head would be virtually exploding if I were still in the kind of professional position I used to occupy (ie forward thinking / strategist type role).

I sympathise with those who are professionally in a world that shows little sign of getting a consensual strategic grip of so many big and vital issues. Current world economic conditions exacerbated by apparent national incompetence make it harder than ever to garner support for long term strategic policies and actions relating to the environment, nature and social justice. We now seem to be living in the omnishambles era and its effects seem to be contagious.

Can there be a wrong time to make the right decisions?

We arrive at a time when global co-ordination and co-operation is most needed only to find that it appears least likely in terms of visible trend.?Science has told us that we know enough to realise that such is the size and urgency of the (climate and nature) challenge that it requires massive near-term collective responsibility and action. But instead, we observe fragmentation, populist individuality and new pressing problems on the rise. If the world is relying on transitional capital redeployment at huge scale, then I’m not yet seeing the breakthrough actions beyond the verbal commitments. They say necessity is the mother of invention. So I’m hoping necessity is ready to give birth to a strong set of triplets.

We can’t go on together with suspicious minds

Returning to a lower-level theme I’ve previously written about – populist opinion or extreme sentiment continues to dominate so many of the narratives , media content and comments. Do we see enough reasoned and measured content that is evidence based from relevant subject specialists? Trust has shifted away from experts and still shows little sign of returning. Experts might even be hiding as a result.

There has been a seeming lack of appetite for compromise and an absence of transparent, evidence based, debated and peer reviewed, subject specialist / expert led consensus policy making in Govt (I mean UK but could equally apply elsewhere). And really that picture reflects society in general. People are behaving similarly in our day-to-day decisions and beliefs. Weaponised words such as woke, and elite have successfully created wide scale mistrust of expertise and institutions that used to inform Govts and people (and to a lesser degree business). ?

I’m right and you’re an idiot

We seem to be condemned to a sequence of issues and policy choices that divide us 50/50 either side of viscerally held ideological barriers. ?Surely there are policies to be found where instead 70%/80% can accept it with compromises, fairly sharing the pain and proceed. There has to be pain. How else can we “get Britain moving” again?

Instead we are opening a maverick’s charter where more extreme positions, populist bluster and magic phrases seem to make sense and find platforms. And it rapidly spills over into real world business consequences.

It seems far more acceptable to simply own an ideological position on any subject (regardless of having any particular grounding, professional experience or education in said subject) and shouting loudly “I’m right and you’re an idiot” to anyone that contends it.?

Why? What happened to open humble curious minds? What happened to respecting institutions and specialists who make it their life’s work to educate us?

Don’t get me wrong, I’m all in favour of challenging the status quo and offering new solutions to emerging challenges - indeed it’s to be positively encouraged - but some of the lurching and discarding that results can be so damaging.

But recently I found myself doing exactly the same! For example, I was literally shouting “this is utter madness” at the TV as Kwasi was unveiling his mini budget live on air (it was idiotic right?). I’m sure so many of you were too but here it was actually happening … live … not in a twitter point of view way but in a real-world market moving way. Such blunders that were fully foreseeable without even having to think deeply about it! Madness.

Similarly, on the subject of LDI getting introduced to mainstream media with all manner of talking heads completely misleading the viewers and misunderstanding the topic (it was idiotic right?), I found myself shouting at the TV again. OMG – it was at this point (fortunately) that I went on holiday ….. (just returned)

I had hoped I might be quite a few years away yet from my “ranting at the TV“ stage of life (I was thinking ranting at whatever future media system we have in the future, fully hoping to outlive the TV).

There isn’t always a simple answer – no matter how enticing it feels

I’ve written before that we get what we deserve (can be found in my LinkedIn Articles section) but to be fair few of us have had any say in this latest political administration. What are we as a voting society learning from these experiences? Are today’s tools and mechanisms for communication and publication part of the problem or part of the solution? Can we actually save ourselves from our own collective behavioural traits? Possibly not.

I’d personally like to rely more on expertise and consensus please … but to many that seems to be inflammatory language. They emphasise the “mor(e) on” over the “expertise” part of that “rely more on expertise” phrase if you see what I mean.

In a 36 year career I essentially had two primary employers (lots of takeovers / brand changes etc ). However, both gave me an incredible amount of training and breadth of experience. Some may regard it as brainwashing! Even so I always felt as though I was picking my own interests within a smorgasbord of opportunities. And my hands on, real world practical experience amplified my understanding of my specialisms - both their strengths and their weaknesses.

Above all I learned that complex problems with many interdependencies never have simple black & white fixes that work in all conditions so we should expect to stay alert and frequently course correct in most things involving moving parts.

Indulgent though it is, I’d pick a few key areas that I think were reasonably recognised as specialisms for me via a sustained combination of academic and real-world business implementation and monitoring.

Some example topics that I feel reasonably qualified to speak about rather than just sell one side

1)?????Active vs Passive investing. An evergreen “debate” and a complete waste of time and effort. This is a perfect example of folk who want to pick a side and scream “I’m right and you’re an idiot” at each other. Anyone who does so misunderstands the subject (and typically bypasses portfolio construction detail and asset allocation policy amongst other aspects if it is to really be about successful long-term investing). But it can never be an either/or treatise.

I would however be in favour of a “high-cost vs low-cost investing” debate to get closer to a more informed outcome. (Not a new suggestion by me)

I haven’t time or space to unpack my reasons for my “waste of time and effort” conclusion to treating this as if there were a right vs wrong debate to have, but 13 years at BZW/BGI in a business actually pioneering indexation solutions amongst institutions has contributed to my understanding of this subject. Plus, a further 18 years advising clients who have adopted either or both approaches.

2)?????LDI. Liability Driven Investing. I have been a strong proponent of these solutions for DB Pension Schemes since the accounting regulations marked pension scheme deficits on sponsors balance sheets. I’ve advised on numerous LDI implementations since its earliest days in the early 2000s including very large and very small schemes. I’ve seen so many schemes successfully fully secure (insure) their member’s benefits as a result and I’ve also seen the opposite during the GFC and beyond of schemes that didn’t hedge certain accounting / funding risks failing their member’s full entitlements, bringing their sponsors down and being picked up by the PPF lifeboat.

Once again there is no space here to rehearse the arguments, but I’ll repeat as above that complex systems with many interdependencies never have black and white simple fixes that work in all conditions and don’t have risks of failure etc. What has upset me has been the volume of poorly informed commentary from a range of respected media absolutely sticking the boot in on issues they are not suitably qualified to comment on. Plus ca change, you might say.

From a PR perspective this is tough territory for COMBINED LDI and Pensions specialists to explain but explain they must. Many of you noticed and kindly liked my little Venn diagram I drew in response to this crisis. If we can get to centre ground informed conversation and lessons learned that will be great. Tackling our systemic problems only comes after blow outs not before (and solutions likely create new systemic problems). Ergo slow or absent advance solutions to pandemic, climate, nature etc…

3)?????ESG. I found it hard to ignore that my investment world was full of mathematicians and economists but lacked climate scientists and social policy makers. Intelligent folk are very adept at rapidly assimilating some information and conveying themselves as subject experts. Indeed, asset management and consulting rely on this “skill” such is the breadth of the canvas. It is the uncertainties in investment that I would hope would encourage a strong sense of humility amongst experienced practitioners but that doesn’t often sell well to Trustees, whereas confidence does. Ergo emerging ESG promotion and communication were often disconnected from the science and the deep-seated concern. I’m grateful to my years with the Cambridge Institute for Sustainability Leadership in plugging some of those (huge) gaps and giving me some better insights. Better still are the wider industry professional qualifications that are now a feature of those entering the professions.

Business definitely woke up to these areas (eventually) and coming into the Covid pandemic I was optimistic that strategic agendas were actually changing. Coming though the pandemic there were even signs that the penny was dropping too with more senior decision takers as the financial market consequences of low probability high impact events became more real. The trouble with climate change is it’s not low probability but the connection to financial markets may have become clearer for some. But the near term will always dominate and immediate pressures of recession, market dislocations, cost of living etc may see some CEOs cutting their ESG commitments if what I read is accurate. Many will cheer that development too.

4)?????Politics. In my career I was always guided to not mix politics and business. It was only on my last few years that I felt the courage to test that because I could not reconcile that these things were treated as if they were entirely independent. They are not. So, although I vainly suggest that I do (or did) have some expertise on the above three topics of Active vs Passive, LDI and ESG, I am definitely in the individual punter category on Politics. However, I would like to see business get braver here - we do get what we deserve and if we do deserve a better world for future generations then business has to lead on what so many see as a political agenda of social inequality, environmental sustainability and natural world protection. ?(I see it as investment risk). GDP as a dominant measure in of itself is part of our challenge to expand its definition and “growth, growth, growth” agendas without such an expansion are likely to do us more harm.

Have you got the measure of this?

As I reflect on the 4 cherry picked but topical subjects above one thing occurs to me is how our penchant for real time measurement is driving their take up or not. Our obsession with benchmarking and frequent measurement leads so called active managers to hug indices more closely than they should and play a game of survival rather than investment (Joe Wiggins wrote an excellent piece on that recently). Even more strangely it has given rise to the creation of millions (literally)! of different market indices – more than you can wave a measuring stick at. (Quick disclosure for many years I was a member of FTSE Russell's Policy Advisory Board - a governance role which helped my market indices knowledge)

LDI is only useful because it is a solution to a measurement problem created by regulation. I would quickly fold on my LDI suitability views if deficits weren’t marked to market on company balance sheets and funding codes didn’t dictate similarly. (Remember it was a response to MFRs shortcomings)

However, in the case of ESG it is the absence of measurement which slows its acceptance. Ironically once developed and embedded in business metrics these could be the most important variables humanity ever measures and monitors. Politics I guess is measured via opinion polls – certainly the (obviously) sentiment driven data drives political actions heavily.

My conclusion is measurement helps until our actions actually get dictated by it. In 3 of the above 4 topics that is the present case, in the other measurement hasn't even started to offer us guidance yet.

From Gadabout to Coddiwomple

It’s time for me to update my status from “trainee gadabout”, I’ve got nearly a year’s experience now and I think I can drop the trainee. Further I believe I’m due a promotion and I’ve offered myself the position of “Coddiwomple”. It’s defined as “To travel in a purposeful manner towards a vague destination”. That’s the kind of objective that suits me.

At some point I guess I’ll simply say “retired” but despite being a small cog in the retirement industry for so long it’s still not an apt description for the millions in that fortunate status who are still gadding about and coddiwompling around. Mind you, if markets continue to deliver 2022 numbers, then such planned activities will be very restricted and curtailed!?

Valuing difference

As a low-level contrarian, I’ve tended to want to quietly subvert a few common elements of received wisdom or popular sayings. For example, I’m often conscious of the saying that putting your head above parapet is risky (gets shot) … I know there’s no reason for me to get involved defending LDI recently for example (or indeed have any comment on an industry I've retired from) but when I saw so much poorly informed commentary sticking the boot in, I couldn't resist…

Ironically one of my favourite interests is scuba diving where you definitely get the most rewards by keeping your head down and keeping quiet!

Another personal favourite thought of mine was saying to myself “the early worm gets eaten by the bird” - which is why I never really embraced the idea of corporate breakfast meetings… although I seemed quite happy to burn the candle at the other end of the day not necessarily helping my career. Ironically in retirement I seem to wake up earlier! (Connected to less candle burning at night)

I do think corporate life is improving at embracing different lifestyle choices and personal preferences better now, however. In my defence of “expertise” I do want to see challenge from those without the specific credentials… but it would be nice to see more questions and less statements from those relatively new to a subject.

I digress … again. So my main point here is I like expertise and relevant experience and I think it gives a more grounded and rounded view as opposed to a more biased view!

Show us your credentials!

Wouldn’t it be great if every time we read an opinion piece in any media forum or listened to a speaker / video that there was a kind of kite mark to the authors expertise and experience in said subject? Too many commentaries in the last few weeks from folk googling the acronym “LDI” for the first time is just an example of anything trending in investment space.

Perhaps it's to be expected. After all, it applies at the very top. For example, I never expected a Chancellor of the Exchequer to be needing to google "balancing the books" or a Prime Minister to be needing to google “serving the nation”!!

Selfishly at a minimum I want my retirement savings and investments to not get quite so battered as they have in my first year of retirement in order to help me continue to plod along that new journey with continued excitement, curiosity, gadding and coddiwompling.

Stay well LinkedIn friends.

John Belgrove , Coddiwomple 17/10/22