What industry rules need to be changed so that billions of 💷 sitting in pension funds can be used more easily to invest in UK companies to stim ulate the economy?
Is it a risk thing?@PensionsAge @henryhtapper— Colin Bingle (@bingle_colin) July 21, 2024
Colin is a scientist, I don’t know him , I follow him for his expertise, he follows me for mine. He asks a reasonable question to which the answer seems obvious enough. We cannot legislate or regulate for a change in attitude , we need to trust that by choosing to invest in the right companies , we will reward ourselves and those we invest for, with superior returns. There is no reason why we should have a home bias in doing this other than it is easier to invest using our own currency and research which we can do ourselves.
Colin follows up
The rules don’t need changing, it’s the attitude to short and long-term risk. Great question Colin! https://t.co/0wBSl2TH4n
— Henry Tapper (@henryhtapper) July 21, 2024
I think Colin is right. Government cannot make rules to instruct us how to invest, it is our money or the money of people we invest for. But Government can make it plain that investing in the UK economy will be easy and rewarding in the long-term. Ironically, this is less likely to be about protectionism (the imposition of rules) as deregulation, where British companies can compete globally without let or hindrance.
Nothing fancy
We were discussing last week how to promote the Long Term Asset Fund that is being created by colleagues of mine at Disruptive Capital. It is a new fund that will invest in a variety of projects through a number of managers. I asked what the primary differentiators for the fund would be – the answer that came back was “simplicity, value for money and access”. There is nothing in that answer that exploits rules , simply investing in stocks that provide investors with value for their money with access to the right people is enough.
The fund won’t just invest in the UK , but it will have a home bias as people like Kate Bingham, who offers access to life science investments, is someone who our people know.
If there are opportunities abroad that stack up, then the fund is free to invest where VFM can be achieved through access to these investments. There need be nothing complicated about it.
The Government are right to focus on VFM
As I have been writing for the past five years, the efficient execution of investment management leads to higher long term returns. You need to know what you are doing and you need to find the right price to buy and sell.
But very little long-term value is locked up in the initial and eventual transactions. The long term value is unlocked over time by the investments themselves.
When I ask the investment people I work with where they see this long-term value, they talk about home-grown opportunities which they can spot and invest in. The regulatory position has very little to do with it.
Colin is right. We do not need to have rules to invest, we need conviction and the guts to take short-term risks for long-term gain.
I could do with a few more people like Colin in my life right now!