After a rare moment of introspection and self-doubt, the chairman of the insignificantly-sized investment company Kermitted Asset Management revisits a foundation stone of business survival
“Do you think I’ve made a terrible mistake?” asked the chairman of the insignificantly-sized investment company Kermitted Asset Management when we caught up the other day. “I’m going to need a bit more context before I answer that,” I hedged. “What particular era, jurisdiction or questionable choice of venture-slash-business partner are we talking about here.”
The chairman gave me a funny look and took a long sip from his glass. “It’s nothing to do with anything I may or may not have done in days gone by,” he replied eventually. “As you well know, I have plausible deniability on all business concluded right up to the end of 2019 – the many highs, occasional lows and each and every unexplained FCA break-in, server failure and highly-localised filing-cabinet fire.
“No. What I am reluctantly edging towards acknowledging as my first-ever mistake in however many decades it’s been in Her – sorry, His – Majesty’s financial services industry is getting involved with this whole ESG affair. And, more specifically, going so whole-heartedly, unambiguously and wiggle-room-free into one single area of investment.
“Seriously – what can I have been thinking to have ignored a foundation stone of business survival?” “Q’s last words to 007 in The World is not Enough?” I said immediately. “Q’s last words to 007 in The World is not Enough,” confirmed the chairman. “‘Always have an escape plan.’” “Words to live by,” I nodded. “No argument there,” sighed the chairman. “And live by them I do – or at least did.
“It’s Diversification 1.01, really – majoring in dotcom stocks in early 2000? Make sure you have a structured products business on the side. Alongside that, perhaps move to a nice side-line in split capital trusts, then an offshoot into absolute return or 130/30, a quick diversion into collateralised debt and, fast-forward 10 years, you have a cheeky side-hustle in patient capital – and then what did I do?”
“You went all-in on ESG,” I said. “I went all-in on ESG,” the chairman sighed again. “Given the environment at the time – no pun intended – it seemed a no-brainer. Then again, you know what I say about no-brainers.” “They don’t involve any use of the brain,” I dutifully replied. “Still, to be fair to you, in early 2020 ESG felt like something special – not just an investment trend but the investment trend for the coming decade and more.”
“Exactly,” sighed the chairman. “And also to be fair to me, how was I to know the world’s regulators would step in and make things so complicated that, within a few years, asset managers, intermediaries and end-investors alike would start concluding the game was not worth the candle?” It was my turn to give the chairman a funny look. “I jest, of course,” he continued.
“Of course, it was only a matter of time before that happened. And, yes, I know there’s a fighting chance all these articles, labellings and other varieties of green tape are being introduced with the very best of intentions – no matter what the road to hell is paved with. There can be no argument investors need to be protected, whether that be from, quote-unqote, ‘bad actors’ or, no quotes required, themselves.
“Yet I’m getting a nasty sense of déjà vu all over again – whereby the collection of capital and its allocation towards objectively sensible causes becomes at least a dozen times more complicated than it might be. Thus, rather than heading from the ‘A’ of ‘I need a savings pot’ to the ‘B’ of ‘Diversified portfolio of positive assets’, people go straight to the ‘OMG’ of crypto, NFTs and the latest tips on TikTok.”
If ever the chairman had needed a boost, it was now – so please forgive what I said to him next. “Listen,” I began. “I appreciate the good ship Kermitted seems to be steaming straight for a regulatory minefield but, regardless of your uncharacteristic wholeheartedness in this endeavour, have you ever come across a field of investment so ambiguous in its vocabulary or so packed with wiggle room? I know someone who has made a career from a fraction of that – and who should also remember the first half of Q’s parting words to Bond: ‘Never let them see you bleed.’”
