March 21, 2025 • 31 mins
UK billionaire Michael Spencer joins Merryn this week to explain why he’s betting big on Nutshell Asset Management’s trading strategy.
There isn’t much everyone agrees on in markets. But one thing you rarely hear an argument against is the importance of trading as little as possible. The higher your turnover, the higher your costs go and the worse your overall performance will be. So find good quality stocks you have faith in and hold them for the very long term—Warren Buffett or Nick Train style.
Or maybe don’t. Spencer, the billionaire behind one of the world’s biggest financial brokerage fortune, says the low turnover story is old hat. There has been a change in market structure, he says, and trading costs today are “microscopic” compared with even a few years ago.
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Speaker 1 (00:02):
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the show. Welcome to Maren Talks Money, the podcast in
(00:41):
which people who know the markets explain the markets.
Speaker 2 (00:44):
I am Maren Somerset Web.
Speaker 1 (00:46):
This week I was speaking with British billionaire Lord Michael Spencer.
Michael is arguably one of the UK's most successful entrepreneurs.
He's best known for ICAP, which you founded in nineteen
eighty six and built into one of the world's biggest
broken dealers, putting him among the City of London's most
prominent figures, and later became an ex Group. Next Group
which spends the sold to CME Group Inc. In twenty
(01:08):
eighteen in a deal that valued the UK firm at
three point nine billion pounds. In this conversation, Michael and
I speak about a new venture he's passionate about, Nutshell
Asset Management.
Speaker 2 (01:19):
Nutshell was founded in twenty nineteen.
Speaker 1 (01:21):
Last year Michael increased his stake in the operating company
from twenty five percent to just over forty percent and
took on the role of chairman. He's also a big
investor in the growth fund itself, having put in twenty
million pounds doing last year alongside a significant equity investment
in the management company has now put sixty million pounds
into this business. So we talk about why why is
(01:43):
he so confident in nutshell strategy and so confident in
Mark Ellis, who is the CEO. I also ask him
about the other investment opportunity CCS at the moment and
what do you think is the government needs to change
to make the city of London more competitive.
Speaker 2 (01:57):
Hello Michael, thank you so much for joining us today.
Speaker 3 (02:00):
Thank you, it's a pleasure to be here.
Speaker 1 (02:02):
The first thing I want to talk about is this
fund management business Nutshell. So you own part of the company.
You are heavily invested in the fund that the company runs,
and your chairman of it. So obviously this is a
fund management style that means quite a lot to you.
So I wonder if we could start by talking about Nutshell.
Speaker 2 (02:20):
What is it that brought you to that.
Speaker 4 (02:22):
I built my careerity though starting a company called ye
Caap and it finished up as a very good story.
But I've always followed the stock markets to the world,
and really I guess that's my passion. And in recently
traditional investing has become profoundly out of fashion as everyone
wants to go towards index linking and passive management as
opposed to active management. There's too much criticism of active
(02:43):
managers taking two bigger fees and not generating performance. And
four or five years ago I met Mark Ellis, who
set up Nutshell. It's been formally a derivative trader RBS.
Although I didn't know him personally, he was quite a
big client to ICAP, the firm that I then ran,
and he had a very very.
Speaker 3 (03:01):
Good track record as a deprivative.
Speaker 4 (03:03):
Trade But he was also likely passionate about the stock
market and one people develop an analytical system that can
process a lot of data over thousands of companies, not
just in one market, but in the global market, to
be able to access data on a huge basis, to
give an analytical scoring to large numbers of very you know,
thousands upon shares on a real time basis, and to
(03:26):
create a matrix that would score stocks that when they
got to a very high score, you bought them. But
even because you bought them didn't mean you then owned
them forever. If they went from having a very a
very cheap rating, so you start buying them.
Speaker 3 (03:43):
He also took the view that if those stocks then.
Speaker 4 (03:46):
Became expensive because the statistics had changed or the share
price had changed, that you could actually sell your holding
as well. So it is actually a genuine active asset
manager which has, relatively speaking, compared with many active as
is quite a high stock turnover. Buy things when they
are cheap, seldom when they become expensive, and process the
(04:08):
data of literally tens of thousands of stocks worldwide from
Japan through to the United States, obviously the very biggest market,
and the performance of his project speaks for itself to me.
In past six years it has had only one down year.
Speaker 3 (04:24):
The up years have been generous.
Speaker 4 (04:26):
I mean thirty five percent, four percent, twenty five, twenty
six percent, twenty seven percent five out of those six years,
and the down year was twenty two percent. Over the
past three years, Nutshell is in the top one and
a half percent of active funds. So it is possible
you might say either this is a good project or
it's just a lucky project. And I've watched Dick cafln
(04:48):
have to really believe that what Market's done, what he
has built here is a superior active management system for
a platform, and I backed it with quite a lot
of my money investing in the fund and also in
taking an equity state and also becoming chairman.
Speaker 1 (05:06):
And when you look at the numbers so far, the
fund is outperformed well, I guess you would see it
its main compatitive Fundsmith. And because you had a bat
withan all the papers, a bat with Terry Smith that
Nutshell without form Fundsmith and Dean it did and you
donated twenty thousand pounds to.
Speaker 2 (05:22):
Charity as a result.
Speaker 1 (05:23):
Blue Whale, who we've had on the podcast from the
past and again has this quality growth bias, but one
where you hold the stocks for a long time, and
same of course with the nick Train, who also hasn't
behaved particularly well recently. Blue Well by the Way had
but nick Train again a similar kind of idea. Let's
find these these quality growth companies, let's buy them when
they're cheap, and let's hold them untill they're expensive, but
(05:44):
over a long period of volatility. Whereas what appears to
be happening in at Nutshell is you take that idea,
buy good companies when they're cheap, sell them when the expensive,
but you do it over a much shorter time period.
Speaker 3 (05:55):
And we're much more opportunity to stay, yeah.
Speaker 2 (05:57):
Much more atenistic. And then you have very very high turnover.
Speaker 1 (05:59):
And of course, one of the things that I've written
about for decades and everyone else writes about too, is
it one of the greatest killers of performance is turnover
and the costs that come with turnover. So what Nutshell
is doing is something that journalists, wealth managers, IFAs, etc.
Have been explicitly avoiding for a long time. Very high turnover.
Speaker 4 (06:19):
Yes, but I think there is a slight change, if
I might say, in the market structure today. A lot
of the Nutshell transactions are done at close of day
market auctions, so there isn't a bit off a spread,
and execution commissions today are microscopic actually compared with what
they wear several years ago, and pure execution commissions are
(06:42):
really very low friction cost. So I think that the
arguments against transaction costs are less powerful today than no where,
certainly decade or twenty years ago. When I started at
the stock market, commission rates were more than one percent,
and if the modeling outperforms that friction, we grain alpha.
And hitherto that has been the case, and I believe
(07:04):
and hope it will continue to be interesting.
Speaker 1 (07:06):
Well, we talk a lot about activersive passive on this podcast,
and we tend to have a bit of a bias
towards active.
Speaker 2 (07:12):
We try not to be biased, but of course we always.
Speaker 1 (07:14):
Are, and I'm very pro the idea that there will
come a point when there will be a return towards
active And some of the research that we've looked at
over the last couple of years is suggested to us
that the genuinely active do outperform on average over most
periods of time. It's just that inside what we consider
to be active funds, there are an awful lot of
(07:35):
funds that remain to a degree closet trackers. If you
look at funds and you look at their active share
you will more often than not find that funds with
a very high active shareer with something else that makes
them genuinely active do unperform passive.
Speaker 4 (07:50):
And I think that's a fair criticism because obviously, if
you're running very big active funds, one thing you're terrified
about doing falling anywhere, you know, far away from your
benchmark indices, and that drags you all this psychologically towards
being a closet tracker, whereas Nutshell absolutely is not in
that category at all. We don't attach ourselves to any
(08:11):
particular benchmark.
Speaker 3 (08:12):
That we represent we beat.
Speaker 4 (08:14):
We're out there just to beat the market and hopefully
outperform as many of our competitors as we can. And
of course there is a sort of an interesting intellectual
mathematical contradiction here if everyone became only invested on a
passive basis, and there'd be very little discrimination about evaluating
them what's the right share price for a company?
Speaker 3 (08:34):
Because obviously, if you're a passive.
Speaker 4 (08:37):
Fund manager, you treat everything on an equal basis, and
you only allocate your gap in relation to the market gap.
You don't ever at any point have a discussion whether
you think Nvidia is cheap or expensive, or what are
the parameters will make it worth buying or not worth buying,
or for a stotl like obviously Tesla another interesting one.
Speaker 1 (08:55):
So there comes a point when passive destroys the price
discovery of the market.
Speaker 4 (09:00):
It undermines it dramatically. Yes, of course it does. It
means the investors who are impassive effectively not taking a
view whatsoever about any individual stock at all. They're just
saying we want market exposure, and to an extent, also
reinforces markets when they become overvalued and undervalued. When people
are all piling in because it seems like a good
(09:20):
thing to do, you can get the extremities of bull
market runs taken to have a greater heights because momentum
effect of investors piling in is exaggerated. They make no
effort to ask themselves are stocks expensive or cheap at
the moment?
Speaker 1 (09:33):
And is this where we are at the moment? Oh,
we had a point perhaps with the US market where
the constant inflows are passive. And again these unquestioned flows
into the US market via passive fund that's given us
this situation it's incredible concentration at the top of the
market thirty seven percent of the US market top ten shares, etc.
Which we hear about all the time. Do you think
(09:54):
this is a function of genuine quality and value whatever
their evaluations, Messa, but value at the top of the market,
or is it a function in part of these passive
flows and hand liable to severe disruption.
Speaker 4 (10:09):
I think the answer is that the predominance of passive
investing has been an exacerbator on market valuations. Yes, in
some instances, you obviously them get into the specifics world
which ones and clearly the US has undoubtedly being dramatically
and be normally successfully dynamic in being the crucible of
so many of these great companies that have emerged in
(10:31):
the United States in the past twenty years, all the
names that are familiar to it, Magnificent seven and many
others do and we haven't seen that really mirrored in
the European markets and to a lesser extent elsewhere in
the world. But yes, I do think it has probably
lifted evaluations. And I'm taking personally a fairly cautious few
on the markets right now. I think our valuations have
(10:52):
been lifted to very high numbers.
Speaker 3 (10:54):
And obviously we're in a complete new.
Speaker 4 (10:56):
Political paradigm with the arrival of President Trump and is
approach to global trade and commercial issues, particularly his attitude
toward terarists, which I personally think are ultimately damage to
the United States as well as other countries around the
world and global trade certainly.
Speaker 1 (11:13):
Yeah, and this brings us into an environment where there's
much more volatility across markets, which probably plays into the
way Nutshelle operates for starters. But it does mean that
what the thing at the moment is this shift from
US equities over into European equities and maybe a little
into UK equities, etc. We might be at the point
where this shift away from American exceptionalism or what we
have perceived as American exceptionalism, is beginning, possibly a decade
(11:38):
or turning point.
Speaker 4 (11:40):
I mean to a degree, I actually think the United
States does deserve a degree of credit for exceptionalism. It
has to been a nation that has had a wonderful
culture of innovation, creativity, money making. You know, going to
the United States, you notice that people are very, very
successful and make lots of money, a widely shared by
(12:00):
society and as a whole, whereas that's not really true
in the United Kingdom. And I think indeed, when we
get to talking about the success of investing in the
United Kingdom companies that list here, and entrepreneurship, this is
one of the issues that separates the United States from
the many countries, particularly uken European countries in terms of
the dynamism that people want to go out there and
(12:22):
build their own companies and become rich and famous, and
that has considered a great thing in the United States,
whereas in the United Kingdom a lot of people think
that if you've made a lot of money, you probably
made it dishonestly, and.
Speaker 2 (12:33):
You should certainly give it a lord for the government.
Speaker 4 (12:36):
You should certainly the government should be entitled to take
ever larger amounts on it because you have very broad shoulders.
And I think that is if you are talking about
the United Kingdom specifically. I think those subliminal factors matter
hugely in the long run, and the success of an
economy is whether we really celebrate economic systems or we
(12:58):
sniff it.
Speaker 1 (12:59):
Well, let's look at the UK then, and let's look
at the UK market something again. We talk about it
and write about a lot on this pot about how
can we make the UK market more attractive? And we've
talked about what makes America so attractive, and we're seeing
this shift in investor interest away from the US into
other markets at the moment. But in the UK things
(13:20):
really still look quite miserable, don't they. What can we
do to bring the UK back from the brink?
Speaker 4 (13:26):
They are sadly bleak, And of course the answer is
this can't be sorted out in a quick period of time.
It takes a whole cultural and ecosystem change, and there
are several factors that need to be addressed first and foremost.
I've always found it laughable that we are the only
major stock market still has stamp duty. And as I've
explained to Chancellor after Chancellor, if you say you're in
(13:49):
favor of the stock market being a thriving stock market
in the UK, why are we the only market in
the world that has stamp duty. It's a tax on transaction,
And as I said to very simply, if you have
a tax on action that lowers the volume of turnover,
of course it does. If you lower the volume of turnover,
that means the stock is less liquid. Investors will pay
a premium to have liquid stocks. So what you are
(14:11):
saying is, for fourth, the London market is less liquid,
therefore we're going to have lower rated stocks. And they
all look so well, is that really the only thing
that matters? And then it's not the only thing. But
if you are not prepared to abolish that duty, then
stop pretending that you're in favor of the London market
regaining some of its global power and global reach. That
(14:33):
is at the very beginning, that is a necessary condition.
It's not a sufficient condition, but it is a totally
necessary condition.
Speaker 2 (14:41):
Why can't they see that, Michael?
Speaker 1 (14:43):
I mean there are people involved in the industry at
every level who going constantly and say to them it's
got to go. You don't raise that much money from it,
and all it does is bit by bit destroy our
stock market. It would be the most wonderful signal to
the world that the UK is really open to business
to get rid of it. But they won't.
Speaker 4 (15:02):
Why because they say there's no votes in us at all.
All those on the left will say, we're looking after
our rich friends, we're looking after the investment bankers, we're
looking after the stockbrokers, and we need to rediscover the
narrative of actually making a long term argument. You know
what we are because London's an important financial center of
(15:24):
financial services are our larger single generator of revenue and
we need to be efficient and compete globally instead of
which I sadly I think the quality of our politicians
for a long time now has been that there are
no votes in this. It brings in a quite a
few billion into the treasury and we'll keep it because
(15:47):
it won't make any difference next week. We'll do it
in the future when things are better. It's always let's
defer this decision. And all it has meant is there's
been a slow drag on the London market that no
really exciting company wants to list in the UK. Klan
is not going to list in the UK, revolute as
to when it lists, when list in the UK, Lots
(16:07):
of companies are now moving their listing from the UK
to elsewhere, and this slow corrosion has now It really
is sad to see it. And respectively, I think the
chance of Rachel Reeve's doing this is non existent, but
the Conservatives had a chance and it's a chance they've squandered.
And although I am a lifelong Conservative, that angers me considerably,
(16:29):
and I will continue to make the argument in the
case so that hopefully at some point of not two
days of future, if we're back in power, that whoever's
are a new leader prime minister at the time will
address that there are other things that need to be done.
And the other one is the cultural issue of actually
supporting the idea that listed companies and people getting wealthy
is something that we want as opposed to looking only
(16:50):
at ways of taking their money, often by taxation. If
we don't celebrate our business success people nearly enough in
this country, those are the biggies that really damaged. It's
the wrong culture, the taxation of the government on corporate dividends,
stamp duty and generally just really celebrating entrepreneurship.
Speaker 1 (17:13):
So, my god, I totally agree with you on all
those things, but it's hard to grow back and that
it would be I think pretty difficult politically at this
point to reverse that action of Gordon Browns, despite the
fact it's one of the things that obviously we write
and talk.
Speaker 2 (17:24):
About all the time. What else could be done.
Speaker 1 (17:27):
There was talk before the election about a bridge, I said,
but that was done pretty quickly, and now there's talk
about cutting the cash I said, down to maybe four
or five pounds from twenty to try and encourage people
to push their money into the stock market. Of course,
who could know if that would be the UK stock market.
And then of course there is discussion about mandating UK
(17:47):
pension funds to push up the amount of money that
they put into the UK market from its current kind
of four percent of to maybe something more like ten.
Would you be approving of any of those ideas.
Speaker 4 (17:58):
I'm uncomfortable about mandatory struck. I think I would really
only consider that a feasible one if the government reversed
the position of the taxation of dividends, but they're not
going to do that, and the ice a debate. I
don't really know enough to be honest with you. I
guess it would be helpful, but it's not going to
(18:18):
be enough. Addressing one of those issues or turf those
issues is not going to reverse a sort of fundamental
The stock market used to be important in London. Now
nobody really cares, and we pretend to care, but we
don't really and that is a sad and ultimately very
(18:40):
bad thing for our economy.
Speaker 1 (18:42):
So when we talk about pretending to care, let's talk
about the current government and the extent which it talks
constantly about growth and how it's a mission to drive
economic growth in the UK. But when you look at
the policies of the current government, do you see growth
ahead or no.
Speaker 4 (19:00):
Sadly, they have got no concept of what it takes
to generate economic growth. They genuinely feel that the taxation
of corporations and individuals makes little difference to economic growth.
They believe that government are better at allocating resources than
(19:24):
the private sector, and they think that we are really
fine upstand, the good honorable left of center people. We
can allocate the money of the country's got, after all,
a rich country really in the right direction that will
bootstrap the economy outputs and generate fair, widely spread, great growth.
(19:45):
And all they're doing is taking money away from a
higher productivity part of the private sector to the public
sector where the productivity output is woeful. And the things
that shocked me about the first budget was not realizing
that a massive increase in national insurance on companies, by
the way, would not have an impact on employment or
(20:06):
employment decisions. A decision of such extraordinary, I mean naivety
would be a polite way of putting such a degree
of astonishing naivety that this would not backfire by a
significant change in employment structures, which consequently mean that they
backfired completely as a fundraising mechanism, on top of which
(20:27):
then proposing to introduce employment regulations which on their own
admission added five to seven billion a year onto the
cost of the corporate sector for no other purpose really
than to satisfy the trade union, their trade union paymasters.
So you coupled their taxation approach and allocation of resources
(20:50):
approach and their unfriendliness towards employment, and you think, how
can you possibly generate a material level of economic growth?
And at the moment our GDP growth rate it stumbles
along at point one point two point three percent. By
the way, our population is growing by one.
Speaker 3 (21:10):
Percent a year.
Speaker 4 (21:11):
So GDP per capita at the moment is shrinking, and
that number will not go up on any long term basis.
So they review their taxation of employment, and they review
the ludicrous and actually totally counteractive employment regulations that they're
proposing to implement.
Speaker 1 (21:31):
Yeah, now you have a record of being a very
strong sport obviously of the Conservative Party. When you look
at the current version of the Conservative party, what policies
would you support from them?
Speaker 4 (21:41):
I have been a lifelong Conservative, and although I disengage
quite a lot in the past eight years because I
felt the party really drifted away from being conservative, and
it was genuinely quite true that at some point it
was difficult to discriminate between conservative policy of certain of
(22:03):
our governments and where the opposition stood. And I felt
that we were profoundly mistaken in not being prepared to
make the arguments about the importance of the private sector,
why welfare was costing us too much money, and the
Party got overly distracted. Immigration is a big issue, by
the way, I absolutely accepted as a big easy but
(22:24):
the party become overly obsessed about immigration, and absurdly I
do think about illegal immigration. I mean illegal immigration is
fifty thousand a year, not a good number, by the way,
I'm not saying it is. Legal immigration was up to
nine hundred thousand, and I cannot understand what the Tory
Party or the Story government that I was thinking and
allowing that to happen. But we didn't do the right
things economically on taxation or motivation, or what it was
(22:47):
doing about productivity in the public sector or any form
of discussion about reform of the National Health Service, the
reform of welfare. So the Tory Party was defeated, as
you all know, the biggest electoral defeat ever in the
history of the party last year. It wasn't a defeat
that surprised me at all, to be honest with you,
and we deserved it. I mean, let's be honest, we
(23:09):
deserved it. We've been in a power for fourteen years.
Our record, with a few exceptions maybe around education and
a few other things, our overall performance we won't fall,
particularly in the past six years of that. And so
the Tory Party is now really trying to reassemble itself
and it had been guilty of a huge level of
infighting over the last several years, which was not just
(23:30):
unedifying but also destructive and actually.
Speaker 3 (23:33):
Getting their job done.
Speaker 4 (23:35):
And we've got a new leader in the party, obviously
can be bad, not whom I personally support considerably, and
I am looking to spend time with her, as are
many others, to help her and her.
Speaker 3 (23:47):
Team without rushing to conclusions.
Speaker 4 (23:50):
And I think she's right to not rush to a
co feast of policy out pourings. I mean, the Tory
Party still has a big job to do to re
establish its credibility. It's any form of dependability. I mean,
I know many many friends of mine who left the
party in the last election. Of many of them of
(24:11):
course the reform. And I can't be dishonest and say
I was surprised. The Tory Party has a long battle
ahead of it, but it is one that I have
certainly re engaged and will do my best to help
provide ideas, input and in any way that I can.
But it is a long journey ahead of us.
Speaker 2 (24:30):
And you saw friends moved to reform, tempted at all.
Speaker 3 (24:34):
No, no, I'm not.
Speaker 4 (24:37):
I'm notwithstanding the recent facts in the party. I rather
agree with Rupert Lowe who said Reform at the moment
is effectively a protest party. And it doesn't mean to
say I don't respect Farage.
Speaker 3 (24:50):
I mean, you know, he's.
Speaker 4 (24:51):
Clearly a politician, has had a big impact on the
whole of the political spectrum of the United Kingdom, and
after all he won remarkably well in the last election.
But I still consider it's not it is still for
the Tory Party to recover and re establish their credentials,
but it's not going to happen overnight.
Speaker 3 (25:11):
It's going to take several years and it's a long battle.
Speaker 1 (25:16):
Should we move back to what we're supposed to be
talking about, to investment into companies. You said earlier that
you were even nervous about the market as a whole
and markets being overvalued, and we were really talking about
America at the time. We were talking about the American markets,
which are significantly more expensive than most other global markets.
Most there are very few markets around that are actively cheap,
(25:38):
but almost all outside the US and knocking around historical
averages rather than anything else where. Would you invest at
the moment obviously with not Shell, but not Shell aside.
Speaker 4 (25:48):
Listen, if I have a negative bias about US equity
markets at the moment, and I do genuinely, this is
not a long term position. I mean the statistics are powerful.
Speaker 3 (25:59):
In the long run.
Speaker 4 (26:00):
Equity investing, well executed, well selected, produces superior returns to
fixed income or pretty much any other class. Obviously, there
are periods when you get remarkable things like Bitcoin getting
up to one hundred thousand bucks.
Speaker 3 (26:17):
I've never invested in crypto. If I do, make sure
you sell.
Speaker 1 (26:23):
Okay, so you have you're not a believer in crypto
and not a believer in any crypto, even bitcoin.
Speaker 4 (26:32):
I am not a believer in it as an investment asset.
If you want to say, I just I quite like
a flutter at the horses every now and then.
Speaker 3 (26:42):
We know that I quite enjoy going to a casino.
Speaker 4 (26:45):
I don't go to casinos, by the way, but I'm
having bitcoin because I think that's fine if so long
as you accept that this is a gambling instrument, it's
not an investment instrument. As you very well, every long
term research is shown that actually equity investing in companies
that invest in growing and briefing is a better long
term way of building your pension fund or or whatever
(27:09):
it is. So I do feel that the US market
is having the froth blown off in it. I mean,
I think what is happening on world tariffs is genuinely
quite negative. I suspect that Trump will backtrack on that policy,
but he went and do it quickly. And in the meantime,
(27:29):
it's the whole process of what he's doing.
Speaker 3 (27:31):
One day, one day in Mexico's having twenty five percent.
Speaker 4 (27:34):
Next it's been postponed for a month, and in Canada
and then China. This is provides a sort of unpredictably
in disruption that makes investing by companies and or by
individuals much more difficult, and therefore it is broadly not
good for the global economy. And so the trade war
(27:55):
that Trump is starting I think is a misjudged project,
and I think it will backfire on the United States
in time, and people may well reverse it, but the
damage will then have been done.
Speaker 1 (28:09):
One thing that you do yourself is invest in a
lot of private companies and unlisted companies. And one of
the concerns that many investors have had over the last
decade or so it's a lot of the growth now
happens off market, and so once companies are listed, possibly
not in the US, but nonetheless companies are listed on
much bigger size than they used to be, and so
a lot of the games that we used to get
(28:30):
from listed equity markets actually now come long before they're listed.
Speaker 4 (28:35):
There's still plenty of good stuff out there in the
listed marketplace.
Speaker 3 (28:38):
We at nutshell.
Speaker 4 (28:39):
I think mark Ellis processes ten thousand companies on an
ongoing basive across the globe.
Speaker 3 (28:47):
A portfolio is at largely.
Speaker 4 (28:49):
US, but the UK, Denmark, Sweden, France, Netherland, Tenada, and Norway, Germany, Taiwan,
if you've got the capacity to process that, which, of course,
as an individual reading analyst reports, you've got no capacity
to handle anything like that scale.
Speaker 3 (29:04):
Of course, there are good companies to look for out there.
That doesn't mean to say there's not a lot of
stuff that's good in private equity, do okay, And.
Speaker 1 (29:11):
We're seeing at the moment, we're seeing a small decline
in private equity asset under management globally, which is the
first one for a long long time, which I suspect
is a function of rising interest rates.
Speaker 4 (29:21):
Yes, rising interest rates a big component to the drive
of private equity in the nineties and of the early noughties.
Speaker 1 (29:29):
I tell you what, why don't we finish on Nutshell
because you just mentioned it again and talked about the
amount of companies that it looks at, And of course
that is one of the obvious places where AI suddenly
comes into its own right going through all these reports,
pulling out the relevant data, making everything extremely quick. Said
the nut shall, I know, operates with very few employees.
We're always looking for use cases for AI that make
(29:49):
a real difference, and this looks like the obvious one.
Speaker 3 (29:52):
Right it is.
Speaker 4 (29:53):
It's a pretty obvious one, absolutely, and it is a
sector investing which is right for the correct application of AI.
By the way, I do not represent myself as an
expert in AI at all, but I'm sure AI would
be like all those things in technology, using it without
knowing how to drive it. You've got to know how
to use the information and use the system effectively to
(30:15):
generate outcomes and re economically valuable.
Speaker 3 (30:18):
And so hopefully that is well.
Speaker 4 (30:20):
We appear to be doing that well enough, and I
think that will be one of the things that we
need to make sure we can continue to do.
Speaker 3 (30:26):
Right.
Speaker 1 (30:27):
It seems to me that we should try and get
your manager, Marc Ellis, get him on as well, talk
us through some of the companies and why they're held
and not held and how that works.
Speaker 3 (30:36):
Yeah, I do, Hil, Thank you so much. It's been
a pleasure to do this with you. Thank you very much.
Speaker 2 (30:45):
Thanks for listening to this week's marrin Dogs Money.
Speaker 1 (30:47):
If you like us, a rate review and subscribe wherever
you listen to podcasts and keep sending questions or comments
to Merrorn Money at Bloomberg dot net.
Speaker 2 (30:53):
You can also follow.
Speaker 1 (30:54):
Me and John on Twitter or x I'm at Marinas
w and John is John Underscore step Back. The episode
was hosted by Meat Marrit Somethings that Web. It was
produced by Someasadi and Moses and sound designed by Blake
Maples and of course very special thanks to Lord Michael
Spencer
Bloomberg Audio Studios, podcasts, radio news. Hello Maren Talks Money listeners,
I just want to find what you might have missed
and Saturday's Maren Talks Money newsletter, which now comes out
every Saturday.
Speaker 2 (00:15):
Do sign up. It's really quite good.
Speaker 1 (00:17):
This week I have written about what on earth is
going on in stock markets and what you should do it.
Is there really a regime change underway? Do good investors
recognize regime changes? How do they do that? And what
do you need to do as a result. That's kind
of interesting, So make sure to sign up for the newsletter.
Bloomberg subscribers only linkage in the show notes. Now onto
the show. Welcome to Maren Talks Money, the podcast in
(00:41):
which people who know the markets explain the markets.
Speaker 2 (00:44):
I am Maren Somerset Web.
Speaker 1 (00:46):
This week I was speaking with British billionaire Lord Michael Spencer.
Michael is arguably one of the UK's most successful entrepreneurs.
He's best known for ICAP, which you founded in nineteen
eighty six and built into one of the world's biggest
broken dealers, putting him among the City of London's most
prominent figures, and later became an ex Group. Next Group
which spends the sold to CME Group Inc. In twenty
(01:08):
eighteen in a deal that valued the UK firm at
three point nine billion pounds. In this conversation, Michael and
I speak about a new venture he's passionate about, Nutshell
Asset Management.
Speaker 2 (01:19):
Nutshell was founded in twenty nineteen.
Speaker 1 (01:21):
Last year Michael increased his stake in the operating company
from twenty five percent to just over forty percent and
took on the role of chairman. He's also a big
investor in the growth fund itself, having put in twenty
million pounds doing last year alongside a significant equity investment
in the management company has now put sixty million pounds
into this business. So we talk about why why is
(01:43):
he so confident in nutshell strategy and so confident in
Mark Ellis, who is the CEO. I also ask him
about the other investment opportunity CCS at the moment and
what do you think is the government needs to change
to make the city of London more competitive.
Speaker 2 (01:57):
Hello Michael, thank you so much for joining us today.
Speaker 3 (02:00):
Thank you, it's a pleasure to be here.
Speaker 1 (02:02):
The first thing I want to talk about is this
fund management business Nutshell. So you own part of the company.
You are heavily invested in the fund that the company runs,
and your chairman of it. So obviously this is a
fund management style that means quite a lot to you.
So I wonder if we could start by talking about Nutshell.
Speaker 2 (02:20):
What is it that brought you to that.
Speaker 4 (02:22):
I built my careerity though starting a company called ye
Caap and it finished up as a very good story.
But I've always followed the stock markets to the world,
and really I guess that's my passion. And in recently
traditional investing has become profoundly out of fashion as everyone
wants to go towards index linking and passive management as
opposed to active management. There's too much criticism of active
(02:43):
managers taking two bigger fees and not generating performance. And
four or five years ago I met Mark Ellis, who
set up Nutshell. It's been formally a derivative trader RBS.
Although I didn't know him personally, he was quite a
big client to ICAP, the firm that I then ran,
and he had a very very.
Speaker 3 (03:01):
Good track record as a deprivative.
Speaker 4 (03:03):
Trade But he was also likely passionate about the stock
market and one people develop an analytical system that can
process a lot of data over thousands of companies, not
just in one market, but in the global market, to
be able to access data on a huge basis, to
give an analytical scoring to large numbers of very you know,
thousands upon shares on a real time basis, and to
(03:26):
create a matrix that would score stocks that when they
got to a very high score, you bought them. But
even because you bought them didn't mean you then owned
them forever. If they went from having a very a
very cheap rating, so you start buying them.
Speaker 3 (03:43):
He also took the view that if those stocks then.
Speaker 4 (03:46):
Became expensive because the statistics had changed or the share
price had changed, that you could actually sell your holding
as well. So it is actually a genuine active asset
manager which has, relatively speaking, compared with many active as
is quite a high stock turnover. Buy things when they
are cheap, seldom when they become expensive, and process the
(04:08):
data of literally tens of thousands of stocks worldwide from
Japan through to the United States, obviously the very biggest market,
and the performance of his project speaks for itself to me.
In past six years it has had only one down year.
Speaker 3 (04:24):
The up years have been generous.
Speaker 4 (04:26):
I mean thirty five percent, four percent, twenty five, twenty
six percent, twenty seven percent five out of those six years,
and the down year was twenty two percent. Over the
past three years, Nutshell is in the top one and
a half percent of active funds. So it is possible
you might say either this is a good project or
it's just a lucky project. And I've watched Dick cafln
(04:48):
have to really believe that what Market's done, what he
has built here is a superior active management system for
a platform, and I backed it with quite a lot
of my money investing in the fund and also in
taking an equity state and also becoming chairman.
Speaker 1 (05:06):
And when you look at the numbers so far, the
fund is outperformed well, I guess you would see it
its main compatitive Fundsmith. And because you had a bat
withan all the papers, a bat with Terry Smith that
Nutshell without form Fundsmith and Dean it did and you
donated twenty thousand pounds to.
Speaker 2 (05:22):
Charity as a result.
Speaker 1 (05:23):
Blue Whale, who we've had on the podcast from the
past and again has this quality growth bias, but one
where you hold the stocks for a long time, and
same of course with the nick Train, who also hasn't
behaved particularly well recently. Blue Well by the Way had
but nick Train again a similar kind of idea. Let's
find these these quality growth companies, let's buy them when
they're cheap, and let's hold them untill they're expensive, but
(05:44):
over a long period of volatility. Whereas what appears to
be happening in at Nutshell is you take that idea,
buy good companies when they're cheap, sell them when the expensive,
but you do it over a much shorter time period.
Speaker 3 (05:55):
And we're much more opportunity to stay, yeah.
Speaker 2 (05:57):
Much more atenistic. And then you have very very high turnover.
Speaker 1 (05:59):
And of course, one of the things that I've written
about for decades and everyone else writes about too, is
it one of the greatest killers of performance is turnover
and the costs that come with turnover. So what Nutshell
is doing is something that journalists, wealth managers, IFAs, etc.
Have been explicitly avoiding for a long time. Very high turnover.
Speaker 4 (06:19):
Yes, but I think there is a slight change, if
I might say, in the market structure today. A lot
of the Nutshell transactions are done at close of day
market auctions, so there isn't a bit off a spread,
and execution commissions today are microscopic actually compared with what
they wear several years ago, and pure execution commissions are
(06:42):
really very low friction cost. So I think that the
arguments against transaction costs are less powerful today than no where,
certainly decade or twenty years ago. When I started at
the stock market, commission rates were more than one percent,
and if the modeling outperforms that friction, we grain alpha.
And hitherto that has been the case, and I believe
(07:04):
and hope it will continue to be interesting.
Speaker 1 (07:06):
Well, we talk a lot about activersive passive on this podcast,
and we tend to have a bit of a bias
towards active.
Speaker 2 (07:12):
We try not to be biased, but of course we always.
Speaker 1 (07:14):
Are, and I'm very pro the idea that there will
come a point when there will be a return towards
active And some of the research that we've looked at
over the last couple of years is suggested to us
that the genuinely active do outperform on average over most
periods of time. It's just that inside what we consider
to be active funds, there are an awful lot of
(07:35):
funds that remain to a degree closet trackers. If you
look at funds and you look at their active share
you will more often than not find that funds with
a very high active shareer with something else that makes
them genuinely active do unperform passive.
Speaker 4 (07:50):
And I think that's a fair criticism because obviously, if
you're running very big active funds, one thing you're terrified
about doing falling anywhere, you know, far away from your
benchmark indices, and that drags you all this psychologically towards
being a closet tracker, whereas Nutshell absolutely is not in
that category at all. We don't attach ourselves to any
(08:11):
particular benchmark.
Speaker 3 (08:12):
That we represent we beat.
Speaker 4 (08:14):
We're out there just to beat the market and hopefully
outperform as many of our competitors as we can. And
of course there is a sort of an interesting intellectual
mathematical contradiction here if everyone became only invested on a
passive basis, and there'd be very little discrimination about evaluating
them what's the right share price for a company?
Speaker 3 (08:34):
Because obviously, if you're a passive.
Speaker 4 (08:37):
Fund manager, you treat everything on an equal basis, and
you only allocate your gap in relation to the market gap.
You don't ever at any point have a discussion whether
you think Nvidia is cheap or expensive, or what are
the parameters will make it worth buying or not worth buying,
or for a stotl like obviously Tesla another interesting one.
Speaker 1 (08:55):
So there comes a point when passive destroys the price
discovery of the market.
Speaker 4 (09:00):
It undermines it dramatically. Yes, of course it does. It
means the investors who are impassive effectively not taking a
view whatsoever about any individual stock at all. They're just
saying we want market exposure, and to an extent, also
reinforces markets when they become overvalued and undervalued. When people
are all piling in because it seems like a good
(09:20):
thing to do, you can get the extremities of bull
market runs taken to have a greater heights because momentum
effect of investors piling in is exaggerated. They make no
effort to ask themselves are stocks expensive or cheap at
the moment?
Speaker 1 (09:33):
And is this where we are at the moment? Oh,
we had a point perhaps with the US market where
the constant inflows are passive. And again these unquestioned flows
into the US market via passive fund that's given us
this situation it's incredible concentration at the top of the
market thirty seven percent of the US market top ten shares, etc.
Which we hear about all the time. Do you think
(09:54):
this is a function of genuine quality and value whatever
their evaluations, Messa, but value at the top of the market,
or is it a function in part of these passive
flows and hand liable to severe disruption.
Speaker 4 (10:09):
I think the answer is that the predominance of passive
investing has been an exacerbator on market valuations. Yes, in
some instances, you obviously them get into the specifics world
which ones and clearly the US has undoubtedly being dramatically
and be normally successfully dynamic in being the crucible of
so many of these great companies that have emerged in
(10:31):
the United States in the past twenty years, all the
names that are familiar to it, Magnificent seven and many
others do and we haven't seen that really mirrored in
the European markets and to a lesser extent elsewhere in
the world. But yes, I do think it has probably
lifted evaluations. And I'm taking personally a fairly cautious few
on the markets right now. I think our valuations have
(10:52):
been lifted to very high numbers.
Speaker 3 (10:54):
And obviously we're in a complete new.
Speaker 4 (10:56):
Political paradigm with the arrival of President Trump and is
approach to global trade and commercial issues, particularly his attitude
toward terarists, which I personally think are ultimately damage to
the United States as well as other countries around the
world and global trade certainly.
Speaker 1 (11:13):
Yeah, and this brings us into an environment where there's
much more volatility across markets, which probably plays into the
way Nutshelle operates for starters. But it does mean that
what the thing at the moment is this shift from
US equities over into European equities and maybe a little
into UK equities, etc. We might be at the point
where this shift away from American exceptionalism or what we
have perceived as American exceptionalism, is beginning, possibly a decade
(11:38):
or turning point.
Speaker 4 (11:40):
I mean to a degree, I actually think the United
States does deserve a degree of credit for exceptionalism. It
has to been a nation that has had a wonderful
culture of innovation, creativity, money making. You know, going to
the United States, you notice that people are very, very
successful and make lots of money, a widely shared by
(12:00):
society and as a whole, whereas that's not really true
in the United Kingdom. And I think indeed, when we
get to talking about the success of investing in the
United Kingdom companies that list here, and entrepreneurship, this is
one of the issues that separates the United States from
the many countries, particularly uken European countries in terms of
the dynamism that people want to go out there and
(12:22):
build their own companies and become rich and famous, and
that has considered a great thing in the United States,
whereas in the United Kingdom a lot of people think
that if you've made a lot of money, you probably
made it dishonestly, and.
Speaker 2 (12:33):
You should certainly give it a lord for the government.
Speaker 4 (12:36):
You should certainly the government should be entitled to take
ever larger amounts on it because you have very broad shoulders.
And I think that is if you are talking about
the United Kingdom specifically. I think those subliminal factors matter
hugely in the long run, and the success of an
economy is whether we really celebrate economic systems or we
(12:58):
sniff it.
Speaker 1 (12:59):
Well, let's look at the UK then, and let's look
at the UK market something again. We talk about it
and write about a lot on this pot about how
can we make the UK market more attractive? And we've
talked about what makes America so attractive, and we're seeing
this shift in investor interest away from the US into
other markets at the moment. But in the UK things
(13:20):
really still look quite miserable, don't they. What can we
do to bring the UK back from the brink?
Speaker 4 (13:26):
They are sadly bleak, And of course the answer is
this can't be sorted out in a quick period of time.
It takes a whole cultural and ecosystem change, and there
are several factors that need to be addressed first and foremost.
I've always found it laughable that we are the only
major stock market still has stamp duty. And as I've
explained to Chancellor after Chancellor, if you say you're in
(13:49):
favor of the stock market being a thriving stock market
in the UK, why are we the only market in
the world that has stamp duty. It's a tax on transaction,
And as I said to very simply, if you have
a tax on action that lowers the volume of turnover,
of course it does. If you lower the volume of turnover,
that means the stock is less liquid. Investors will pay
a premium to have liquid stocks. So what you are
(14:11):
saying is, for fourth, the London market is less liquid,
therefore we're going to have lower rated stocks. And they
all look so well, is that really the only thing
that matters? And then it's not the only thing. But
if you are not prepared to abolish that duty, then
stop pretending that you're in favor of the London market
regaining some of its global power and global reach. That
(14:33):
is at the very beginning, that is a necessary condition.
It's not a sufficient condition, but it is a totally
necessary condition.
Speaker 2 (14:41):
Why can't they see that, Michael?
Speaker 1 (14:43):
I mean there are people involved in the industry at
every level who going constantly and say to them it's
got to go. You don't raise that much money from it,
and all it does is bit by bit destroy our
stock market. It would be the most wonderful signal to
the world that the UK is really open to business
to get rid of it. But they won't.
Speaker 4 (15:02):
Why because they say there's no votes in us at all.
All those on the left will say, we're looking after
our rich friends, we're looking after the investment bankers, we're
looking after the stockbrokers, and we need to rediscover the
narrative of actually making a long term argument. You know
what we are because London's an important financial center of
(15:24):
financial services are our larger single generator of revenue and
we need to be efficient and compete globally instead of
which I sadly I think the quality of our politicians
for a long time now has been that there are
no votes in this. It brings in a quite a
few billion into the treasury and we'll keep it because
(15:47):
it won't make any difference next week. We'll do it
in the future when things are better. It's always let's
defer this decision. And all it has meant is there's
been a slow drag on the London market that no
really exciting company wants to list in the UK. Klan
is not going to list in the UK, revolute as
to when it lists, when list in the UK, Lots
(16:07):
of companies are now moving their listing from the UK
to elsewhere, and this slow corrosion has now It really
is sad to see it. And respectively, I think the
chance of Rachel Reeve's doing this is non existent, but
the Conservatives had a chance and it's a chance they've squandered.
And although I am a lifelong Conservative, that angers me considerably,
(16:29):
and I will continue to make the argument in the
case so that hopefully at some point of not two
days of future, if we're back in power, that whoever's
are a new leader prime minister at the time will
address that there are other things that need to be done.
And the other one is the cultural issue of actually
supporting the idea that listed companies and people getting wealthy
is something that we want as opposed to looking only
(16:50):
at ways of taking their money, often by taxation. If
we don't celebrate our business success people nearly enough in
this country, those are the biggies that really damaged. It's
the wrong culture, the taxation of the government on corporate dividends,
stamp duty and generally just really celebrating entrepreneurship.
Speaker 1 (17:13):
So, my god, I totally agree with you on all
those things, but it's hard to grow back and that
it would be I think pretty difficult politically at this
point to reverse that action of Gordon Browns, despite the
fact it's one of the things that obviously we write
and talk.
Speaker 2 (17:24):
About all the time. What else could be done.
Speaker 1 (17:27):
There was talk before the election about a bridge, I said,
but that was done pretty quickly, and now there's talk
about cutting the cash I said, down to maybe four
or five pounds from twenty to try and encourage people
to push their money into the stock market. Of course,
who could know if that would be the UK stock market.
And then of course there is discussion about mandating UK
(17:47):
pension funds to push up the amount of money that
they put into the UK market from its current kind
of four percent of to maybe something more like ten.
Would you be approving of any of those ideas.
Speaker 4 (17:58):
I'm uncomfortable about mandatory struck. I think I would really
only consider that a feasible one if the government reversed
the position of the taxation of dividends, but they're not
going to do that, and the ice a debate. I
don't really know enough to be honest with you. I
guess it would be helpful, but it's not going to
(18:18):
be enough. Addressing one of those issues or turf those
issues is not going to reverse a sort of fundamental
The stock market used to be important in London. Now
nobody really cares, and we pretend to care, but we
don't really and that is a sad and ultimately very
(18:40):
bad thing for our economy.
Speaker 1 (18:42):
So when we talk about pretending to care, let's talk
about the current government and the extent which it talks
constantly about growth and how it's a mission to drive
economic growth in the UK. But when you look at
the policies of the current government, do you see growth
ahead or no.
Speaker 4 (19:00):
Sadly, they have got no concept of what it takes
to generate economic growth. They genuinely feel that the taxation
of corporations and individuals makes little difference to economic growth.
They believe that government are better at allocating resources than
(19:24):
the private sector, and they think that we are really
fine upstand, the good honorable left of center people. We
can allocate the money of the country's got, after all,
a rich country really in the right direction that will
bootstrap the economy outputs and generate fair, widely spread, great growth.
(19:45):
And all they're doing is taking money away from a
higher productivity part of the private sector to the public
sector where the productivity output is woeful. And the things
that shocked me about the first budget was not realizing
that a massive increase in national insurance on companies, by
the way, would not have an impact on employment or
(20:06):
employment decisions. A decision of such extraordinary, I mean naivety
would be a polite way of putting such a degree
of astonishing naivety that this would not backfire by a
significant change in employment structures, which consequently mean that they
backfired completely as a fundraising mechanism, on top of which
(20:27):
then proposing to introduce employment regulations which on their own
admission added five to seven billion a year onto the
cost of the corporate sector for no other purpose really
than to satisfy the trade union, their trade union paymasters.
So you coupled their taxation approach and allocation of resources
(20:50):
approach and their unfriendliness towards employment, and you think, how
can you possibly generate a material level of economic growth?
And at the moment our GDP growth rate it stumbles
along at point one point two point three percent. By
the way, our population is growing by one.
Speaker 3 (21:10):
Percent a year.
Speaker 4 (21:11):
So GDP per capita at the moment is shrinking, and
that number will not go up on any long term basis.
So they review their taxation of employment, and they review
the ludicrous and actually totally counteractive employment regulations that they're
proposing to implement.
Speaker 1 (21:31):
Yeah, now you have a record of being a very
strong sport obviously of the Conservative Party. When you look
at the current version of the Conservative party, what policies
would you support from them?
Speaker 4 (21:41):
I have been a lifelong Conservative, and although I disengage
quite a lot in the past eight years because I
felt the party really drifted away from being conservative, and
it was genuinely quite true that at some point it
was difficult to discriminate between conservative policy of certain of
(22:03):
our governments and where the opposition stood. And I felt
that we were profoundly mistaken in not being prepared to
make the arguments about the importance of the private sector,
why welfare was costing us too much money, and the
Party got overly distracted. Immigration is a big issue, by
the way, I absolutely accepted as a big easy but
(22:24):
the party become overly obsessed about immigration, and absurdly I
do think about illegal immigration. I mean illegal immigration is
fifty thousand a year, not a good number, by the way,
I'm not saying it is. Legal immigration was up to
nine hundred thousand, and I cannot understand what the Tory
Party or the Story government that I was thinking and
allowing that to happen. But we didn't do the right
things economically on taxation or motivation, or what it was
(22:47):
doing about productivity in the public sector or any form
of discussion about reform of the National Health Service, the
reform of welfare. So the Tory Party was defeated, as
you all know, the biggest electoral defeat ever in the
history of the party last year. It wasn't a defeat
that surprised me at all, to be honest with you,
and we deserved it. I mean, let's be honest, we
(23:09):
deserved it. We've been in a power for fourteen years.
Our record, with a few exceptions maybe around education and
a few other things, our overall performance we won't fall,
particularly in the past six years of that. And so
the Tory Party is now really trying to reassemble itself
and it had been guilty of a huge level of
infighting over the last several years, which was not just
(23:30):
unedifying but also destructive and actually.
Speaker 3 (23:33):
Getting their job done.
Speaker 4 (23:35):
And we've got a new leader in the party, obviously
can be bad, not whom I personally support considerably, and
I am looking to spend time with her, as are
many others, to help her and her.
Speaker 3 (23:47):
Team without rushing to conclusions.
Speaker 4 (23:50):
And I think she's right to not rush to a
co feast of policy out pourings. I mean, the Tory
Party still has a big job to do to re
establish its credibility. It's any form of dependability. I mean,
I know many many friends of mine who left the
party in the last election. Of many of them of
(24:11):
course the reform. And I can't be dishonest and say
I was surprised. The Tory Party has a long battle
ahead of it, but it is one that I have
certainly re engaged and will do my best to help
provide ideas, input and in any way that I can.
But it is a long journey ahead of us.
Speaker 2 (24:30):
And you saw friends moved to reform, tempted at all.
Speaker 3 (24:34):
No, no, I'm not.
Speaker 4 (24:37):
I'm notwithstanding the recent facts in the party. I rather
agree with Rupert Lowe who said Reform at the moment
is effectively a protest party. And it doesn't mean to
say I don't respect Farage.
Speaker 3 (24:50):
I mean, you know, he's.
Speaker 4 (24:51):
Clearly a politician, has had a big impact on the
whole of the political spectrum of the United Kingdom, and
after all he won remarkably well in the last election.
But I still consider it's not it is still for
the Tory Party to recover and re establish their credentials,
but it's not going to happen overnight.
Speaker 3 (25:11):
It's going to take several years and it's a long battle.
Speaker 1 (25:16):
Should we move back to what we're supposed to be
talking about, to investment into companies. You said earlier that
you were even nervous about the market as a whole
and markets being overvalued, and we were really talking about
America at the time. We were talking about the American markets,
which are significantly more expensive than most other global markets.
Most there are very few markets around that are actively cheap,
(25:38):
but almost all outside the US and knocking around historical
averages rather than anything else where. Would you invest at
the moment obviously with not Shell, but not Shell aside.
Speaker 4 (25:48):
Listen, if I have a negative bias about US equity
markets at the moment, and I do genuinely, this is
not a long term position. I mean the statistics are powerful.
Speaker 3 (25:59):
In the long run.
Speaker 4 (26:00):
Equity investing, well executed, well selected, produces superior returns to
fixed income or pretty much any other class. Obviously, there
are periods when you get remarkable things like Bitcoin getting
up to one hundred thousand bucks.
Speaker 3 (26:17):
I've never invested in crypto. If I do, make sure
you sell.
Speaker 1 (26:23):
Okay, so you have you're not a believer in crypto
and not a believer in any crypto, even bitcoin.
Speaker 4 (26:32):
I am not a believer in it as an investment asset.
If you want to say, I just I quite like
a flutter at the horses every now and then.
Speaker 3 (26:42):
We know that I quite enjoy going to a casino.
Speaker 4 (26:45):
I don't go to casinos, by the way, but I'm
having bitcoin because I think that's fine if so long
as you accept that this is a gambling instrument, it's
not an investment instrument. As you very well, every long
term research is shown that actually equity investing in companies
that invest in growing and briefing is a better long
term way of building your pension fund or or whatever
(27:09):
it is. So I do feel that the US market
is having the froth blown off in it. I mean,
I think what is happening on world tariffs is genuinely
quite negative. I suspect that Trump will backtrack on that policy,
but he went and do it quickly. And in the meantime,
(27:29):
it's the whole process of what he's doing.
Speaker 3 (27:31):
One day, one day in Mexico's having twenty five percent.
Speaker 4 (27:34):
Next it's been postponed for a month, and in Canada
and then China. This is provides a sort of unpredictably
in disruption that makes investing by companies and or by
individuals much more difficult, and therefore it is broadly not
good for the global economy. And so the trade war
(27:55):
that Trump is starting I think is a misjudged project,
and I think it will backfire on the United States
in time, and people may well reverse it, but the
damage will then have been done.
Speaker 1 (28:09):
One thing that you do yourself is invest in a
lot of private companies and unlisted companies. And one of
the concerns that many investors have had over the last
decade or so it's a lot of the growth now
happens off market, and so once companies are listed, possibly
not in the US, but nonetheless companies are listed on
much bigger size than they used to be, and so
a lot of the games that we used to get
(28:30):
from listed equity markets actually now come long before they're listed.
Speaker 4 (28:35):
There's still plenty of good stuff out there in the
listed marketplace.
Speaker 3 (28:38):
We at nutshell.
Speaker 4 (28:39):
I think mark Ellis processes ten thousand companies on an
ongoing basive across the globe.
Speaker 3 (28:47):
A portfolio is at largely.
Speaker 4 (28:49):
US, but the UK, Denmark, Sweden, France, Netherland, Tenada, and Norway, Germany, Taiwan,
if you've got the capacity to process that, which, of course,
as an individual reading analyst reports, you've got no capacity
to handle anything like that scale.
Speaker 3 (29:04):
Of course, there are good companies to look for out there.
That doesn't mean to say there's not a lot of
stuff that's good in private equity, do okay, And.
Speaker 1 (29:11):
We're seeing at the moment, we're seeing a small decline
in private equity asset under management globally, which is the
first one for a long long time, which I suspect
is a function of rising interest rates.
Speaker 4 (29:21):
Yes, rising interest rates a big component to the drive
of private equity in the nineties and of the early noughties.
Speaker 1 (29:29):
I tell you what, why don't we finish on Nutshell
because you just mentioned it again and talked about the
amount of companies that it looks at, And of course
that is one of the obvious places where AI suddenly
comes into its own right going through all these reports,
pulling out the relevant data, making everything extremely quick. Said
the nut shall, I know, operates with very few employees.
We're always looking for use cases for AI that make
(29:49):
a real difference, and this looks like the obvious one.
Speaker 3 (29:52):
Right it is.
Speaker 4 (29:53):
It's a pretty obvious one, absolutely, and it is a
sector investing which is right for the correct application of AI.
By the way, I do not represent myself as an
expert in AI at all, but I'm sure AI would
be like all those things in technology, using it without
knowing how to drive it. You've got to know how
to use the information and use the system effectively to
(30:15):
generate outcomes and re economically valuable.
Speaker 3 (30:18):
And so hopefully that is well.
Speaker 4 (30:20):
We appear to be doing that well enough, and I
think that will be one of the things that we
need to make sure we can continue to do.
Speaker 3 (30:26):
Right.
Speaker 1 (30:27):
It seems to me that we should try and get
your manager, Marc Ellis, get him on as well, talk
us through some of the companies and why they're held
and not held and how that works.
Speaker 3 (30:36):
Yeah, I do, Hil, Thank you so much. It's been
a pleasure to do this with you. Thank you very much.
Speaker 2 (30:45):
Thanks for listening to this week's marrin Dogs Money.
Speaker 1 (30:47):
If you like us, a rate review and subscribe wherever
you listen to podcasts and keep sending questions or comments
to Merrorn Money at Bloomberg dot net.
Speaker 2 (30:53):
You can also follow.
Speaker 1 (30:54):
Me and John on Twitter or x I'm at Marinas
w and John is John Underscore step Back. The episode
was hosted by Meat Marrit Somethings that Web. It was
produced by Someasadi and Moses and sound designed by Blake
Maples and of course very special thanks to Lord Michael
Spencer
Host
Merryn Somerset Webb
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