S2 Ep. 33 - Invest like an open DB scheme

Investment Uncut

In the first of our "Invest like a..." mini series, show hosts Dan Mikulskis and Mary Spencer welcome Richard Williams, CIO of RailPen, onto the show to have a conversation about investing like an open DB scheme. Richard started his career at LCP, which was colloquially known by his flatmate (who was also a trainee actuary) as Lane Clark and Paychecks…! We discuss Good investing is about identifying your edge, nurturing and protecting it. RailPen edges: - A true long-term horizon. They hold high returning but volatile assets. This gives managers (including internally managed assets) some security that they won’t be sacked on short term performance. - Governance process enables team to be nimble but also to be a good counterparty: they know what they want, they won’t lead managers on, they are good for their money and are a long-term partner. This all means they are more likely to be presented with illiquid asset opportunities from managers, or offered lower prices. Is this the way to truly benefit from the illiquidity premium? - They have a willingness to be different eg willing partner with managers who have short track records. - They have a great team: they are helped by the hybrid approach RailPen takes with some assets managed in-house. It is very important to have all stakeholders aligned on longer-term objectives. But even if you have a lot of edges, investing is still hard! There is great importance of the role of a mentor – and learning from junior as well as senior colleagues. Decisions are best made in groups, but small groups. This generally avoids funds managed by solo investment managers, but also big groups are unwieldy for making big decisions. One thing for listeners to take away Be grateful for how fortunate we all are to work in this industry and in such an interesting area. Most underappreciated thing Part of the skill is to keep things simple – but that’s not easy. There are so many temptations to do the wrong thing. Recommendations Richard Oldfield – Simply not easy Sir Heid Plochy - Nuclear folly Owen Walker - Built on a Lie