Interview

What makes a great investor


As Threadneedle forges links with Cass, Stefan Stern interviews Crispin Henderson, its Chief Executive and finds out what it takes to manage £64.8 billion of investors' funds.
Considering the sums of money that are involved, the atmosphere at Threadneedle in the City of London is remarkably calm. The fund management group has about £64.8 billion under investment on behalf of highly demanding clients - individuals, pension funds and other institutional investors. Given the turbulence in financial markets over the past three years, you might expect a sense of shock or fatigue in the air.
But no. On a sharp winter's morning I am shown in to meet Crispin Henderson, Threadneedle's Chief Executive and all seems pretty tranquil. This stability stems from two main factors: experience and results. Threadneedle's record is impressive. As many as 86 per cent of its funds have outperformed their peers over the past three years. The company - created in 1994 by combining the investment operations of Allied Dunbar and Eagle Star - continues to attract top talent. Yet you won't see Threadneedle people building personality cults around themselves. "We do have 'stars', but we don't have a star culture," says Henderson. "We are very much a collegiate organisation. Teamwork is extremely important to us. Principle triumphs over personality." He can speak with some authority on this point, as he is a relative newcomer to the business, someone who chose to join Threadneedle after carving out a successful career elsewhere.

Credit crunch
Henderson joined the accountancy firm Deloitte, Plender and Griffiths straight from school. He spent the next 35 years there, the last 25 as a partner. Over that time what were the big eight accountancy firms merged (or, in the case of Arthur Andersen, crumbled) to become the big four. Henderson thus found himself working for Coopers & Lybrand and, finally, PricewaterhouseCoopers (PwC), where he helped to establish (then lead) the investment management special advisory services group. He got to know Threadneedle as an adviser but then, a little like Victor Kiam and his Remington shaver, liked the business so much he joined it, as chief operating officer, in 2002. He later became chief financial officer. When the former chief executive, Simon Davies, became chairman in the summer of 2007, Henderson stepped up to replace him. This was around the time that the credit crunch first began to hit and customers were queuing up outside branches of Northern Rock to get their money out. What is the difference between life as an adviser and as the boss? "I had built a business at PwC," Henderson says, "so I did come armed with some of those skills." But while an adviser can only advise, he adds, the manager actually puts things into action. So having spent the past eight years on the inside of a successful investment firm, perhaps he can reveal some of the secrets of the trade? What makes a really good investor? "It does help to have maths," he says. But it is analysis and decision-making that count. "Those are the innate skills of a great investor."

Know when to sell
One subtle point is perhaps less well understood, he suggests. "The skills of buying are extremely well developed," he says. "But knowing when to sell - that combination of instinct and grasping market reality - is where the difference is." And he offers this (free!) piece of investment advice: the first loss is often the cheapest. In other words, "if a trade is going wrong, sell it quickly". Threadneedle has recently formed a corporate partnership with Cass, bringing together two organisations that are leaders in investment thinking. Threadneedle's culture is summed up by its catchphrase "out-think, out-perform", reflecting its commitment to rigorous research, debate and idea sharing. While the investment firm may not want to hire egotists or rampant individualists, it certainly is on the lookout for business people of sophistication and insight.

£30,000 essay competition
As a mark of its commitment, Threadneedle is sponsoring a new essay prize for students undertaking an MSc in Investment Management. The best three will make it to a shortlist, and the winner will receive a £20,000 prize as a contribution to course fees, with the two runners-up collecting £5,000 each. The winner will also be able to spend an internship at Threadneedle as part of the MSc course. As an experienced observer of the financial scene, Crispin Henderson is optimistic that Cass will continue to produce graduates who can play their part in the better running and performing of the financial services industries. The recent global crisis reminds him of the secondary banking crisis of 1973-75. "Too much easy credit," he says. "The same problem today as then. Admittedly the magnifier effects of new technology, globalisation and interdependence have made the current problems more severe. But I expect it is on page one of the Cass course on banking: do not lend long and borrow short. It is an old principle but the old principles tend to be good principles." It is that sort of seasoned sobriety that stands Threadneedle in good stead and which may one day do the same for Cass alumni.
Stefan Stern was appointed Visiting Professor at Cass Business School last autumn.

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