Baroness Morrissey: Seize The Moment - My Tips For Investing & Life

0:00It was a very uncomfortable place to be, if I'm honest, because I was dead wrong for a while. and every day my colleagues would challenge me, reasonably so. Everybody thought I was mad and that was not conjecture, they told me so. But it was a great taste of, you know, testing the courage of my conviction and it was genuinely the making of my career. And when I started buying those gilts, they were over 8%, even higher than they are today, Neil. And I didn't sell them, I sent myself, you know, I thought, okay, can't be greedy. But we ran it for multiple years and we sold them when the handle got below 3%.

0:29I do worry now, I think there is the danger of complacency. I mean, we get the situation where nothing seems to unnerve markets. And I'm an optimistic person. I believe in America. I believe in capitalism. But we need to pull back, I think. Leap before you look. And I know that's the opposite of what the normal saying is. But so many people, especially women in my experience, they look and they look and they look and they never leap. They never take the chance. They let the fear of failure put them up from trying something. And my grand old age, I'm 59, I know many more people, my peers, who regret not trying something than trying and failing.

1:09Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the world, giving you, our listeners, the edge. My guest today is a titan of the finance industry here in the UK. She's currently chair of Fidelis, Altum Group and the Eton College Endowment Fund, but shot to fame as the CEO of Newton Investment Management, a role she took on at the age of just 35 when the company had £20 billion in assets under management. A decade and a half later, when she stepped down, assets had more than doubled to£50 billion in assets under management.

1:53And it was at Newton where we first met. She was CEO of the company I started my career at. Helena, it is such a treat to welcome you to the podcast. Thank you, Wilf. Well, congratulations on your escape from Newton. You went on to great things. It wasn't an escape, but it was a career pivot that I guess has worked out, if I'm lucky enough to have you as a guest here. It must have done. And you also worked in government fairly briefly. Maybe we'll come to the hat. And founded the 30 % Club and a chair of the diversity project today as well. So much to get to. Wanted to start though with your kind of snapshot on the markets because before you became a CEO in the asset management industry, you were initially a bond trader by profession.

2:40What is your snapshot on where we stand today in global G7 bond markets and the kind of risk that we have a proper fallout at the long end of the bond curve? Well, I'm with Lord Mervyn King on this subject. He's just pronounced, he thinks, you know, we're all in a mess. Fiscal room for manoeuvre for governments is incredibly thin. And obviously, you know when you look back at say the financial crisis the global financial crisis there was a lot less government debt out there and lots of tools were available like quantitative easing and so forth we really are you know in a very difficult position I think now and I don't want to start off all doom and gloom but clearly here in the UK we are really suffering as well as people kind of try to work out what is the escape route from this doom loop that we seem to be getting ourselves in In the short term, I mean, assume there were no major policy changes.

3:38Just looking at the market dynamics, the 30-year bond yield here, is it a 27-year high or there or thereabouts? Is there a chance that we suddenly hit sort of escape velocity and yields gap up in a significant way? Yeah, I mean, the bond market, obviously yields have backed off a little bit since, you know, about a couple of weeks ago when since then we've had weak economic data from the states and everything has sort of calmed down a bit and people have sort of perhaps moved away from the abyss. But we're really vulnerable, I think. There is this idea, obviously we've never seen it before, but bond markets can decide, or bond participants can decide to cut off the credit line for governments and say, we're not going to lend the money.

4:17We're not going to finance the debt unless we paid an awful lot more for it. And we haven't seen yet any real spike in the long-dated yields. We've seen a gradual rise and we've seen, obviously, a real upwards movement. But apart from perhaps in Japan, we have seen, you know, it's been quite gradual. We haven't seen a Liz Truss kind of moment where it just sort of collapses and it becomes a bit of a vicious spiral. And I do worry about that. I think governments, as I say, have got very limited room for manoeuvre if the markets decide to cut them off. There's obviously a Fed decision imminently and a Bank of England decision imminently.

4:51both are starting to get, particularly in the US, a little bit political. How important is central bank independence? And in the US in particular, is it just talk or do you sit here and think, you know, that question of independence of the central bank is genuinely worth asking at the moment? No, I think it is a worry that it's being interfered with. I mean, I'm speaking as someone who basically had their career defining trade by buying long-dated gilts just before the Labour government got in in 1997. And obviously then the next day, Gordon Brown made the Bank of England independent for monetary policy anyway, and it unleashed the biggest rally ever.

5:32So I'm obviously a fan, but it does depend who we've got in charge. The reason why I think it's so important ultimately is because obviously governments are often elected for a pretty short length of time. The electoral cycle is just not long enough, and you'll get huge decisions being made for political expediency, potentially, if you haven't got that independence. I do think everyone needs to work together well, and that's obviously not happening, particularly in the States. There needs to be a great triumvirate or dynamic between here, the Treasury, and the Bank of England, and then the rest of government policy.

6:06So that's critical. It's not that you're independent and don't pay any attention to what the others are doing. I didn't know that you made that trade. So was that a political prediction you got right? or good positioning for other reasons? So it was, I mean, you were at Newton for a few years. So I was tutored by Stuart Newton, basically, who was very much a contrarian investor, lateral thinker. And I realized that, and it's perhaps pertinent to today's situation, because I don't think this is the case now, that actually, however bad things got me, people were really worried about tax and spend labor coming in.

6:37And this was way back, you know, 1996. People get nervous about that happening. So this was just before Tony Blair came through. Exactly. And I mean, we can laugh now because they were worried that there might be 50 billion pounds worth of gilt situants in the 97-8 fiscal year. I mean, that's a drop in the ocean today, obviously, isn't it? And it turned out to be 17 and a half billion. I mean, the market's got it completely wrong. So earlier, it wasn't just the day before, but, you know, six months or so before, I started to build a position because I felt it was all discounted in the price. And it was a very uncomfortable place to be, if I'm honest, because I was dead wrong for a while.

7:13And every day, my colleagues would challenge me, reasonably so. Everybody thought I was mad. And that was not conjecture. They told me so. But it was a great taste of, you know, testing the courage of my conviction, but also going back to the analysis and keep on testing it. What would happen if? And on any which way I did it, I couldn't get to a worse position than we were in at the time in terms of guilt yields. So I just kept doubling down. and it was genuinely the making of my career. And when I started buying those gilts, they were over 8%, even higher than they are today, Neil. And I didn't sell them.

7:45I sent myself, you know, I thought, okay, can't be greedy, but we ran it for multiple years and we sold them when the handle got below 3%. So that was, I mean, that made my career as a bond fund manager and it showed me so much about the important things of investing well as, you know, to keep your head when all about you are losing theirs with apologies to Roger L. Kipling. And yeah, it was a great lesson in life, really, particularly when I was going wrong at the beginning. And I was seen as a bit of a failure there because, you know, sometimes those moments are when you learn, you know, strength of character and resolve.

8:18Wow. I mean, I didn't know that background. I knew you'd obviously made your name at Newton as a bond trader, a very successful one. And it led to you not that many years later then. In 2001, you were asked to become CEO of the company. Yeah. and I'm fascinated and you're only 35 so was that a surprise to you when you were asked to become CEO? It was the biggest surprise to me than anybody I think so I had no management training no business background I was literally running money and I had I have to admit this or mention there's five smallest children I mean the youngest had just turned one two and three um so it was not a textbook path to being the CEO um but I really believed in what Newton was doing in terms of how to invest.

8:59And I realized, even though I had no idea what the job entailed, if I'm really honest, I knew it was a really once in a lifetime opportunity. I still don't quite know why I was asked, I suppose. But I think my rationale for it is that I think at the time, the company had just been taken over by Malin Bank. That turned out well in the end, but obviously there was a lot of friction in the short term. And I think my colleagues wanted somebody who would kind of more pull them together rather than sort of tell them what to do. And I had always sort of led sort of, I don't know if you call it first among equals, but definitely trying to bring people with me.

9:36And they asked me to do the job. And obviously you did a brilliant job. It didn't start well, but it ended up okay. It did well, fantastic. On my five years there, it was very clear leadership bringing people with you. And as we said already, AUM went from 20 billion to 50 billion during your tenure. You kind of alluded to that there already a bit, But asset management is a very interesting industry where most of the people who make money for the company and who have careers that rise quickly are because they're very good at making investment calls in stocks or bonds. That's a very different skill set to then being a CEO, is it not?

10:14Yeah, I mean, I'm going to agree and disagree if that's okay. Because I do think that, you know, leading in the context of investing and leading a team and trying to, you know, you're a great team member, but bringing out the best in people, those skills are very similar in a CEO role. The trouble is that in fund management, in particular, I would suggest, people usually get no time and attention spent on how to manage, how to lead. It's almost assumed that if you're good at managing money, you'll be good at managing people. And so you often get, I'm not going to name names, but for example, we had somebody at Newton who you will remember, I'm sure, who ended up ahead of a desk.

10:50Please name names. He had no, no, I'm not going to, I always get in trouble for that. He had no interest really in managing people. But one of his colleagues was brilliant at it. And so I said to him one day, I said, do you mind if we kind of move those responsibilities? You'll still be caught at the desk, but she's going to look after the people, do all the, you know, career development, bring, you know, making sure that people's voices are being heard. and he actually was totally chilled about it because he found it very stressful you know doing this sort of people stuff but that doesn't usually happen people sort of regard it as data symbol and i do think that's a problem um and i'm very keen we just did some work at the diversity project on cognitive diversity and the impact on investment team performance and the answer basically is that it can really add but only if you have a really skillful manager who bring out the differences in a really good way amongst people.

11:38So I think the need is even greater. And I'm now puzzling over how to bring, you remember, fund managers sometimes, and you talk to them a lot now, have quite significant egos. And you can't say, I'm going to train you how to lead. You have to say, I'm going to give you a masterclass and bring a brilliant leader. So I'm thinking carefully about how to position this and persuade them to come to the table. We should talk because master investors is a slightly different title, but it's not different from Masterclass. I want to talk to you about the diversity project and the 30 % Club in a second, but just still dwelling on this leadership of an asset management company, how much of a successful asset management company comes down to pure and simple, the investment performance of the underlying fund and how much down to marketing?

12:24And I'm really interested in this today more than ever, where people can reach investors purely by social media and the arguments they're making perhaps rather than just the underlying kind of performance of the fund? So I do think there's definitely both wonderful marketed companies out there and wonderful performing companies out there. And obviously the ideal is to have both. I know personally, I couldn't preside over a company that was just, you know, very good at selling itself and not very good at managing the money or doing the insurance policies or whatever the nature of the business is.

13:00That's just how I'm wired. But I'm pretty confident there are people out there who start with what's the story going to be and then sort of reverse engineer into it. What I think we're seeing now is actually, if you're a big-ish company or a large company, then you have the resources to really sell yourself and to give this sense of real solidity and almost like certainty about what you're doing. And of course, trustees, pension funds, for example, then they think it's a low-risk decision then to put their funds in with a big house. so it makes it incredibly difficult then for smaller players to come up and you know make a headway even if they've got a better product it's just not it just makes it and I don't think that's a good thing I think that makes it very yes it's a high barrier to entry but also it means that you're not necessarily putting your money with people with the best performance and we're seeing a bit of backlash now I mean Phoenix has taken away 20 billion from Aberdeen because they're bringing that in-house I know BlackRock lost a big mandate recently from a Dutch pension fund particularly over ESG issues, there's got to be substance as well as style.

14:05And particularly in the UK, maybe in the US, but I'm sure more in the UK, how much of the marketing that is necessary is actually convincing people to invest in the first place? And it's a hard thing to do because you're kind of then almost encouraging people to take risk. And with that comes responsibility. Definitely. I mean, obviously, culturally here in the UK, in the retail space, We just don't have that culture of investing. We briefly had it when Margaret Thatcher was around and privatizing things and people were buying those shares. I started my career in New York, actually, and I spent two years with Schroeder's in Midtown.

14:43And the first day I walked in, someone asked me, what did I make? And, you know, I wanted to reply. I'm British. I don't talk about these things. So I do think we need to get a bit of that American approach to being responsible for our own financial destiny. And obviously a lot of people haven't saved enough for their pensions, etc. here. But with that, as you say, comes responsibility. And I think it's really important that the democratization of investing, which I think is really a critical thing for this country to achieve, is done responsibly. and that people realize that actually the worst thing you can do is to just convince people to part with their hard-earned savings and invest not diversified or not gradually.

15:24And I'm always saying to people, just don't put all your eggs in one basket and start slowly. You know, just get used to it. But there's a lot of work to be done on just socializing, talking about money. Let's talk a little bit about that early part of your career. So it's briefly in New York, then back to London. And I think it's before you joined Newton, You found it, understandably, I would imagine, for the industry back then, but you found it very hard to sort of break through as a woman. Yeah, I mean, I have to admit, it's probably both as a woman and as someone who didn't have city connections.

15:55I went to state school. I started philosophy. It makes me sound like I have no qualifications for it at all. I did do maths, other maths and physics at A-level. But, you know, I felt a fish out of water in many senses. And I was, when I came back to London and started managing money, I was the only woman in a team of 16. And were you made to feel that as an outsider? Well, I worked with really lovely people. But at the time, this was an environment, you know, which shows that we have made progress on culture. This is a time when no one thought anything twice of taking clients to lap dancing clubs, or there would be what we might describe nicely as banter across the desk.

16:33You know, it was not necessarily a very comfortable environment. And then I had my first child relatively young, age 25, and came back from a short, by British standards, maternity leave. And I got passed over for promotion. I mean, this is a long time ago. That baby is now 33 with a two-year-old of his own. So I'm not in any way criticizing the company now. But then, you know, that put me at a real disadvantage. And I was passed over and I was told it was because there was some doubt over my commitment with the baby. I was told my performance was great. Now, nobody would say that now. There's laws against it for a start.

17:08But obviously they might think it. And that's still why I think one of the reasons why it's still quite difficult for a lot of women. And of course, that's one of the reasons you founded the 30 % Club. And I remember that because what year did you found 30 %? 2010. So it's now 15 years old. Yeah. And so I joined Newton in 2009. I remember it very clearly. And everyone at Newton was, myself included, was very proud that our CEO was leading this charge. But what I think is so fascinating compared to the debate today around DEI is, well, firstly, the target was 30 % of women on boards, obviously not 50%, which I guess speaks to it not being an arbitrary target.

17:49But more to that, I remember the argument was this will improve outcomes. This isn't just an arbitrary we have to hit this level, but diversity of thought will improve the outcome. And it was a very powerful argument because all the banks had just gone under during the financial crisis had been led by men. I think we'll have to recruit you as ambassador for the 30 % club message because that is exactly – I mean, it was a moment to seize. I had run actually a women's initiative. It was a bit broader than Newton. It was within BNY Mellon as we were then our parent company. And it was reasonably successful, but we weren't seeing any improvement in the numbers.

18:26And then we had the financial crisis. and then having gone to an event at Goldman Sachs and first spoken and then listened as we had a small lunch after, everybody was stuck at not really seeing much progress around senior women. And I came away and I thought, but we've just seen this, that was November 2009. We've just had this almighty deafening wake-up call about having the dangers of groupthink and the dangers of people cut from the same cloth sort of all sitting around the room and not challenging each other. And that is the segue in here. The 30%, since you've mentioned it, I mean, only 10%, less than 10 % of board directorships in the UK were held by women at the time.

19:08So for a start, 30 % seemed an ambitious target. But also it resonated. I started reading very voraciously about how do groups behave. And I came across something that a male CEO at Deutsche Telekom had instigated, which was trying to set a 30 % goal for women at all levels of the organization. And he said it was to improve the thinking. but also the 30 % was the critical mass when I looked into group behavior. And that resonated with me. I've mentioned being the only woman out of 16, but when I was three out of 10, still a minority, I felt like part of the group and braver about speaking up and saying my piece.

19:43So it's now 43 % of the number of women on board. So clearly I was under ambitious, but, you know, it's very exciting that we made that progress through voluntary change as well, not legislation. And I think you brought a lot of people along with you. Do you think the argument, I don't know at which point in the last five or so years, it became too sort of almost religious in its fervor and it undid some of that good work? Or critics of DEI today do you think are missing the point? No, I think some DEI initiatives, unfortunately, ended up being sort of the opposite of inclusive. You know, they've seen, they've developed special language.

20:22They were very much making people feel part of the problem rather than part of the solution. People felt they couldn't say anything. They would be saying the wrong thing if they just spoke their mind. And it ended up being sort of very sort of prickly and I think a bit weird. You know, people, like this was a business thing for me. It was like how you should have, you know, you've got half the world's talent are women. You've got wonderful people who've got all sorts of backgrounds. You should be having all of their ideas brought into the table. And so we kind of left, we parted company from that.

20:55And I think that was, you know, now is a great moment. It's a challenge, but it's also an opportunity for DI work to reconsider and to emerge more genuine about inclusion and bringing someone like you, like back to, you know, the party, because, you know, this is for you. It's not supposed to be a zero-sum game where you're just replacing a white middle-class man with a black woman. You know, it's about making sure everyone who's got talent has opportunity. Well, absolutely. And just to round off this part of the conversation, I think it's right in saying central to all of your initiatives in this area is actually the kind of point about diversity of thought leads to better outcomes.

21:36And as is very, very important to allow that diversity of thought, as we were discussing a little bit this morning on that very sad news of Charlie Kirk's assassination. Exactly. And we've moved so far now. I mean, obviously, President Trump, people will disagree or agree with where he's coming from. But I'm sure everyone would agree that, you know, his line in his tribute to Charlie Kirk about and talking about this violence and murder of the tragic but inevitable consequences of this demonization of people that we don't agree with. I mean, that is just such a sad truth now that people who you can't have a conversation, you get afraid of being canceled and so forth.

22:15And I really hope that all the work that I do and also my colleagues at Diversity Project, which is genuinely trying to take diversity efforts to the next level to be like, let's make superior businesses. Let's make, you know, future proof our industry. Let's let's make sure that everyone has opportunity and a voice. And I think that's absolutely the way forward. I just do think we just got ourselves in a terrible spiral downwards where people just now shoot someone rather than have the argument. I mean, it's terrible. Absolutely terrible. I completely agree. Let's talk about a broader point about these initiatives, because I've also heard you say in the past that you're very driven.

22:59And, you know, I think I always say I'm very ambitious and liken the story to my dad was often labeled as being ambitious by the press in the UK. And he would say, you know, in a negative way, and he'd say, I plead guilty to being ambitious, but in the American understanding of the word. And I'm just wondering the extent to which you find it harder to say publicly, I'm driven here versus when you're in the US? Or do you think it's also maybe early in your career more than later, something that was harder to say loud and proud as a woman than for others? I think at this stage people just assume I'm driven, don't they, rather than me having to say it.

23:36But I do feel that very, you know, unashamed of being aspirational. You know, I had a modest, very loving family background, but very, you know, my parents' teachers, my sister teacher. It was always a choice between, you know, ballet lessons or piano. I chose piano. We went on holiday to a little cottage, my godmother. and, you know, we didn't have a lot of material things. And I wanted to be able to send my children to private school if I could. I wanted to just have choices. I could see that some people, and I'm not particularly money-driven. That's been to my cost, I think, actually. But I really also always wanted to be, I suppose, the best I could be.

24:18I know it sounds so cliché and I'm embarrassed saying that. I was a very driven manic brownie, if people know about the Girl Guides, the little ones at the brownies. and I had the world's, you know, the regional record rather for most badges. I mean, I did crazy things. I learned woodwork and metalwork. And to my children's surprise, I even learned how to cook to get the domestic hostess badge, which is the biggest surprise. But it's just how I'm wired. And I don't think, well, I always say, and perhaps it is being a bit embarrassed about it, but I always say I didn't choose to be this way. But now, since I am, I know I'm happier and I feel fulfilled and hope that, you know, people say it's inspiring.

24:54Sometimes they say that. And I hope it slightly rubs off on my own children. And if someone comes up to me in the street and says, I've just taken this job because of something you said, I'm so happy about that. And I think we're all put on this earth for a short time. And, you know, we should we should do the best. Absolutely. Seize the opportunities that that are put in front of us. I totally agree.

25:20Let's talk about London as a financial center. The sad you're grimacing on this. I mean, where was it 15, 20 years ago in the global financial world? Where is it now? It was absolutely top dog, I think. More than New York? Well, I was traveling back and forward between New York or Boston was where BMI Merlin's asset management businesses were to start with. And I've always found America very energizing, very can-do, very optimistic. And so I'm struggling to sort of say one is better than the other. But definitely London had the innovation and obviously the history and I suppose the global outlook.