Edward Bonham-Carter: A worldly warning from the man who guides Jupiter
The Business Interview: The fund management star tells James Moore that overzealous regulation threatens the City's ability to generate wealth
Thursday 23 September 2010
Edward Bonham-Carter fixes me with a steely gaze. "Do you have household insurance?" he says firmly. The boss of Jupiter, city sage and scion of one of Britain's more famous families is pencil thin, not least because of his habit of cycling to work every day. He's an evangelical pedaller ("it's a good thing by almost every criteria") and he's less than impressed when he hears I don't usually wear any head protection on my Brompton.
"It's just like household insurance. You hope you'll never have to call on it, but you have it just in case. It's protection. If someone hits you... You feel like a dickhead for one day. Then you won't notice. Wear a helmet."
That's me told. Up until this time, Mr Bonham-Carter has been relatively relaxed. He comes in in his shirtsleeves, no tie. He looks a little tired, maybe. But perhaps it isn't that surprising – Jupiter recently presented its maiden results to the City following the company's return to the stock market, and this week it entered into the FTSE 250 index of Britain's second biggest companies.
In fact, under his watch Jupiter has increased its funds under management even during the recent turmoil when people were falling over themselves to withdraw their money from rivals. So an early entry into the FTSE 100 is a realistic aspiration.
But why float at all? Jupiter was motoring along very happily as a private company and its success could easily be put at risk if a larger company came along and tried to gobble it up – always a possibility for a public company. The spell under the wing of Germany's Commerzbank wasn't a particularly happy one, after all.
Largely it was, in Mr Bonham-Carter's words, to "clean up the balance sheet". The financing that helped him lead a management buyout from Commerzbank meant a 10 per cent interest rate on some of the debt – horribly expensive at a time of near zero interest rates.
However, it also meant staff could put a value on their shareholdings – and 95 per cent own shares. "I'm not saying we're the John Lewis Partnership but I do believe that equity ownership by staff in asset managers is a good thing both for employees and the clients. In this world where everyone is talking about remuneration, it's an appropriate thing. If we ask customers to entrust us with their savings then it is a good thing that our fund managers are invested in their own success."
As such, he is supportive generally of the remuneration reforms being pursued at the moment in response to the financial crisis – with bankers as well as fund managers increasingly being paid in the shares of the companies they work for, and bonuses subject to clawback if the work they do is shown up as poor in future years. "We've been doing that for years," Mr Bonham-Carter says.
He is, however, less supportive of other changes, not least the way companies like his are being treated like banks by regulators even though they don't have the same sort of credit risk: "The consequences (of the financial crisis) over the next few years are pretty anaemic growth as we get over the debt hangover. We are also undergoing re-regulation in the West. Some of it is justified but there is an element of shutting the barn door after the horse has bolted. And asset managers aren't banks. People don't take a credit risk with us. The shares are held with a separate nominee company."
While he might be a liberal, he is also against attempts to "rein in" the City of London. "People should recognise that the financial industry in London is world beating. It's right up there. You should back your strengths," he says. "The system had a real problem in the credit crunch and lessons need to be learned but you don't want to, in reaction, then destroy your competitive edge and there are a number of very good reasons why London is at the leading edge. We just need to be aware of that so things like tax and regulation don't give us a big competitive disadvantage."
Generally, though, he's a supporter of the Coalition. " I come from a Liberal family. It is exciting times for politics. I think the Coalition is going to hold together. At the top of the parties there is a meeting of minds. Inevitably there is going to be some much-needed pain and I'm pretty cautious on the economic outlook.
"The consumer is going to be under the cosh and money is being taken out of the economy. But the corporate sector is in very good health. I think they're heading in the right area economically. The key metric for me is what action is taken to encourage longer-term growth. You can't cut your way to growth. Politics is also about redistributing income but it should be remembered that you need to give people the incentive to grow the overall cake."
Mr Bonham-Carter is very different from his predecessor as Jupiter's head, John Duffield. He's more consensual and thoughtful. He's measured in his speech. But he still has strong views. As for Jupiter, it's more of the same. He won't be rushing out to do deals. "Jupiter's story has largely been one of evolution rather than revolution. It maybe a prejudice of mine, but this is a people business. People often miss that out in deal analysis. You can put the finances together and say if we put these businesses together we'll get this and that, but you shouldn't forget the fact that people have different cultures.
"Fund management like we do it, trying to beat the market, is not necessarily a scale business."
To Jupiter and beyond
* An old Harrovian who only managed a 2.2 at Manchester University, he's been on an upward curve ever since, joining Jupiter in 1994 after spells at Schroders and the Electra Investment Trust.
* A morning person who "leaps out of bed" to cook breakfast for the family but admits his culinary skills could do with some work. His family life is rather more conventional than that of his sister (Helena, the actress). Doesn't talk about her, but the two are close and see each other regularly.
* Life after Jupiter? "Living longer gives you the opportunity to do different things. The paradox is if you're in a challenging job you don't spend much time thinking about what you could be doing. But I'm not the sort to sit back and play golf when I retire. And I don't play golf."
* That "difficult" relationship with Jupiter founder John Duffield? "I don't mind John. I've got a lot to thank him for. I wouldn't be here if he hadn't left. I think that we should acknowledge credit where it's due."
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