Duncan Wales would simply vanish into the night. No one in the City law firm where he worked knew where he was, or what he was up to. Nor could he always explain to them what he was doing: “I was living in a weird twilight world.”
What his colleagues didn’t – or couldn’t – know was that Duncan was off fighting on secret missions around the world, from Afghanistan to the Balkans, disappearing sometimes for months on end. “I think I must be one of the few men who knows what it must feel like to be a woman coming back to work after having a baby. You disappear for weeks, and then one day suddenly turn up back at the office.” He chuckles: “You couldn’t really talk about your experience. Women must feel that too. And often people just didn’t care what you were up to.”
It was after his time at the University of Cambridge, and the death of his father, that Duncan volunteered for this double life, training to be a lawyer at Clifford Chance and a reservist squadron commander in the British Army at the same time. The army runs deep in his bones: many of his forefathers had seen active service, while one grandfather had been an army doctor, tending to King George VI, Winston Churchill and Harold Macmillan. “I felt that I needed to be tested as they had been.”
And so he was. Twelve years in the army left Duncan with a broken ankle, from parachuting, a burnt leg and several mashed up noses, as a result of bar fights. His social life has been almost as adventurous – he nearly broke his neck a few years ago playing polo, and cracked a shoulder on the rugby field. And – wait for it – he’s now considering taking up motorcycling.
All good training for his latest escapade as chief executive of Exotix Capital?
When I meet him, he doesn’t show signs of broken bones, though his strict, correct posture is a dead giveaway of his army life.
He laughs: “A reliable but dull job would certainly not be for me. There is more to life than that.”
The name Exotix may suggest a Croydon nightclub, but it is actually far more daring than that. Since he’s been in charge, Exotix has become Britain’s only investment bank specialising in doing business with some of the world’s toughest yet fastest-growing nations – those known as the frontier countries. And it’s now the biggest of its kind in the world. “Or at least that’s what the PR people claim,” he says, with another chuckle.
Duncan was parachuted into Exotix last year while working for Standard Chartered’s corporate banking division, after a call from Michael Spencer, chief executive of NEX Group – the electronic markets business once known as ICAP. Mr Spencer is the bank’s biggest investor.
“Michael called me to say, ‘I don’t believe this is not a valuable business. But it has been an unloved asset.’ He asked me if I would come and turn it around.”
It was an offer he couldn’t refuse. Duncan Wales knew Michael Spencer well, having been the legal director and part of the top team of BrokerTec when the electronics bond-trading platform was taken over by ICAP. He went on to become ICAP’s general legal counsel, helping Mr Spencer with some of his biggest acquisitions and steering the group through the financial crash. Or, as he puts it,“when the rubber hit the road after Lehmans went down and there was mayhem in the markets”.
Michael Spencer still owns half of Exotix through his private company, IPGL, and NEX owns another 20 per cent. Duncan, senior staff and other investors hold the balance, although he is about to shake it up by offering shares to all employees.
We meet in the Baker Street HQ, which is of course situated in Watson House. Recalling the street’s imaginary detective, Duncan says he started from first principles: with what he knew. The world’s biggest banks are retreating from the developing world even though the frontier non-BRIC countries in Africa and Asia are among the fastest growing. So there’s a huge gap in finance – and information.
Which is why he set about turning Exotix from an agency broker into a fully-fledged investment bank, one that now connects 1,100 international investors with companies, financial institutions and governments that need to raise finance for deals. And to do that well, he now has people on the ground in offices in Nairobi, Lagos, Dubai and New York as well as London. On top of bond trading, the 100 staff offer companies, financial institutions and governments everything from corporate advisory to raising equity and debt capital. Some of the recent, juicier deals include advising Australia’s Volt Resources on raising $40m (£29m) of structured bonds on the Dar es Salaam stock exchange to finance developing a graphite mine in Tanzania – which has one of the biggest deposits in the world – and the restructuring of a Nigerian bank.
He has upped the bank’s game in research, setting up a new information services unit – the Exotix Research Portal – offering top-quality, paid-for research covering 160 companies and government entities. “The introduction of MiFID 2 [the EU ruling which has made financial institutions unbundle research from other activities] has meant the big banks are now offering only the basics in research. We believe this leaves a huge opportunity for specialists like us to offer innovative research and analytics on everything from corporates to credit analysis. We have hired some of the best analysts around.”
“Argentina is our hot tip for 2018,” he says: “The country is doing well under President Mauricio Macri and looks stable. Our team recently upgraded Argentinian bonds from hold to buy.”
Investors should sit up – the top five bonds picked by Exotix analysts soared 35 per cent in 2016, more than triple the 10 per cent return on the benchmark JPMorgan EMBI index.
One of his own favourite frontiers is Africa. “The continent is buzzing. There’s a real sense of change, as we have seen in countries like Kenya, where mobile phones and technology are helping to bring about enormous growth and prosperity.” He likes the sense of social purpose that his work is doing too, helping to support the infrastructure and trade these developing countries need. All the companies they work with are heavily vetted. “We want to know that they are sustainable businesses with good corporate governance.”
The West should be more excited by China’s One Belt One Road policy, he says, which is opening up trade and business along the old Silk Road route from Asia through to Europe.
“China’s One Belt One Road has huge implications for the world’s future trade. The OBOR area covers more than half the world’s population and 40 per cent of world GDP and will connect up the import and export supply chain from China through Asia, Africa and Europe. We are too inward-looking in the West.”
In New York for a recent meeting at the United Nations, Duncan Wales was struck by the western focus of the assembly, and the absence of half the world’s leaders. “Putin, Modi and Xi Jinping were not at that meeting, which I thought was an interesting reflection on our times. It seems they do not consider the UN, Nato or the EU too important.”
And so to Brexit. What, if any, impact does he expect on his own business (or the City in general) from the UK’s decision to leave the EU? “Well, I was a firm Remainer, although I can see many of the EU’s flaws. However, I believe the outline of the first part of the deal, including the two-year transition that Theresa May has reached with the EU, is a good one. Business likes certainty, so this is a positive outcome. The devil, of course, is in the detail.”
He also suspected that any deal being proposed with the City would include a certain amount of regulatory alignment. Even so, the lawyer in him warns there is a danger Britain will be too literal. “We always gold-plate our laws and follow regulations to the letter. But in the long term, I do not believe the City will suffer too much.”
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