Aoifinn Devitt: Series 3 is kindly supported by Eagle Point Credit Management. Eagle Point Credit Management is a specialist investment manager principally focused on income-oriented credit investments in niche and inefficient markets. Founded by Thomas Majewski in partnership with Stone Point Capital in 2012, Eagle Point currently manages over $7.8 billion in AUM. Investment strategies pursued by the firm include collateralized loan obligations, CLOs, portfolio debt securities, and other opportunities across the credit universe. Currently, Eagle Point is the largest investor in CLO equity in the world and one of the largest non-bank lenders focused on providing financing solutions to credit funds. You can learn more about Eagle Point at eaglepointcredit.com. What are some of the unintended consequences of the bank crisis? Why is superintelligence sometimes overrated? And what are some of the trends we are overlooking today? Find out next. I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people. And their stories. I’m joined today by Duncan MacInnes, who is an investment director at Ruffer LLP, where he has spent over a decade. He previously worked in wealth management. Welcome, Duncan. Thanks for joining me today.
Duncan MacInnes: Hi, Aoifinn, and thanks for having me.
Aoifinn Devitt: Well, let’s start with your background and career journey. Can you talk about where you grew up, your early interests, and how ultimately you came to enter the world of finance and investing?
Duncan MacInnes: Yeah, so I’ll try and make my background as interesting as possible. I grew up in a place called Motherwell, which is just outside Glasgow, where I went to school and university. And that’s in Scotland, for those of you that don’t know. And in high school, I would say that I was a capable student, but somewhat lacking in motivation and direction. And really, for me, it was all about sports, friends, computer games, that sort of stuff. And only because it was quite a good school was I sort of handheld through to university. Otherwise, Lord knows where I’d have ended up.
Aoifinn Devitt: And when you mentioned sport, was there any particular sport that motivated you more than others? Anything that captivated you?
Duncan MacInnes: It was always rugby for me. I’m not sort of— I’m not built for ballet, so rugby worked quite well. And played that from the age of sort of 7 through to the end of university.
Aoifinn Devitt: Right. So we’ll come back to that maybe just to see in terms of lessons learned. And then when it came to choosing a discipline or a direction, How did that pan out?
Duncan MacInnes: My family are medical, lots and lots of doctors on my dad’s side, and the advice from them was to not be a doctor, and in fact, how about suing doctors? So I was steered towards law because I liked an argument and I was relatively verbose, as we’ll all find out. And so I ended up doing law at university, or reading law at university, but actually All that taught me was that I didn’t want to be a lawyer. I realized very, very early on in my legal degree that this was not for me, that it’s not like the law that you see on the TV. There’s only, only very few lawyers get to stand up in court and pontificate. So I really did not enjoy my degree. And the only thing that came, the only positive that came from it is my wife, who I met at university and we’re sort of still together as far as I’m aware.
Aoifinn Devitt: And then in terms of, I’m certainly one can pontificate in investment, I suppose that goes with the job. How did you then find yourself applying to investment roles? Did you find your legal skills enhanced your aptitude there?
Duncan MacInnes: A very, a very meandering journey. So I really, all I knew, like I said, is I didn’t want to be a lawyer. And then in the summer of second year after all of university, my dad died fairly suddenly from a sort of aggressive cancer and my mom. They were separated, long divorced at the time, emigrated to the UK in the same week. So it was a pretty traumatic week. And that sort of jarring experience, I think, forced me to grow up quite a bit and actually to take ownership of financial affairs to a degree that I hadn’t before then. But in terms of what came next, so I sort of survived the rest of university. And I ended up at the end of university being a sort of, you know, decent student with a decent degree from a decent university that was Glasgow University. So without a sort of burning vocation or actually any really useful work experience, which, know, you if you even brought that forward to today, it would be almost impossible to get a good graduate job in 2023 with that CV. But back in 2007, so we’re talking about then, It was still difficult. And so what I did was the only reasonable strategy was spray and pray. So I applied to everything you could imagine, from Unilever to Tesco to MI5 to the Big Four accountants, investment banks, legal firms. And I had a legal traineeship lined up actually when I got a job at Barclays. And I have to be honest, I was totally cynical about it because I didn’t know anything about what I wanted to do. I ditched the legal job and took the Barclays job because the money was a lot better. It really was as simple as that. But if we sort of go on a bit, the Barclays grad scheme back then was— it was just before the financial crisis, so you were still in the sort of heyday of big bank spending. So it was a very luxurious program where you rotated around different departments and different cities. So I worked in Glasgow, Edinburgh, London, and Singapore for 6, 7 months in each place. And it was only when I got to Singapore that I sort of fell in love with something, and that something was markets. It was a really interesting time to be working and learning about financial markets because the job began 2 weeks before Lehman Brothers went bust. And I think I moved to Singapore in Q1 2009, I think it was. So that was pretty much the exact market bottom. Post-financial crisis. So I had this formative experience of financial markets driving everything that was happening in the world, being the focus of everything and getting to be, although incredibly junior, right at the coalface of that. So this idea that in financial markets you could have a thought or an insight, and if that is proven correct, you get to make money from it. Was just so sort of exciting to me, and it sort of feels like the biggest and best game in the world played by, you know, lots of clever people. So all of a sudden, having gone from having no direction, I had this thing that I really, really enjoyed. And for me, it sort of became tunnel vision from that point.
Aoifinn Devitt: It’s really interesting. A couple of points there I’m taking away. First of all, it’s good and instructive that one doesn’t need to have necessarily a storied university career full of medals and awards, because I think not everybody does. I mean, especially the graduates coming out today who may have had a sidetracked university experience. Equally, those graduate schemes are fantastic. I think they still offer amazing opportunities, especially those with global rotations. And I also spent time in Hong Kong in my early 20s, and I found that there’s something about Asia that makes it very immersive. Maybe it’s the very concentrated nature of those cities, the fact that, you know, you’re surrounded by skyscrapers, surrounded by markets, by retail investors sucking up every piece of information. It is the ultimate immersive game if you think of in it that— They’re.
Duncan MacInnes: Very long days as well. In Asia. I mean, that’s what I sort of remember, was that I would start at— I think I started at 7 AM, and people would take long lunches, but they would work until 6 or 7, and they would often go for dinner and then come back to the office. So I think it was maybe something to do with the fact that people have small apartments in Hong Kong and Singapore, but actually the office was maybe a more enjoyable environment to be in. So people worked really long hours, which, like you say, made it very immersive and collegiate.
Aoifinn Devitt: And you were in private wealth at this time, is that correct? Or did you— I, yeah.
Duncan MacInnes: So I was hired for Barclays Wealth, which was the private bank of Barclays. And the intention of that graduate program was that you would end up as a private banker. The rotation to Singapore was into equity research. And that was when I sort of realized that I wanted to be closer to the coalface of investment decision-making and investment research than the client side.
Aoifinn Devitt: And if we take it forward then into what’s on your mind today, so Ruffer is known to have a multi-strategy approach. It’s known to have a wide variety of investment views, some of them contrarian. As you look out, we’re recording this second quarter of ’23, what’s on your mind now? What’s at the, I suppose, the forefront of your mind as you look to markets? What’s obsessing you today?
Duncan MacInnes: So for those of the listeners that don’t know, very brief history of Ruffer. The business began in 1995 from sort of humble beginnings with a shared office with another firm. We’ve grown to $26 billion under management for a whole variety of clients, from private individuals through to sovereign wealth funds all over the globe. But for those, all those different client types, we’re doing one thing, and the one thing is trying to build an all-weather portfolio. So global multi-asset, totally unbenchmark, go anywhere, which, as you say, leads us occasionally to contrarian or interesting positions. And I think reputationally, we’re known as bear market operators. So we’ve done particularly well in the crises. So we made money in the dot-com crisis, we made money in the financial crisis, and we made money in the COVID crash, and then in 2022 where almost everything fell as well. So that’s really forged the reputation of the firm. But over the long term, we’ve actually, we’ve outperformed the stock market and we’ve done it with less risk and less volatility. But I think the biggest difference between us and conventional asset managers is that Most investors start from a position of return maximizing. How can I make the most money? And then maybe I’ll sprinkle some hedges around the outside of that to try and mitigate the downside. Our approach is almost completely the opposite. We have this sort of minimax regret, so minimize the probability of your maximum regret. How do we make sure we don’t lose money? And then once we’ve done that, how much is left to shoot for the stars? So Bearing all that in mind, how do we look at 2023? I think it’s been a pretty surprising first quarter of the year. So if you went back to December and said by the end of the first quarter, 3 of the top 30 US banks will have disappeared and Credit Suisse will have been silently assassinated over a weekend and merged with UBS, do you think stock markets and bond markets will be up or down? I think most people would’ve said that sounds like they’re going to be down quite a lot. And in fact, they’re actually pretty substantially up. So I think the big question, the live issue is whether or not this is a banking crisis. And if it is a banking crisis, to what extent it looks like 2008. And I think the headline is it doesn’t look like 2008. It’s not a global financial crisis. We don’t need to worry about Alastair Darling saying that the cash machines were going to run out of money. But that doesn’t mean that we shouldn’t be very worried about what’s happening here. So I think this is quite a— the acute phase of this crisis has probably passed, but the chronic phase could go on for quite a bit longer. And the problem at the center of this that we see is that central banks and governments have a very difficult choice at the moment because they have competing goals. On the one hand, they want to focus on financial stability. But they also have to manage monetary stability. And monetary stability effectively means inflation. And if you try and fix financial stability by posing the banks with money to make sure that they survive this, then that exacerbates the inflation problem. And if you continue to raise interest rates and withdraw liquidity from the system, which is what they’ve been trying to do for the last year or so, that will exacerbate the bank run. So how they square this circle is going to be the big issue for 2023. And the sort of the way that I try to describe it to people is that money is moving closer to the center of the financial system. So people are withdrawing money from the regional banks, the smaller banks, and they’re moving it to treasuries and money market funds or to JP Morgan and Citigroup where they know it will be safe. But the closer the money moves to the center, the less monetary energy or velocity it has. And that reduces the risk-taking capacity of the financial system as a whole. Now, every individual is acting rationally here. So even though I don’t think people have to worry about the safety of their deposits, the truth is, is that you can earn more in a money market fund than you can in the bank, and you don’t have to worry about it. So why wouldn’t you do it? But if everyone— it’s a sort of tragedy of the commons. If everyone acts like that, then it creates a really big problem. And it’s that reduced risk-taking capacity of the system and specifically It’s the smaller regional banks that do lending to the real economy. So small and medium businesses, commercial property, these sorts of things. And that we are seeing day by day as the data comes out is having a real squeeze at the moment. And that could be quite concerning and potentially will tip us into recession this year.
Aoifinn Devitt: Really interesting analysis. And I like your acute versus chronic analogy. Clearly, once born into a medical family, you will always have that with you, the medical analogies. Having been in a medical family myself. But I’d love to say, so that’s a very, a fairly big idea out there. And what one of my next questions was around anything that we’re overlooking or perhaps not fully appreciating in today’s markets. And Rothbard, as I mentioned, you know, was early perhaps into gold and into other kind of commodities at the time. So if we do the thought experiment of taking that centralization of, of money and the lower velocity to its logical conclusion, Where do we go from here? What are some of the scenarios? And maybe we talk a lot about things breaking and maybe this wasn’t the thing that broke, but could anything else break?
Duncan MacInnes: There’s this idea that when the Federal Reserve raises interest rates, it tends to raise interest rates until something breaks. So there is now a question as to whether the thing that breaks, whether that was Silicon Valley Bank and Signature and Credit Suisse, it’s hard to say. So I like to think of these things you think back about the financial crisis and you think of it as an event, but it wasn’t really an event, it was a process. So over the course of 2 years, you had Northern Rock, then 6 months until Bear Stearns, then another 6 months until Lehman Brothers, and then another 6 months until the stock market bottomed in March 2009. So perhaps Credit Suisse is Bear Stearns, but I don’t think it’s Lehman Brothers, and I don’t think it’s the bottom. So I think there’s potentially more things to break But what I would say in terms of what people can do about investing is that none of this stuff is good news that I’m talking about, but actually it would be okay if it came with low asset prices. So there wasn’t much good news in March 2009, but it was still a phenomenal time to invest. Unfortunately, there’s lots to worry about at the moment out there. There’s the banking crisis, there’s the risk of recession, there’s the war rumbling on, there’s China making noises about invading Taiwan, there’s commodity and wage pressures, there’s taxes going up. But if asset prices were cheap, I think you could still find a way to get excited about things. But unfortunately, they’re not particularly. Risk premiums, which are sort of the additional return that you earn above cash for owning riskier assets, are pretty low on average. So provocatively, I’ve been saying to clients, why take risk if you don’t have to? So at the moment, you can earn 5% in US dollar cash, in a money market fund or a very short-dated Treasury bill. And if you look at the earnings yield on the S&P, the S&P 500, it’s also 5%. So the stock market is subject to all of those vicissitudes and uncertainties that I mentioned. Cash is subject to none of them apart from inflation. So really, I don’t think you’ve been compensated for taking much risk. Our view would be that later in the year, you probably get the reality of recession. You get the consequences of this liquidity being withdrawn from the system. And our base case would be that the stock market revisits the lows of, of last year. And that might be the buying opportunity because I think you will get ultimately a government response, sort of fiscal policy response to try and get the economy going again from recessionary lows. But we probably have to feel more pain between now and then.
Aoifinn Devitt: Really interesting. And just like the SVB woes could maybe be said to have been hiding in plain sight, I mean, it wasn’t any secret that interest rates have been rising and that they’ve been forced into buying so-called low-risk assets, which as we know from the UK, low-risk government bonds can be less low-risk than we think in these extreme events. Would you say there’s anything else kind of hiding in plain sight? Can we take hints from the stock market, the bond market? The bond market doesn’t seem to believe the Fed with this inverted yield curve. Equally on the equity market side, tech stocks have been doing very well despite a lot of bad news and negative utterings there. So what’s actually going on? And are we missing something large?
Duncan MacInnes: Yeah, I think so. I think that first point you made about low-risk assets is very important. So what we sort of all learned to focus on was counterparty risk. And so you buy government bonds, you have no counterparty risk, so it’s a low-risk asset. What everyone overlooked was duration risk, the sensitivity to changes in interest rates. Of course, very long-dated government bonds come with lots of duration, and the long-dated inflation-linked bonds, which are so important to the UK pension industry, fell 70% last year. They were down more than Bitcoin. These were revealed to be much riskier than people thought. Full disclosure, we held some and still do. I think the risk hiding in plain sight and is being discussed, but I think is still underappreciated, is that the entire institutional asset management industry— pension funds, charities, endowments, and so on— have increasingly been drawn to illiquid assets over the last decade or so. So private equity, venture capital, private credit have become the flavor of the month. And I think there is a reckoning coming for these assets. Now, that’s bad news for investor portfolios, The good news is that I think to go back to the phrase of acute versus chronic, that’s a chronic problem, not an acute one. The benefit of the opacity and illiquidity is that I think these losses will be realized over a very long time. But I have pretty high conviction that there will be losses and they will be realized. But what you won’t have is the sort of cataclysmic down 50% that you’ve seen in some of the profitless tech public companies. Instead, you’ll see a slow-motion bleed over quarters of down 5%, down 5%, down 5%. And then in 5 years’ time, 10 years’ time, we’ll look back and we’ll say the vintage of illiquid and private investments from 2019, ’20, and ’21 were pretty poor. They were bad investment decisions. But it will take a while for that to be born out.
Aoifinn Devitt: And another question I just want to ask you about while we’re on this fascinating topic, you know, philosophical topic in terms of what investors are focusing on. In tech, there’s that old adage that we overestimate in the short term, underestimate in the long term. And it seems with some of these big events, whether it be the energy transition, there’s a lot of concern now, I’m based in the US, around will the US dollar continue to be the reserve currency? These are sort of long-term perhaps changes that sometimes get brought forward into short-term concerns. Do you think there’s anything out there that we’re perhaps worrying too much about today, that it’s longer dated and it will play out later, and something that maybe that it is a large, big structural change that we need?
Duncan MacInnes: That’s a good question. I think two things. I think one you mentioned, de-dollarization does seem to be the topic du jour. So every meeting I’ve done in the last few weeks, that has come up. It definitely feels to have sort of caught the narrative zeitgeist. And there have been various announcements from foreign governments of trade between nations. I can’t remember who the specifics were, but India is buying oil from the Middle East and they’ve decided to denominate it in gold or in yuan rather than dollars. So I think the direction of travel, the desire for de-dollarization from Asian economies or economies that the West would deem bad actors is clear. That will happen over time, I think. But I think that’s something that’s currently somewhat overblown. So the reality is that the dollar is the only game in town when it comes to a global reserve currency. So much of global debt outstanding is in dollars. So if you want to prove your creditworthiness or if you want to deleverage, you need the dollars to do it. So I think that that is a trend that will be live for the next decade. But the idea that we’re all going to sort of switch to buying our oil in Bitcoin or gold or yuan tomorrow is probably not going to happen. And then maybe another trend that is exaggerated, and we’re very much talking our own book here, is the demise of fossil fuels. So the energy transition is an inevitability. There is a huge amount of political capital and desire from the population for us to transition, never mind the fact that it’s possibly a scientific imperative if we’d like to stay on the planet for more than a few more decades. We will need to transition the economy off fossil fuels. However, the reality is, is that that will probably go a lot slower than the hardcore ESG proponents would like it to, and that fossil fuel demand, oil demand globally is still growing. And that’s because emerging markets continue to grow, global GDP continues to grow, everyone wants an air conditioner, everyone wants a car, etc., etc. So We have pretty significant exposure to oil in our portfolios because we think that is underestimated. Because when you look at the pricing of the assets, it would suggest that oil’s going to sort of disappear from the global energy mix in the next 10 years. I think that’s probably fanciful.
Aoifinn Devitt: Well, I could talk all day. We could go all around the asset pie chart and it would be fascinating. Just to move a little bit more to maybe investor sentiment, you mentioned having a lot of meetings talking about de-dollarization. I’d just love to ask you more in terms of the different priorities right now in terms of, say, institutional investors and maybe the private wealth investor. Do they have different things on their mind right now?
Duncan MacInnes: No, I think broadly we’re all wrestling with that same sort of menu of challenges: war, inflation, recession, interest rates, narrow risk premiums. But as a generalization, I would say that the biggest distinction is that institutional investors focus upon benchmarking, relative returns, career risk, not being willing to stick their head above the parapet on certain issues. Individuals, private wealth, worry more about preservation of capital, protection against inflation, and being able to sleep well at night. So I think philosophically there are sort of differences there.
Aoifinn Devitt: And the question I always ask on this podcast, given it does have a particular focus on diversity, So having started in the industry perhaps at the early part of the 2000s, have you seen any change in terms of its diversity? What are your thoughts? Studying law tends to be a bit more of a 50/50 equation in university. Any thoughts on how the diversity of the industry is evolving?
Duncan MacInnes: I would probably make a distinction between Ruffer and the industry, although acknowledge that both have more to do. I think both are heading in the right direction. But there’s more to do. The industry has undoubtedly improved, I think, since 2008 when my career began in terms of diversity of social class, gender, ethnicity. But where the industry fails, I think, is diversity of thought. So there’s still a really strong emphasis on finance graduates, pass your exams, think a certain type of way, think like a CFA. Know, You I did the CFA. And I sort of feel like I’ve spent the 10 years since trying to unlearn most of it. So, you know, there’s a lot of pressure on thinking a particular way in the finance industry. Whereas to contrast with Ruffer, I think Ruffer has done very well in terms of gender equality. We had a female CEO, several females on our executive committee and board, lots of female partners. But I think we have more to do in terms of social class and diversity of ethnicity. But, you know, we’re trying there, like I said. Where I think we’re very good relative to the industry, as well as gender equality, is that cognitive diversity. So we reputationally, as you said at the start, we think very differently from the rest of the industry. As a firm, we’ve got lots of people who think about things in different ways that come from different academic disciplines. Fiona, that I work with in the Edinburgh office, I didn’t touch a calculator or a spreadsheet from the age of about 16 to 22. That’s quite rare in finance. So I think we do very well in that regard. And I’ve never quite been able to put this as eloquently as I would like, but investing in finance, it’s a little bit like a language. And different people within the industry speak different languages. You have people that speak in quantitative terms, you have people that speak in qualitative terms, you have the value investing tribe that speak their language and a growth investing tribe that speak their language. Or you have people like me that sort of speak in riddles or metaphors. And I think we have a pretty good mix within Ruffer of people that speak all those different languages and that sort of bring different perspectives.
Aoifinn Devitt: I like that, the idea of this multilingual organization, certainly, and different clients speak different languages as well.
Duncan MacInnes: And I think that’s the— as well as literal languages. Yes, we have clients that speak lots of literally different languages.
Aoifinn Devitt: Yeah. Let’s get back to some personal reflections now. So over the course of your career so far, clearly finance is a humbling place as well. Have there been any setbacks or challenges or investment calls that you got wrong that have had an impact on you?
Duncan MacInnes: Yeah, it is definitely humbling because it’s one of the few industries where you get a scorecard on a minute-by-minute basis from the market reminding you how wrong or right you are. And everything is so measured. One of the biggest challenges when I made the jump from Barclays to Ruffer, that was sort of making the jump from wealth management to institutional fund management. And that’s not an easy one to traverse. There’s a degree of snobbery, I would say, between the two, where institutional fund management views itself as superior to wealth management. And to be honest, I think that is slightly unjustified. There’s really talented people in both. But what I was finding was that my CV as a wealth manager wasn’t taken seriously as I was only 24, 25, whatever it was at the time, trying to make that move. And so in hindsight, I’m not sure if I’m sort of overlaying too much method to the madness in hindsight, but I think when I was trying to manufacture that move, in hindsight anyway, it feels like the plan was laying the groundwork, Passing the exams was of course necessary, but I wrote an investment blog to try and showcase my work, I suppose, showcase my thinking, show that I was willing to go above and beyond and market myself effectively to potential employers. And I think that the lesson from that was probably that basically people are willing to take a chance on you if they see passion or potential.
Aoifinn Devitt: That’s so good. I had another guest who spoke about the problem of pigeonholing. And he was pigeonholed as a banker. He wanted to move into industry and strategy, and he was always thought of as just a service provider and a banker. And I had never heard of that. I’d heard of being pigeonholed as a lawyer, but pigeonholing is a problem. And equally, it demonstrates that, you know, the old adage of if you don’t have the job you want or you can’t find the job you want, invent it, or actually kind of just start doing it, which is in a way what blogging can be, just doing the work you want to do. So I like that approach. Have you had any particular key people, mentors or sponsors that have had an influence on you or even outside your career that have influenced you in life?
Duncan MacInnes: So I knew this question was coming, and it feels sort of almost arrogant to not have an answer. I wouldn’t say I was self-taught, but I would say that I didn’t really have any mentors early in my career because I was quite remote. I was based in Glasgow and Edinburgh for Barclays, so I was miles away from the city or Wall Street, where most of the people that I would have wanted to learn from were based. But I did have that formative experience of sort of being born into my career exactly as the financial crisis was kicking off. So what I did very simply was sort of try to learn from, either by meeting or just by reading their output, the people who navigated the financial crisis well. It felt like that was a pretty good test of competence. You know, if if you, you can survive the biggest financial crisis the Great Depression or thrive in it, then you probably were doing something right. So a lot of my learning came from books and investor letters and so on from people who did well there. So I did a huge amount of extracurricular reading in my 20s, learning about the sort of old-school macro hedge fund managers who were willing to have these contrarian or controversial opinions and express them in ways that made money. That was one of the reasons that I came to Ruffer. My Ruffer origin story is that one of my first-ever client meetings at Barclays, the client’s portfolio had quite a lot of red ink on it because of the time of the particular meeting. But one of the few holdings that was on a gain was the Ruffer Total Return Fund. And I said, “Well, what’s that?” So I went online, Googled it, found the fact sheets, and started reading Jonathan’s investment reviews. Kept reading them for another 3 or 4 years. And then when I had passed my exams and so on, applied for the job and actually was rejected and then tried again 6 months later. And that time there was a space and I snuck in.
Aoifinn Devitt: No, that’s great. And you’re not the only one to have not had a specific mentor. I think that’s quite common, more common than we think. And it’s actually quite possible to have a very successful career without one. I think that’s part of the point of that question, you know, to draw out how common it is. And last question— my I think, you.
Duncan MacInnes: Know, it’s if you are lucky enough to have one, then I think it sounds like a phenomenal advantage that you should really, really try and leverage. Or even having an uncle in the industry, all these sort of slightly old-fashioned things. If you have any of those advantages, then I think you should try and use them.
Aoifinn Devitt: My last question is around any advice or word of wisdom, creed or motto that you’ve picked up over the years through this extensive reading. And I will say we can put some, any recommendations in the show notes if you have any, but Anything you can leave us with there?
Duncan MacInnes: Well, recommendations. I always recommend— I get this question quite a lot, and I think my top 4 books that I always say are Superforecasting by Philip Tetlock, Thinking in Bets by Annie Duke, who’s a former poker player, The Most Important Thing by Howard Marks, who’s a famous distressed debt investor, and then one called The Psychology of Money by Morgan Housel, which is just the most dense book of wisdom that you could ever imagine. He squeezed so much wisdom into about 250 pages that can be read in almost 1 or 2 sittings. So I think those 4 contain an awful lot of the information that you would want to know, which actually, I suppose, brings on to the creed or motto. Wouldn’t be an investment interview or discussion without a Warren Buffettism sneaking in somewhere. And I think his business partner, Charlie Munger, actually was the one that said, it’s remarkable how much long-term advantage people like Warren and I have gotten by trying to be consistently not stupid instead of trying to be very intelligent. And I think there is a lot to that. The way that at Ruffer we sort of frame that is that if you look after the downside, if you minimize the losses, the upside sort of looks after itself. You own a portfolio of risk assets, you own equity in businesses, these things make money over time. The key is to avoid the big losses. And the other thing, the other Buffetism, which is maybe comfort to people like me who are capable but not exceptional students, is that investing is a game where the guy with the 100 IQ can beat the guy with 160 IQ as long as he’s in control of his emotional intelligence. So there are many, many lessons in finance of people who were exceptionally smart who ended up blowing themselves up like Long-Term Capital Management, the geniuses that sort of invented CDOs squared in 2006. Sometimes a PhD in rocket science is actually a disadvantage. So I think it’s trying to harness your emotional intelligence and make consistently not stupid decisions gets you a long way.
Aoifinn Devitt: I love that. So everything in moderation, even intelligence. Definitely a good way to look at it. Well, this has been a great discussion, Duncan. Thank you so much. It’s been sweeping. As I’ve said, any one of these rabbit holes, we, we kind of just sniffed at, we could easily have gone down and had a very podcast-length thorough discussion. It’s been a pleasure to speak with you here, and thank you for coming to share your insights with us.
Duncan MacInnes: Thanks for having me.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces podcast. If you liked what you heard and would like to tune in to hear more inspiring investors on their personal journeys, please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice, and all views are personal and should not be attributed to to the organizations and affiliations of the host or any guest.
Aoifinn Devitt: Series 3 is kindly supported by Eagle Point Credit Management. Eagle Point Credit Management is a specialist investment manager principally focused on income-oriented credit investments in niche and inefficient markets. Founded by Thomas Majewski in partnership with Stone Point Capital in 2012, Eagle Point currently manages over $7.8 billion in AUM. Investment strategies pursued by the firm include collateralized loan obligations, CLOs, portfolio debt securities, and other opportunities across the credit universe. Currently, Eagle Point is the largest investor in CLO equity in the world and one of the largest non-bank lenders focused on providing financing solutions to credit funds. You can learn more about Eagle Point at eaglepointcredit.com. What are some of the unintended consequences of the bank crisis? Why is superintelligence sometimes overrated? And what are some of the trends we are overlooking today? Find out next. I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people. And their stories. I’m joined today by Duncan MacInnes, who is an investment director at Ruffer LLP, where he has spent over a decade. He previously worked in wealth management. Welcome, Duncan. Thanks for joining me today.
Duncan MacInnes: Hi, Aoifinn, and thanks for having me.
Aoifinn Devitt: Well, let’s start with your background and career journey. Can you talk about where you grew up, your early interests, and how ultimately you came to enter the world of finance and investing?
Duncan MacInnes: Yeah, so I’ll try and make my background as interesting as possible. I grew up in a place called Motherwell, which is just outside Glasgow, where I went to school and university. And that’s in Scotland, for those of you that don’t know. And in high school, I would say that I was a capable student, but somewhat lacking in motivation and direction. And really, for me, it was all about sports, friends, computer games, that sort of stuff. And only because it was quite a good school was I sort of handheld through to university. Otherwise, Lord knows where I’d have ended up.
Aoifinn Devitt: And when you mentioned sport, was there any particular sport that motivated you more than others? Anything that captivated you?
Duncan MacInnes: It was always rugby for me. I’m not sort of— I’m not built for ballet, so rugby worked quite well. And played that from the age of sort of 7 through to the end of university.
Aoifinn Devitt: Right. So we’ll come back to that maybe just to see in terms of lessons learned. And then when it came to choosing a discipline or a direction, How did that pan out?
Duncan MacInnes: My family are medical, lots and lots of doctors on my dad’s side, and the advice from them was to not be a doctor, and in fact, how about suing doctors? So I was steered towards law because I liked an argument and I was relatively verbose, as we’ll all find out. And so I ended up doing law at university, or reading law at university, but actually All that taught me was that I didn’t want to be a lawyer. I realized very, very early on in my legal degree that this was not for me, that it’s not like the law that you see on the TV. There’s only, only very few lawyers get to stand up in court and pontificate. So I really did not enjoy my degree. And the only thing that came, the only positive that came from it is my wife, who I met at university and we’re sort of still together as far as I’m aware.
Aoifinn Devitt: And then in terms of, I’m certainly one can pontificate in investment, I suppose that goes with the job. How did you then find yourself applying to investment roles? Did you find your legal skills enhanced your aptitude there?
Duncan MacInnes: A very, a very meandering journey. So I really, all I knew, like I said, is I didn’t want to be a lawyer. And then in the summer of second year after all of university, my dad died fairly suddenly from a sort of aggressive cancer and my mom. They were separated, long divorced at the time, emigrated to the UK in the same week. So it was a pretty traumatic week. And that sort of jarring experience, I think, forced me to grow up quite a bit and actually to take ownership of financial affairs to a degree that I hadn’t before then. But in terms of what came next, so I sort of survived the rest of university. And I ended up at the end of university being a sort of, you know, decent student with a decent degree from a decent university that was Glasgow University. So without a sort of burning vocation or actually any really useful work experience, which, know, you if you even brought that forward to today, it would be almost impossible to get a good graduate job in 2023 with that CV. But back in 2007, so we’re talking about then, It was still difficult. And so what I did was the only reasonable strategy was spray and pray. So I applied to everything you could imagine, from Unilever to Tesco to MI5 to the Big Four accountants, investment banks, legal firms. And I had a legal traineeship lined up actually when I got a job at Barclays. And I have to be honest, I was totally cynical about it because I didn’t know anything about what I wanted to do. I ditched the legal job and took the Barclays job because the money was a lot better. It really was as simple as that. But if we sort of go on a bit, the Barclays grad scheme back then was— it was just before the financial crisis, so you were still in the sort of heyday of big bank spending. So it was a very luxurious program where you rotated around different departments and different cities. So I worked in Glasgow, Edinburgh, London, and Singapore for 6, 7 months in each place. And it was only when I got to Singapore that I sort of fell in love with something, and that something was markets. It was a really interesting time to be working and learning about financial markets because the job began 2 weeks before Lehman Brothers went bust. And I think I moved to Singapore in Q1 2009, I think it was. So that was pretty much the exact market bottom. Post-financial crisis. So I had this formative experience of financial markets driving everything that was happening in the world, being the focus of everything and getting to be, although incredibly junior, right at the coalface of that. So this idea that in financial markets you could have a thought or an insight, and if that is proven correct, you get to make money from it. Was just so sort of exciting to me, and it sort of feels like the biggest and best game in the world played by, you know, lots of clever people. So all of a sudden, having gone from having no direction, I had this thing that I really, really enjoyed. And for me, it sort of became tunnel vision from that point.
Aoifinn Devitt: It’s really interesting. A couple of points there I’m taking away. First of all, it’s good and instructive that one doesn’t need to have necessarily a storied university career full of medals and awards, because I think not everybody does. I mean, especially the graduates coming out today who may have had a sidetracked university experience. Equally, those graduate schemes are fantastic. I think they still offer amazing opportunities, especially those with global rotations. And I also spent time in Hong Kong in my early 20s, and I found that there’s something about Asia that makes it very immersive. Maybe it’s the very concentrated nature of those cities, the fact that, you know, you’re surrounded by skyscrapers, surrounded by markets, by retail investors sucking up every piece of information. It is the ultimate immersive game if you think of in it that— They’re.
Duncan MacInnes: Very long days as well. In Asia. I mean, that’s what I sort of remember, was that I would start at— I think I started at 7 AM, and people would take long lunches, but they would work until 6 or 7, and they would often go for dinner and then come back to the office. So I think it was maybe something to do with the fact that people have small apartments in Hong Kong and Singapore, but actually the office was maybe a more enjoyable environment to be in. So people worked really long hours, which, like you say, made it very immersive and collegiate.
Aoifinn Devitt: And you were in private wealth at this time, is that correct? Or did you— I, yeah.
Duncan MacInnes: So I was hired for Barclays Wealth, which was the private bank of Barclays. And the intention of that graduate program was that you would end up as a private banker. The rotation to Singapore was into equity research. And that was when I sort of realized that I wanted to be closer to the coalface of investment decision-making and investment research than the client side.
Aoifinn Devitt: And if we take it forward then into what’s on your mind today, so Ruffer is known to have a multi-strategy approach. It’s known to have a wide variety of investment views, some of them contrarian. As you look out, we’re recording this second quarter of ’23, what’s on your mind now? What’s at the, I suppose, the forefront of your mind as you look to markets? What’s obsessing you today?
Duncan MacInnes: So for those of the listeners that don’t know, very brief history of Ruffer. The business began in 1995 from sort of humble beginnings with a shared office with another firm. We’ve grown to $26 billion under management for a whole variety of clients, from private individuals through to sovereign wealth funds all over the globe. But for those, all those different client types, we’re doing one thing, and the one thing is trying to build an all-weather portfolio. So global multi-asset, totally unbenchmark, go anywhere, which, as you say, leads us occasionally to contrarian or interesting positions. And I think reputationally, we’re known as bear market operators. So we’ve done particularly well in the crises. So we made money in the dot-com crisis, we made money in the financial crisis, and we made money in the COVID crash, and then in 2022 where almost everything fell as well. So that’s really forged the reputation of the firm. But over the long term, we’ve actually, we’ve outperformed the stock market and we’ve done it with less risk and less volatility. But I think the biggest difference between us and conventional asset managers is that Most investors start from a position of return maximizing. How can I make the most money? And then maybe I’ll sprinkle some hedges around the outside of that to try and mitigate the downside. Our approach is almost completely the opposite. We have this sort of minimax regret, so minimize the probability of your maximum regret. How do we make sure we don’t lose money? And then once we’ve done that, how much is left to shoot for the stars? So Bearing all that in mind, how do we look at 2023? I think it’s been a pretty surprising first quarter of the year. So if you went back to December and said by the end of the first quarter, 3 of the top 30 US banks will have disappeared and Credit Suisse will have been silently assassinated over a weekend and merged with UBS, do you think stock markets and bond markets will be up or down? I think most people would’ve said that sounds like they’re going to be down quite a lot. And in fact, they’re actually pretty substantially up. So I think the big question, the live issue is whether or not this is a banking crisis. And if it is a banking crisis, to what extent it looks like 2008. And I think the headline is it doesn’t look like 2008. It’s not a global financial crisis. We don’t need to worry about Alastair Darling saying that the cash machines were going to run out of money. But that doesn’t mean that we shouldn’t be very worried about what’s happening here. So I think this is quite a— the acute phase of this crisis has probably passed, but the chronic phase could go on for quite a bit longer. And the problem at the center of this that we see is that central banks and governments have a very difficult choice at the moment because they have competing goals. On the one hand, they want to focus on financial stability. But they also have to manage monetary stability. And monetary stability effectively means inflation. And if you try and fix financial stability by posing the banks with money to make sure that they survive this, then that exacerbates the inflation problem. And if you continue to raise interest rates and withdraw liquidity from the system, which is what they’ve been trying to do for the last year or so, that will exacerbate the bank run. So how they square this circle is going to be the big issue for 2023. And the sort of the way that I try to describe it to people is that money is moving closer to the center of the financial system. So people are withdrawing money from the regional banks, the smaller banks, and they’re moving it to treasuries and money market funds or to JP Morgan and Citigroup where they know it will be safe. But the closer the money moves to the center, the less monetary energy or velocity it has. And that reduces the risk-taking capacity of the financial system as a whole. Now, every individual is acting rationally here. So even though I don’t think people have to worry about the safety of their deposits, the truth is, is that you can earn more in a money market fund than you can in the bank, and you don’t have to worry about it. So why wouldn’t you do it? But if everyone— it’s a sort of tragedy of the commons. If everyone acts like that, then it creates a really big problem. And it’s that reduced risk-taking capacity of the system and specifically It’s the smaller regional banks that do lending to the real economy. So small and medium businesses, commercial property, these sorts of things. And that we are seeing day by day as the data comes out is having a real squeeze at the moment. And that could be quite concerning and potentially will tip us into recession this year.
Aoifinn Devitt: Really interesting analysis. And I like your acute versus chronic analogy. Clearly, once born into a medical family, you will always have that with you, the medical analogies. Having been in a medical family myself. But I’d love to say, so that’s a very, a fairly big idea out there. And what one of my next questions was around anything that we’re overlooking or perhaps not fully appreciating in today’s markets. And Rothbard, as I mentioned, you know, was early perhaps into gold and into other kind of commodities at the time. So if we do the thought experiment of taking that centralization of, of money and the lower velocity to its logical conclusion, Where do we go from here? What are some of the scenarios? And maybe we talk a lot about things breaking and maybe this wasn’t the thing that broke, but could anything else break?
Duncan MacInnes: There’s this idea that when the Federal Reserve raises interest rates, it tends to raise interest rates until something breaks. So there is now a question as to whether the thing that breaks, whether that was Silicon Valley Bank and Signature and Credit Suisse, it’s hard to say. So I like to think of these things you think back about the financial crisis and you think of it as an event, but it wasn’t really an event, it was a process. So over the course of 2 years, you had Northern Rock, then 6 months until Bear Stearns, then another 6 months until Lehman Brothers, and then another 6 months until the stock market bottomed in March 2009. So perhaps Credit Suisse is Bear Stearns, but I don’t think it’s Lehman Brothers, and I don’t think it’s the bottom. So I think there’s potentially more things to break But what I would say in terms of what people can do about investing is that none of this stuff is good news that I’m talking about, but actually it would be okay if it came with low asset prices. So there wasn’t much good news in March 2009, but it was still a phenomenal time to invest. Unfortunately, there’s lots to worry about at the moment out there. There’s the banking crisis, there’s the risk of recession, there’s the war rumbling on, there’s China making noises about invading Taiwan, there’s commodity and wage pressures, there’s taxes going up. But if asset prices were cheap, I think you could still find a way to get excited about things. But unfortunately, they’re not particularly. Risk premiums, which are sort of the additional return that you earn above cash for owning riskier assets, are pretty low on average. So provocatively, I’ve been saying to clients, why take risk if you don’t have to? So at the moment, you can earn 5% in US dollar cash, in a money market fund or a very short-dated Treasury bill. And if you look at the earnings yield on the S&P, the S&P 500, it’s also 5%. So the stock market is subject to all of those vicissitudes and uncertainties that I mentioned. Cash is subject to none of them apart from inflation. So really, I don’t think you’ve been compensated for taking much risk. Our view would be that later in the year, you probably get the reality of recession. You get the consequences of this liquidity being withdrawn from the system. And our base case would be that the stock market revisits the lows of, of last year. And that might be the buying opportunity because I think you will get ultimately a government response, sort of fiscal policy response to try and get the economy going again from recessionary lows. But we probably have to feel more pain between now and then.
Aoifinn Devitt: Really interesting. And just like the SVB woes could maybe be said to have been hiding in plain sight, I mean, it wasn’t any secret that interest rates have been rising and that they’ve been forced into buying so-called low-risk assets, which as we know from the UK, low-risk government bonds can be less low-risk than we think in these extreme events. Would you say there’s anything else kind of hiding in plain sight? Can we take hints from the stock market, the bond market? The bond market doesn’t seem to believe the Fed with this inverted yield curve. Equally on the equity market side, tech stocks have been doing very well despite a lot of bad news and negative utterings there. So what’s actually going on? And are we missing something large?
Duncan MacInnes: Yeah, I think so. I think that first point you made about low-risk assets is very important. So what we sort of all learned to focus on was counterparty risk. And so you buy government bonds, you have no counterparty risk, so it’s a low-risk asset. What everyone overlooked was duration risk, the sensitivity to changes in interest rates. Of course, very long-dated government bonds come with lots of duration, and the long-dated inflation-linked bonds, which are so important to the UK pension industry, fell 70% last year. They were down more than Bitcoin. These were revealed to be much riskier than people thought. Full disclosure, we held some and still do. I think the risk hiding in plain sight and is being discussed, but I think is still underappreciated, is that the entire institutional asset management industry— pension funds, charities, endowments, and so on— have increasingly been drawn to illiquid assets over the last decade or so. So private equity, venture capital, private credit have become the flavor of the month. And I think there is a reckoning coming for these assets. Now, that’s bad news for investor portfolios, The good news is that I think to go back to the phrase of acute versus chronic, that’s a chronic problem, not an acute one. The benefit of the opacity and illiquidity is that I think these losses will be realized over a very long time. But I have pretty high conviction that there will be losses and they will be realized. But what you won’t have is the sort of cataclysmic down 50% that you’ve seen in some of the profitless tech public companies. Instead, you’ll see a slow-motion bleed over quarters of down 5%, down 5%, down 5%. And then in 5 years’ time, 10 years’ time, we’ll look back and we’ll say the vintage of illiquid and private investments from 2019, ’20, and ’21 were pretty poor. They were bad investment decisions. But it will take a while for that to be born out.
Aoifinn Devitt: And another question I just want to ask you about while we’re on this fascinating topic, you know, philosophical topic in terms of what investors are focusing on. In tech, there’s that old adage that we overestimate in the short term, underestimate in the long term. And it seems with some of these big events, whether it be the energy transition, there’s a lot of concern now, I’m based in the US, around will the US dollar continue to be the reserve currency? These are sort of long-term perhaps changes that sometimes get brought forward into short-term concerns. Do you think there’s anything out there that we’re perhaps worrying too much about today, that it’s longer dated and it will play out later, and something that maybe that it is a large, big structural change that we need?
Duncan MacInnes: That’s a good question. I think two things. I think one you mentioned, de-dollarization does seem to be the topic du jour. So every meeting I’ve done in the last few weeks, that has come up. It definitely feels to have sort of caught the narrative zeitgeist. And there have been various announcements from foreign governments of trade between nations. I can’t remember who the specifics were, but India is buying oil from the Middle East and they’ve decided to denominate it in gold or in yuan rather than dollars. So I think the direction of travel, the desire for de-dollarization from Asian economies or economies that the West would deem bad actors is clear. That will happen over time, I think. But I think that’s something that’s currently somewhat overblown. So the reality is that the dollar is the only game in town when it comes to a global reserve currency. So much of global debt outstanding is in dollars. So if you want to prove your creditworthiness or if you want to deleverage, you need the dollars to do it. So I think that that is a trend that will be live for the next decade. But the idea that we’re all going to sort of switch to buying our oil in Bitcoin or gold or yuan tomorrow is probably not going to happen. And then maybe another trend that is exaggerated, and we’re very much talking our own book here, is the demise of fossil fuels. So the energy transition is an inevitability. There is a huge amount of political capital and desire from the population for us to transition, never mind the fact that it’s possibly a scientific imperative if we’d like to stay on the planet for more than a few more decades. We will need to transition the economy off fossil fuels. However, the reality is, is that that will probably go a lot slower than the hardcore ESG proponents would like it to, and that fossil fuel demand, oil demand globally is still growing. And that’s because emerging markets continue to grow, global GDP continues to grow, everyone wants an air conditioner, everyone wants a car, etc., etc. So We have pretty significant exposure to oil in our portfolios because we think that is underestimated. Because when you look at the pricing of the assets, it would suggest that oil’s going to sort of disappear from the global energy mix in the next 10 years. I think that’s probably fanciful.
Aoifinn Devitt: Well, I could talk all day. We could go all around the asset pie chart and it would be fascinating. Just to move a little bit more to maybe investor sentiment, you mentioned having a lot of meetings talking about de-dollarization. I’d just love to ask you more in terms of the different priorities right now in terms of, say, institutional investors and maybe the private wealth investor. Do they have different things on their mind right now?
Duncan MacInnes: No, I think broadly we’re all wrestling with that same sort of menu of challenges: war, inflation, recession, interest rates, narrow risk premiums. But as a generalization, I would say that the biggest distinction is that institutional investors focus upon benchmarking, relative returns, career risk, not being willing to stick their head above the parapet on certain issues. Individuals, private wealth, worry more about preservation of capital, protection against inflation, and being able to sleep well at night. So I think philosophically there are sort of differences there.
Aoifinn Devitt: And the question I always ask on this podcast, given it does have a particular focus on diversity, So having started in the industry perhaps at the early part of the 2000s, have you seen any change in terms of its diversity? What are your thoughts? Studying law tends to be a bit more of a 50/50 equation in university. Any thoughts on how the diversity of the industry is evolving?
Duncan MacInnes: I would probably make a distinction between Ruffer and the industry, although acknowledge that both have more to do. I think both are heading in the right direction. But there’s more to do. The industry has undoubtedly improved, I think, since 2008 when my career began in terms of diversity of social class, gender, ethnicity. But where the industry fails, I think, is diversity of thought. So there’s still a really strong emphasis on finance graduates, pass your exams, think a certain type of way, think like a CFA. Know, You I did the CFA. And I sort of feel like I’ve spent the 10 years since trying to unlearn most of it. So, you know, there’s a lot of pressure on thinking a particular way in the finance industry. Whereas to contrast with Ruffer, I think Ruffer has done very well in terms of gender equality. We had a female CEO, several females on our executive committee and board, lots of female partners. But I think we have more to do in terms of social class and diversity of ethnicity. But, you know, we’re trying there, like I said. Where I think we’re very good relative to the industry, as well as gender equality, is that cognitive diversity. So we reputationally, as you said at the start, we think very differently from the rest of the industry. As a firm, we’ve got lots of people who think about things in different ways that come from different academic disciplines. Fiona, that I work with in the Edinburgh office, I didn’t touch a calculator or a spreadsheet from the age of about 16 to 22. That’s quite rare in finance. So I think we do very well in that regard. And I’ve never quite been able to put this as eloquently as I would like, but investing in finance, it’s a little bit like a language. And different people within the industry speak different languages. You have people that speak in quantitative terms, you have people that speak in qualitative terms, you have the value investing tribe that speak their language and a growth investing tribe that speak their language. Or you have people like me that sort of speak in riddles or metaphors. And I think we have a pretty good mix within Ruffer of people that speak all those different languages and that sort of bring different perspectives.
Aoifinn Devitt: I like that, the idea of this multilingual organization, certainly, and different clients speak different languages as well.
Duncan MacInnes: And I think that’s the— as well as literal languages. Yes, we have clients that speak lots of literally different languages.
Aoifinn Devitt: Yeah. Let’s get back to some personal reflections now. So over the course of your career so far, clearly finance is a humbling place as well. Have there been any setbacks or challenges or investment calls that you got wrong that have had an impact on you?
Duncan MacInnes: Yeah, it is definitely humbling because it’s one of the few industries where you get a scorecard on a minute-by-minute basis from the market reminding you how wrong or right you are. And everything is so measured. One of the biggest challenges when I made the jump from Barclays to Ruffer, that was sort of making the jump from wealth management to institutional fund management. And that’s not an easy one to traverse. There’s a degree of snobbery, I would say, between the two, where institutional fund management views itself as superior to wealth management. And to be honest, I think that is slightly unjustified. There’s really talented people in both. But what I was finding was that my CV as a wealth manager wasn’t taken seriously as I was only 24, 25, whatever it was at the time, trying to make that move. And so in hindsight, I’m not sure if I’m sort of overlaying too much method to the madness in hindsight, but I think when I was trying to manufacture that move, in hindsight anyway, it feels like the plan was laying the groundwork, Passing the exams was of course necessary, but I wrote an investment blog to try and showcase my work, I suppose, showcase my thinking, show that I was willing to go above and beyond and market myself effectively to potential employers. And I think that the lesson from that was probably that basically people are willing to take a chance on you if they see passion or potential.
Aoifinn Devitt: That’s so good. I had another guest who spoke about the problem of pigeonholing. And he was pigeonholed as a banker. He wanted to move into industry and strategy, and he was always thought of as just a service provider and a banker. And I had never heard of that. I’d heard of being pigeonholed as a lawyer, but pigeonholing is a problem. And equally, it demonstrates that, you know, the old adage of if you don’t have the job you want or you can’t find the job you want, invent it, or actually kind of just start doing it, which is in a way what blogging can be, just doing the work you want to do. So I like that approach. Have you had any particular key people, mentors or sponsors that have had an influence on you or even outside your career that have influenced you in life?
Duncan MacInnes: So I knew this question was coming, and it feels sort of almost arrogant to not have an answer. I wouldn’t say I was self-taught, but I would say that I didn’t really have any mentors early in my career because I was quite remote. I was based in Glasgow and Edinburgh for Barclays, so I was miles away from the city or Wall Street, where most of the people that I would have wanted to learn from were based. But I did have that formative experience of sort of being born into my career exactly as the financial crisis was kicking off. So what I did very simply was sort of try to learn from, either by meeting or just by reading their output, the people who navigated the financial crisis well. It felt like that was a pretty good test of competence. You know, if if you, you can survive the biggest financial crisis the Great Depression or thrive in it, then you probably were doing something right. So a lot of my learning came from books and investor letters and so on from people who did well there. So I did a huge amount of extracurricular reading in my 20s, learning about the sort of old-school macro hedge fund managers who were willing to have these contrarian or controversial opinions and express them in ways that made money. That was one of the reasons that I came to Ruffer. My Ruffer origin story is that one of my first-ever client meetings at Barclays, the client’s portfolio had quite a lot of red ink on it because of the time of the particular meeting. But one of the few holdings that was on a gain was the Ruffer Total Return Fund. And I said, “Well, what’s that?” So I went online, Googled it, found the fact sheets, and started reading Jonathan’s investment reviews. Kept reading them for another 3 or 4 years. And then when I had passed my exams and so on, applied for the job and actually was rejected and then tried again 6 months later. And that time there was a space and I snuck in.
Aoifinn Devitt: No, that’s great. And you’re not the only one to have not had a specific mentor. I think that’s quite common, more common than we think. And it’s actually quite possible to have a very successful career without one. I think that’s part of the point of that question, you know, to draw out how common it is. And last question— my I think, you.
Duncan MacInnes: Know, it’s if you are lucky enough to have one, then I think it sounds like a phenomenal advantage that you should really, really try and leverage. Or even having an uncle in the industry, all these sort of slightly old-fashioned things. If you have any of those advantages, then I think you should try and use them.
Aoifinn Devitt: My last question is around any advice or word of wisdom, creed or motto that you’ve picked up over the years through this extensive reading. And I will say we can put some, any recommendations in the show notes if you have any, but Anything you can leave us with there?
Duncan MacInnes: Well, recommendations. I always recommend— I get this question quite a lot, and I think my top 4 books that I always say are Superforecasting by Philip Tetlock, Thinking in Bets by Annie Duke, who’s a former poker player, The Most Important Thing by Howard Marks, who’s a famous distressed debt investor, and then one called The Psychology of Money by Morgan Housel, which is just the most dense book of wisdom that you could ever imagine. He squeezed so much wisdom into about 250 pages that can be read in almost 1 or 2 sittings. So I think those 4 contain an awful lot of the information that you would want to know, which actually, I suppose, brings on to the creed or motto. Wouldn’t be an investment interview or discussion without a Warren Buffettism sneaking in somewhere. And I think his business partner, Charlie Munger, actually was the one that said, it’s remarkable how much long-term advantage people like Warren and I have gotten by trying to be consistently not stupid instead of trying to be very intelligent. And I think there is a lot to that. The way that at Ruffer we sort of frame that is that if you look after the downside, if you minimize the losses, the upside sort of looks after itself. You own a portfolio of risk assets, you own equity in businesses, these things make money over time. The key is to avoid the big losses. And the other thing, the other Buffetism, which is maybe comfort to people like me who are capable but not exceptional students, is that investing is a game where the guy with the 100 IQ can beat the guy with 160 IQ as long as he’s in control of his emotional intelligence. So there are many, many lessons in finance of people who were exceptionally smart who ended up blowing themselves up like Long-Term Capital Management, the geniuses that sort of invented CDOs squared in 2006. Sometimes a PhD in rocket science is actually a disadvantage. So I think it’s trying to harness your emotional intelligence and make consistently not stupid decisions gets you a long way.
Aoifinn Devitt: I love that. So everything in moderation, even intelligence. Definitely a good way to look at it. Well, this has been a great discussion, Duncan. Thank you so much. It’s been sweeping. As I’ve said, any one of these rabbit holes, we, we kind of just sniffed at, we could easily have gone down and had a very podcast-length thorough discussion. It’s been a pleasure to speak with you here, and thank you for coming to share your insights with us.
Duncan MacInnes: Thanks for having me.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces podcast. If you liked what you heard and would like to tune in to hear more inspiring investors on their personal journeys, please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice, and all views are personal and should not be attributed to to the organizations and affiliations of the host or any guest.
