Aoifinn Devitt: This podcast series is kindly sponsored by Evanston Capital. For over 20 years, Evanston Capital has had a key focus in identifying early-stage investment managers it believes are capable of generating long-term value-added returns in complex, innovative strategy areas. The series is also sponsored by Alvine Capital. Alvine Capital is a specialist investment manager and placement boutique with a particular focus on alternative assets, a significant presence in London and Stockholm.
William McGrath: I think corporates have become used to— maybe they’ve got almost used an excuse now to say pensions is just something from yesterday, not something that they should be thinking about now. That wasn’t what it was when I was first a finance director. And yeah, you could see that part of your HR strategy was to have a good pension. And I think now, because there’s been endless de-risking of the investments and it has been so costly for so many people, they— it’s almost fashionable now to say it’s too difficult. And I would say that that is just not right. And I think now that there has been this de-risking— whether that’s the right strategy, we can endlessly debate, and LDI and what a disaster that proved to be. But leaving that all to one side, what should you do next? Play forward from here, and you’ve now got a scheme which is actually pretty well funded in most cases. And if you’re a strong corporate, what should you do? And really, you do have a lot of value. If you think about overall, there is still $1.2 trillion in private sector investments in the UK that we could decide how to use. If you decide that, yes, we’re not walking off the pitch, we’re going to run on, which has been the thing I’ve been hammering away at since 2018, that run on beats buyout.
Aoifinn Devitt: 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 William McGrath, who is CEO of C-Suite Pension Strategies. He has a financial and industrial sector background and was a longtime CEO of Agar Rangemaster. Its pension scheme had reached full funding without sponsor contributions because it had a long-term all-stakeholder agreement. He has an honorary doctorate from Birmingham City University for work to sustain the relevance of the Midlands industrial heritage. He returned to the financial sector after 25 years working in industry, so certainly knows a thing or two about the industrial backdrop. Welcome, William. Thanks for joining me today.
William McGrath: Great fun. Thank you.
Aoifinn Devitt: Well, you have such an interesting background. I’d like if you could give us kind of some of the highlights there circling through that and really bring it back to how you have ended up where you have today with this expertise in pensions and some pretty, I’d say, strongly held views on that. Can you start from the beginning and take us through?
William McGrath: Yeah, no problem. I grew up in Bristol and was a swotty school child, so I managed to get into Oxford. And when I did that, I studied history. And after that, I thought, what should we do next? And I joined what is now KPMG, Peat Marck McLintock, which I must say, 6 months before I joined, I’d never heard of them. So I didn’t really have a commercial background. But after I qualified, I thought, oh, what happens next? So I moved into the city, And I worked for an organization called Lloyds Merchant Bank, which is part of the Lloyds Banking Group, which I suppose was the first time I really came across a wide breadth of financial services activities. And that lasted a few years before we went on to Clymel Benson, where again, I was working in a really quite high-powered group. I’m very happy to talk about some of the people there. They were a terrific group. And from those experiences, I was lucky enough to move into industry working for a client. I suppose that happens quite a lot. People getting into industry. And then that started my industrial career. So, the thumbnail sketch is 25 years working in industry, and then coming back, which I suppose is a little unusual, to financial services, which was actually really a bit of a family-driven decision. The children— I’ve got 4 girls— were all moving back to London. And we thought, why don’t we come too? So, if you’re coming back to London, what are you going to do? After the Pargraves Master Business was sold on, what are we going to do? Well, financial services in Central London is something which is a bit of an expertise for the city. So why not try and join in for the second time? So that’s how I ended up back in financial services. But I suppose if you look back through some of that experience, and how do some of the things that I do like to talk about and I bang on about come together, I think the key moment really was when I was at Lloyds Merchant Bank. And one of the clients there was an industrial group, a construction group called Northwest Holst. Which had been lent rather too much money by Lloyds Bank. And they were very anxious to get some of it back. How was that going to happen? And that’s how I started to see two things that are interesting. One may be the difference between different parts of a financial organization. So on one side, you had the bank. And on the other side, you had the investment bank, the merchant bank, who I have to say don’t always see eye to eye. And how does that come together? And as far as the client was concerned, I was on the investment banking side, but we did come up with a proposition which involved a few things like turning the debt into an MBO, which I think I can say was probably my idea. And then the idea of the chief exec, which was to say, this company has a very large pension scheme, which is extremely well-funded. And we’re talking in the mid-’80s here, unfortunately, a long time ago, but in the mid-’80s. And could you get that scheme to invest in the business directly to help the business survive. And that’s what we did. So that’s really where my interest in pensions started. And once you’ve got that link between corporate finance, which is why I was working in the bank, and banking, which is we were dealing with the bank itself, and pensions, what role does that play for the organization and how does it help people? That’s really, I think, the kernel of all the things that happened subsequently, because as it transpired, I went to work for that company, Northulst, took us to the north of England, to Cheshire. And really, once I was into that and got into industry, that pension motif became something people recognized I knew a bit about. And so, for things I did subsequently, yeah, pensions was something I never scared of as a corporate or as a trustee, as I became chair of the trustee for a few years in one of the companies I worked for. So that’s really the background, really. And suddenly you’ve got the idea that actually pensions is something which should be integral, not something to lose sight of. Pull that together with the idea that actually it’s something that can help people, can be used in a positive way, in various different ways. And we’ve carried on with that ever after, really. And that’s, I hate to say it broadly, what we’re still trying to do is persuade corporates, that’s why we call the business we run C-Suite, a board level, think about pensions again. One, it’s not that difficult. And secondly, when you do look at it, you can produce much better answers than may be happening at the moment because there are things like the ESG component of investing in a positive way, the money that you’ve got, see it as a corporate wealth fund, don’t see it as a legacy problem. These are issues which I think all these years later, and all these different experiences later, still resonate, and there’s still some big wins for the economy and for individual businesses.
Aoifinn Devitt: Well, that’s a wonderful segue into my question about your core beliefs. So I think we’ve already touched on some of them here. It’s not that difficult. Think about it as the corporate wealth fund. So as opposed to a drag or kind of an albatross, I suppose, that is a burden, it should be seen as a treasure chest, potentially potential. Can you develop some of those ideas more? And because I think your views are not I’d say the conventional ones. And maybe can you just lay out, set out your stall in terms of how you think corporates should think about their pension plans?
William McGrath: Absolutely. I think corporates have become used to, maybe they’ve got almost used as an excuse now to say pensions is just something from yesterday, not something that they should be thinking about now. That wasn’t what it was when I was first a finance director. And yeah, you could see that part of your HR strategy was to have a good pension. And I think now because there’s been endless de-risking of the investments, and it has been so costly for so many people, they— it’s almost fashionable now to say it’s too difficult. And I would say that that is just not right. And I think now that there has been this de-risking, whether that’s the right strategy, we can endlessly debate an LDI and what a disaster that proved to be. But leaving that all to one side, what should you do next? Play forward from here. And you’ve now got a scheme which is actually pretty well funded. In most cases. And if you’re a strong corporate, what should you do? And really, you do have a lot of value. If you think about overall, there is still $1.2 trillion in private sector investments in the UK that we could decide how to use. If you decide that, yes, we’re not walking off the pitch, we’re going to run on, which has been the thing I’ve been hammering away at since 2018, that run on beats buyout. Just look what you can achieve with it. Yes, sure, you can give it to nice people at LNG or whatever, and I’m sure they’ll look after it very well. But actually, why don’t you say, I’ll have a sensible investment strategy, may even look the kind of return that they’re now seeking. Let’s say gilts 1.5, gilts plus 2, not— haven’t got to shoot the lights out. If you run the business forward and you get stuck into looking at the numbers, you’ll see that the chances of you generating more money than you need are very high. If you succeed in doing that, the question then becomes, what are you going to do with it? And to me, the answer is you should recycle that money in a way that really the people who set up the trust in the first place wanted to do. It looked after today’s people, and it started helping tomorrow’s people and people who are employed today. So this is, why not tap— and we’d like to use an image of a rubber tree, right? Why don’t you tap into that? And each year, maybe 2% of the assets could be used to further the interests of the members who’ve got pensions. When you actually run the numbers, it doesn’t take more than, say, 0.5% of the asset return a year to give the members a discretionary 10% increase each year. That is material. You could then look to, say, put the same kind of amount in supplementing what you’re paying on a DC basis, or even better, which I think is one of the coming things on a collective defined contribution basis, which if that comes through is I would highly recommend is something that corporates should be looking at doing. And then maybe, yeah, maybe money back to the corporate to use for general purposes. But fundamentally, see, you can play this long. When you start looking at the numbers, there is very little case for a serious corporate not to play this long. You’ve been dealt a set of cards if you’re the finance director or the board. One of those cards is a long history, in many cases, where you’ve had a pension scheme which can do great things, has done great things, and can do great things for you again. So don’t think it’s good enough to walk off the pitch.
Aoifinn Devitt: I can see that members first, which is often a philosophy we’ve talked about a lot when it comes to pensions— Penny Green, I was on this podcast speaking about that from the beginning. And equally, what I’m hearing strands of too is this kind of reinvestment in the UK economy, which we know is a strong linchpin of the government’s current policy. And on your statement on the C-suite pension strategies website, you have a quote which talks about adding scrutiny and incentives. And I think clearly scrutiny we would all agree with. Love to talk to you about what some of those incentives are. But let’s get just first on the scrutiny. You said to scrutinize actuarial work.
William McGrath: Actually, I think this is one of those quiet things which have been a complete disaster for the UK economy is the lack of scrutiny of actuarial work. There has been 3 reports produced, Penrose, and then Morris, and then Kingman, 3 reports in 16 years all concluded that the lack of scrutiny of actuarial work was a problem. There is the FRC, the Financial Reporting Council, is responsible for actuaries. They’re responsible for their standards, but they have no clout, and they don’t have the resource to do what they should. So even if you look at the kind of things they put out, very well produced, but if nobody’s looking, it’s no good. And you’ve only got to look at, say, the equivalent position in the States, where the Financial Reporting Council obviously should be taking a few lessons, I think, from the statutory bodies, Accounting Standards Board in the States, which said, if you haven’t got scrutiny, if you haven’t got discipline, everybody will ignore you. Absolutely. And the consequences of that, maybe even when John Kingman was pointing that out in 2018, I think the consequences of that lack of scrutiny have seen two things. One, the LDI crisis. And secondly, now, the bubble, which really has come around for pension risk transfer. And it’s not the people don’t follow the subject, or wouldn’t like to follow the subject. They’re just not given the data. And the industry has an incentive, really, on not telling you how the sums are done. And why I get very excited and banged on for the last couple of years is almost that there is a bellwether, a litmus test for what’s going on now, which is the Technical Actuarial Standard 300 version 2.1 is really well written. It tells you, you have to compare bulk transfers, give it to a life insurer, with running the scheme on. That was something that Jeremy Hunt, I think, did an excellent job, started to push for. If you don’t do the sums properly, and just try and cover that with some nice words from your favorite lawyer, that’s not good enough. Show us the analysis which shows that it, from a member’s perspective and from a corporate perspective, you are better off if you give the money to a life insurer than running the scheme on. It just isn’t true, because you need to look at the downside risk and then the upside opportunity. And what’s happened— and this is where I do get quite excited at the moment. I do think that the pension minister, Torsten Bell, has actually produced some policy nudges and is, I think, headed in the right direction. Basically, those policy nudges include things like the pre-’97 pensioners now that service in the future, if you fall into the PPF, that will be covered. That basically means the downside risk to somebody now is lower. And the other thing, which again, below the radar, but very significant, I think, is you will be able to make payments on a one-off basis to pension members. And the restriction about the authorized payment restriction is going to go. That is a massive point. Because basically a corporate, at the moment, if you give somebody extra £100 in pension, the actuary says, well, it’s not £100, it’s 25 years’ worth of £100, that’s £2,500. Oh, and can you give me the money now? So most corporates think, no, that’s not doing that. But here, there are ways around that already. But here’s a new piece of ruling, tax ruling, which will enable it so much easier to make payments to members. So start standing back and saying, ah, what is the fiduciary duty as a trustee of looking at this scheme and saying, actually, I could give you more? And that’s where I think a lot of people have started to alight on this. Hang on, just giving you what was sometimes called the pension promise, yeah, that’s fine. But that originally was designed to be inflation protected. And reality is, If you don’t protect a pension from inflation as a trustee, I think you’ve got serious stewards’ inquiry on why you’re not trying to pay an inflation-protected pension. That’s what Roy Goode, who wrote up most of this stuff 30 years ago, wanted. And that’s what people should be looking to do. And if there’s the ability to do it, you should be on the case. And I think once the trustees start to see that that is what’s happening, then I think corporates themselves will say, oh, okay, why don’t we look to value share between the parties? And yes, there should be something for the members, there should be something for today’s people, and there should be something for the corporates. So to me, going forward from here, given the changes, indeed the changes coming on fiduciary duty and other of the government’s, I think, good initiatives in this area, put those together, there’s the makings of a much better solution. And then you feed that through to all your kind of— an awful lot of your listeners will be working in asset management. Yeah, the asset managers should say, that’s interesting. We need to be much, much more proactive in this space. We ought to point out that we can give you good returns, which is obviously part of the thing, but also look at the ESG component. Where’s that money going to go? Why isn’t that money being invested more in the UK? And I think there’s a lot of those topics which people circle around endlessly and don’t ever hit the back of the net with it. I think there’s a lot of good work that has been done. And corporates should stop trying to see their pension fund as having somehow being outside their ESG responsibilities. No, it’s part of it. It’s just, it’s don’t look for an ESG carve-out on pensions. No. You should say, I’ve got x hundred million I could invest, I can do a couple of things. One, I can invest in a way which is aligned to the corporate strategy statements I’m making about my— who we are and what we’re trying to do as a corporate. Here is a real simple example of where you can show that in practice. So do it. And I think you can then say, yes, you can then play that up. I think the government should say, yes, I’m going to the point about incentives. I think there’s some very straightforward incentives the government could introduce, which is to say, look, if you invest more in a particular kind of way, whether it’s sort of a generalized ESG component or particularly in the UK economy, we can do two things which help you make the right kind of decisions. One can be we could further improve the PPF for those who are investing in the right kind of way. So maybe no haircuts for those who haven’t yet retired. Simple thing. If you’ve invested in this way, the trade-off is we will— the PPF will cover more of the liabilities should things go badly, which is, I think, not happening too much at the moment. And secondly, you should say to the life insurers as well, life insurance, yes, you can invest. Nobody likes being mandated to do things. But if you don’t invest in a particular kind of way with a certain level of UK productive assets in your portfolios, then that’s up to you. But you can’t expect the Financial Services Compensation Scheme to be free. Effectively, it isn’t. You will pay a levy, which is reflective of the fact that you are maybe investing a lot of money through Bermuda, which may or may not be covered by the FSCS or the PRA’s regulations. Here’s where you basically just edge people to make better quality decisions. And I think that is very doable.
Aoifinn Devitt: We’re going to take a quick break to hear from Evanston Capital Management, one of the sponsors of this podcast series. I sat down with Adam Blitz, CEO and co-CIO at Evanston Capital Management, and asked them about some of the nuances of their portfolio construction and why they sometimes like to select specialist or smaller managers?
William McGrath: We spend a lot of time on implementation and just simply when you’re a smaller manager, your footprint in the market is less. If you change your mind on a name, you can get out of it generally more easily. And again, most of these specialist managers tend to be smaller in terms of the assets under management, and they kind of go hand in hand with one another and that flexibility if you’re wrong on a name, or you just want to get out of a name, or you change your mind, or you want to size up a smaller-cap name in your portfolio, you just have more ability to do that if you’re a specialist manager who’s not managing a ton of money.
Aoifinn Devitt: And now back to the show. Well, clearly when you speak about pensions, we are bringing together many diverse stakeholders of different, perhaps different incentives, as you mentioned, different stakes and different levels of understanding. And you’ve written a piece, which I can put a link to in the show notes, about the management of groups. And I think, yes, it is perhaps set deep into old industrial norms and talk about iron founders, et cetera. But what are the lessons perhaps you have from that in terms of how some of these discussions should go going forward?
William McGrath: Yeah, I think it is fascinating, really, trying to pull threads together to run a group effectively. And not only in the financial services sectors I mentioned, like Clymel Bedsden or Lloyds Merchant Bank, where they were part of a bigger group. But when I work for industrial groups, realize how hard it is to get people motivated to have their own P&L and do all the things they should be doing, and at the same time see a wider collective interest. And that is, to me, gives rise to a couple of things that you can definitely do as a group. I think my take would be that you need a very powerful center, and that comes down to the people at the center, maybe even back to an individual, and I would cite a few people I came across that like Lord Rockley at Clymel Benson, but subsequently, I dealt with Peter Parker, Sir Peter Parker, who was the first chairman I worked for. They had abilities just to pull threads together. But probably the historical one, which I find the most interesting, was a chap called W.T. Wren who ran Allied Iron Founders from the ’30s through to the ’50s. And what was interesting about him, he did the two things which I think are very difficult in running groups. One is getting people to play together. The barons who run their own individual foundries didn’t want to see a great collective and get a team together that is really impressive. And that’s why that book is so noteworthy. A lot of the work is done is directly from board minutes at the time. So you can actually follow the story minute by minute. But the people behind it were noteworthy as well. So David Ogilvy, who became— went on to become the most significant figure of Madison Avenue in advertising, spent 10 years working for the group. And he produced papers which are not just good, they’re absolutely outstanding. And what makes them particularly interesting, they weren’t written retrospectively when he’d already become a star. This was about him on the way up, where the people he was writing about didn’t like what he said. So this was, this was real high-quality material. Actually, there’s one little anecdote which he said a quarter of a century after he wrote this paper for Allied Iron Founders. He said, first, it shows that at 25, I was impressively clever. And secondly, I’ve learned nothing new in the subsequent 27 years. And that was the guy that was behind Rolls-Royce advertising, all that sort of stuff, and behind obviously a big component now in WPP. So I think well worth looking at those things. But what are the messages? The center needs to be strong. The center needs to provide products, which is where Argo came into it, that everybody wants to be involved with. And you just, you need to have a very direct link between the center and the people doing the doing. So I’ve always been pretty anti-divisions. I think that is a problem. So you want to have a powerful center and then successful operations. Well, that’s, I think, obviously, looking deep history, but where does that sort of thing come up now and what we’re doing now? It’s the problem that the pension industry has got today. You look at how the industry is structured, lots of people doing great jobs, but we do have 7 regulators that are impacting on the DB pension scheme. They report to 3 different departments within government. And what is needed— that’s why I call it a JFAR czar— there used to be something called the Joint Forum for Actuarial Regulation. That needs a powerful figure. Could be Torsten Bell, could be a senior civil servant. But fundamentally, you need somebody that can see things in the round because you’ve got two things happening where you’ve got one investment strategy set by the PRA through life insurers and effectively, a different investment strategy set by the TPR, which basically means those working within the life insurance industry have a head start. Did you really mean to do that? It’s just the way things developed. What is needed is somebody to be looking at that. And then once they start doing that, they’re going to ask more questions. And then we’re back to the other thing you need, which is better regulation of the actuarial world. Because it’s obvious that no scrutiny is bad for you. Everybody said too much regulation, let’s get rid of it. Yeah, but if you don’t scrutinize it, it’s a real problem. And so, no, just get those sums done. Get the TAS 300, Technical Actuarial Standard 300, get that work on the table, make sure everybody’s seen it, because all you have to do is to say to all the actuarial consultants and their legal friends that that piece of paper will be on the record and will be asked for. And most of these issues in terms of poor quality information, the lack of people providing disclosures, it will self-correct. Because when people actually see the data, they’ll start making different decisions. So there are, I think, Good, straightforward, everyday management decisions that can be taken by a government if it becomes a little bit more agile, pull those threads together, you’ll start producing better results. And that feeds back to £1.2 trillion. It doesn’t need too much money being invested in a more positive way to more of it in the UK to see actually, we turn around what has been a problem for the UK, particularly the stock market, more sellers than buyers. Now, I spent many, many happy hours talking to stockbrokers in all the years I was chief of exec or a finance director. And yet broadly, you end up concluding after a while that what they’re telling you is whether there’s more sellers than buyers or buyers than sellers. If there are more people investing in this economy and seem to, then there’ll be more projects coming to the market, more listings. A more vibrant city. And the money is there. The fact we’ve overshot in de-risking, we’ll just correct it. If you start correcting it, we’re going to look to almost like a windfall gain in the way we’ve had a windfall loss. And I think that could be so good for the UK economy, so good for— I say a lot of the asset managers should be saying, yes, there’s going to be more money sustained within the UK looking for interesting homes, looking for kind of things like the rebalance Earth and all this kind of things. Yeah, they’re going to be wanting to fund those sort of projects. So this is where I think there can be a really positive story for 2026. It’s within, I think, everybody’s grasp. Even the actuarial profession should say, what’s happening at the moment where there is no statutory backing for the industry? There is nothing. It needs to happen. The government has it on the stocks. Well, I go back to my ARGA days. It’s very funny because the new regulator is going to be called the Audit and Regulatory and Governance Authority, so ARGA. So I make endless jokes about it. ARGA needs to be turned on. And when it gets up to heat, then you’re going to get real quality food coming out. So we think—
Aoifinn Devitt: It stays warm for a long time. It’s the sustained heat as well, right?
William McGrath: Oh, no, absolutely. It’s the same here. Warm the heart. Absolutely. You’re really up there. Excellent, excellent. So no, that is what’s— you get quality food. And I think we’re going to see better outcomes for the UK. And it can make a big difference to people. It pays for itself if you have better pensions. You’re going to end up with that extra half a percent or whatever going to people. And I think at the moment, what a breath of fresh air the deal that Aberdeen have just done with Stagecoach. That is game-changing because what it means is that the scheme is going to run on. And John Hamilton, who’s one of the key guys at the trustees, is outstanding. He will be keen on seeing that money invested in a positive fashion that helps the UK economy. And one of the things that just— how many times are people going to see this before the penny drops? Two-thirds of any surplus will be going to the members. That should mean that there are many people, even let’s say, as people who’ve done buy-ins or buyouts, the members should start, which is one of the things I think, members don’t be so passive, be active. Why can’t we have a deal like the bus drivers got? That should be a message from unions. It should be a message from the members and asset managers too. Don’t just accept your business is drifting off, or those old DB schemes are really closed as far as you’re concerned. Yeah, just keep hammering away at corporates and schemes saying, yeah, there is a better way, because there is.
Aoifinn Devitt: Well, a very strong ringing endorsement of some of your principles there. And I think I’d love to cover it much more. And we’d have to park the contribution to the industrial heritage for our podcast. We’ll have to have a part 2 to come back for. But just to, to finish up this one, just to end with some personal reflections, any high or low that you can speak to across your career?
William McGrath: I think when I look at highs, I can look back at a couple of deals I feel very proud that we did. When I was working in aggregate industry, what became aggregate industries, the merger of Camas and Barden, again, pensions was a key component of that. But we did create in aggregate industries, I think a really vibrant business within the construction industry. I think probably a couple of low points, I think, going back to when I was a finance director, rather nice line, we had too much debt. I had to go and see the bank, I had to go and see NatWest about getting a renewal. And they said, we were asking for a 4-year facility. And they said, William, you’re not a 4-year credit. But that took a lot of getting. We did manage to get out of that particular hole. But I think the other one, which is probably a difficult point, was really in my ARGA days, realizing that the way the actuarial numbers were going to work meant that we would have a real problem with the banking if we didn’t find a stronger parent. And when I look back at that, that was definitely a low point. We do need to find a buyer before the sheer level of contribution that the numbers will tell us are going to be needed was going to be a problem. So actually, we did address that. And what I think I do feel most— one of the things I do feel is a high that came out of that, I think we did put together a deal with the good people from Middleby and Tim Fitzgerald, their chief executive, as he is now, terrific grasp in the end of what it meant. We produced what is actually a counterfactual for all this stuff in the pension industry. In 2016, we froze all the assumptions. We broadly left the numbers, the amount of investment strategy on hold as well, just kept it ticking forward. And it does give you a counterfactual in that that scheme is now fully funded. And reality is, for most schemes, the right answer in the late 2016 and onwards was to do nothing. Nothing new. You’ve done your de-risking, just play it forward. And that’s why we did the interesting contrast with Honda Group, Europe, who were in the same position at the beginning of the time period and the same position at the end, they put half a billion into a comparable pension scheme in that time to get to the same position that the two schemes are in today. And that tells us, yeah, spend more time looking at the actuarial numbers, boys and girls. There is real value in understanding what they’re getting up to, and there’s real value, I think, in the actuaries asking themselves, can we do better for everybody? So I’ve seen the ups and downs of this, and it’s that thread back to when we started right back in the mid-’80s, when we actually got with Northwest Trust to actually got the scheme to invest in the business to help get over some financial problems. It needs all that creativity that can come from grasp of all these different subjects, corporate finance, pensions, HR, and strategy, and the wider benefit to the overall economy.
Aoifinn Devitt: Fantastic. And my last question then is a creed or motto. So clearly you have some deeply held belief when it comes to actuaries, pensions, to the industrial world. Anything you can leave us with in terms of a gem of wisdom that we should maybe all think about as we face the financial maelstrom?
William McGrath: No, I think the line I used to use a lot internally in dealing with things was, get a grip. And I think no subject should be— if you’re in a senior management position, no subject should be something you’re not prepared to get stuck into. Ask the follow-up questions, get a grip, have your own view, have your own angle on what you would like to see happen. And so one of the great lines of Sir Peter Mason, unfortunately no longer with us, but he who ran Northwest Holes, he used to say, your territory, not mine, which was basically meant he thought it through better than you had. But that’s a great line as well. But I think overall, get a grip.
Aoifinn Devitt: Well, I think we will get a grip. We will also read your piece about working in teams. And I think we’ll also give some important thought to that reminder to scrutinize. I think trust but verify, I think is something that we can all remember. Thank you so much, William, for your service to the industry, for your clear passion to finding the right answers, even if they’re complex, to bringing together groups disparate organizations and stakeholders, and for continuing to press this well beyond when maybe many would’ve given up. And thank you for coming here and sharing your insights with us.
William McGrath: It’s been a pleasure.
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 and 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 the organizations and affiliations of the host or any guest.
Aoifinn Devitt: This podcast series is kindly sponsored by Evanston Capital. For over 20 years, Evanston Capital has had a key focus in identifying early-stage investment managers it believes are capable of generating long-term value-added returns in complex, innovative strategy areas. The series is also sponsored by Alvine Capital. Alvine Capital is a specialist investment manager and placement boutique with a particular focus on alternative assets, a significant presence in London and Stockholm.
William McGrath: I think corporates have become used to— maybe they’ve got almost used an excuse now to say pensions is just something from yesterday, not something that they should be thinking about now. That wasn’t what it was when I was first a finance director. And yeah, you could see that part of your HR strategy was to have a good pension. And I think now, because there’s been endless de-risking of the investments and it has been so costly for so many people, they— it’s almost fashionable now to say it’s too difficult. And I would say that that is just not right. And I think now that there has been this de-risking— whether that’s the right strategy, we can endlessly debate, and LDI and what a disaster that proved to be. But leaving that all to one side, what should you do next? Play forward from here, and you’ve now got a scheme which is actually pretty well funded in most cases. And if you’re a strong corporate, what should you do? And really, you do have a lot of value. If you think about overall, there is still $1.2 trillion in private sector investments in the UK that we could decide how to use. If you decide that, yes, we’re not walking off the pitch, we’re going to run on, which has been the thing I’ve been hammering away at since 2018, that run on beats buyout.
Aoifinn Devitt: 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 William McGrath, who is CEO of C-Suite Pension Strategies. He has a financial and industrial sector background and was a longtime CEO of Agar Rangemaster. Its pension scheme had reached full funding without sponsor contributions because it had a long-term all-stakeholder agreement. He has an honorary doctorate from Birmingham City University for work to sustain the relevance of the Midlands industrial heritage. He returned to the financial sector after 25 years working in industry, so certainly knows a thing or two about the industrial backdrop. Welcome, William. Thanks for joining me today.
William McGrath: Great fun. Thank you.
Aoifinn Devitt: Well, you have such an interesting background. I’d like if you could give us kind of some of the highlights there circling through that and really bring it back to how you have ended up where you have today with this expertise in pensions and some pretty, I’d say, strongly held views on that. Can you start from the beginning and take us through?
William McGrath: Yeah, no problem. I grew up in Bristol and was a swotty school child, so I managed to get into Oxford. And when I did that, I studied history. And after that, I thought, what should we do next? And I joined what is now KPMG, Peat Marck McLintock, which I must say, 6 months before I joined, I’d never heard of them. So I didn’t really have a commercial background. But after I qualified, I thought, oh, what happens next? So I moved into the city, And I worked for an organization called Lloyds Merchant Bank, which is part of the Lloyds Banking Group, which I suppose was the first time I really came across a wide breadth of financial services activities. And that lasted a few years before we went on to Clymel Benson, where again, I was working in a really quite high-powered group. I’m very happy to talk about some of the people there. They were a terrific group. And from those experiences, I was lucky enough to move into industry working for a client. I suppose that happens quite a lot. People getting into industry. And then that started my industrial career. So, the thumbnail sketch is 25 years working in industry, and then coming back, which I suppose is a little unusual, to financial services, which was actually really a bit of a family-driven decision. The children— I’ve got 4 girls— were all moving back to London. And we thought, why don’t we come too? So, if you’re coming back to London, what are you going to do? After the Pargraves Master Business was sold on, what are we going to do? Well, financial services in Central London is something which is a bit of an expertise for the city. So why not try and join in for the second time? So that’s how I ended up back in financial services. But I suppose if you look back through some of that experience, and how do some of the things that I do like to talk about and I bang on about come together, I think the key moment really was when I was at Lloyds Merchant Bank. And one of the clients there was an industrial group, a construction group called Northwest Holst. Which had been lent rather too much money by Lloyds Bank. And they were very anxious to get some of it back. How was that going to happen? And that’s how I started to see two things that are interesting. One may be the difference between different parts of a financial organization. So on one side, you had the bank. And on the other side, you had the investment bank, the merchant bank, who I have to say don’t always see eye to eye. And how does that come together? And as far as the client was concerned, I was on the investment banking side, but we did come up with a proposition which involved a few things like turning the debt into an MBO, which I think I can say was probably my idea. And then the idea of the chief exec, which was to say, this company has a very large pension scheme, which is extremely well-funded. And we’re talking in the mid-’80s here, unfortunately, a long time ago, but in the mid-’80s. And could you get that scheme to invest in the business directly to help the business survive. And that’s what we did. So that’s really where my interest in pensions started. And once you’ve got that link between corporate finance, which is why I was working in the bank, and banking, which is we were dealing with the bank itself, and pensions, what role does that play for the organization and how does it help people? That’s really, I think, the kernel of all the things that happened subsequently, because as it transpired, I went to work for that company, Northulst, took us to the north of England, to Cheshire. And really, once I was into that and got into industry, that pension motif became something people recognized I knew a bit about. And so, for things I did subsequently, yeah, pensions was something I never scared of as a corporate or as a trustee, as I became chair of the trustee for a few years in one of the companies I worked for. So that’s really the background, really. And suddenly you’ve got the idea that actually pensions is something which should be integral, not something to lose sight of. Pull that together with the idea that actually it’s something that can help people, can be used in a positive way, in various different ways. And we’ve carried on with that ever after, really. And that’s, I hate to say it broadly, what we’re still trying to do is persuade corporates, that’s why we call the business we run C-Suite, a board level, think about pensions again. One, it’s not that difficult. And secondly, when you do look at it, you can produce much better answers than may be happening at the moment because there are things like the ESG component of investing in a positive way, the money that you’ve got, see it as a corporate wealth fund, don’t see it as a legacy problem. These are issues which I think all these years later, and all these different experiences later, still resonate, and there’s still some big wins for the economy and for individual businesses.
Aoifinn Devitt: Well, that’s a wonderful segue into my question about your core beliefs. So I think we’ve already touched on some of them here. It’s not that difficult. Think about it as the corporate wealth fund. So as opposed to a drag or kind of an albatross, I suppose, that is a burden, it should be seen as a treasure chest, potentially potential. Can you develop some of those ideas more? And because I think your views are not I’d say the conventional ones. And maybe can you just lay out, set out your stall in terms of how you think corporates should think about their pension plans?
William McGrath: Absolutely. I think corporates have become used to, maybe they’ve got almost used as an excuse now to say pensions is just something from yesterday, not something that they should be thinking about now. That wasn’t what it was when I was first a finance director. And yeah, you could see that part of your HR strategy was to have a good pension. And I think now because there’s been endless de-risking of the investments, and it has been so costly for so many people, they— it’s almost fashionable now to say it’s too difficult. And I would say that that is just not right. And I think now that there has been this de-risking, whether that’s the right strategy, we can endlessly debate an LDI and what a disaster that proved to be. But leaving that all to one side, what should you do next? Play forward from here. And you’ve now got a scheme which is actually pretty well funded. In most cases. And if you’re a strong corporate, what should you do? And really, you do have a lot of value. If you think about overall, there is still $1.2 trillion in private sector investments in the UK that we could decide how to use. If you decide that, yes, we’re not walking off the pitch, we’re going to run on, which has been the thing I’ve been hammering away at since 2018, that run on beats buyout. Just look what you can achieve with it. Yes, sure, you can give it to nice people at LNG or whatever, and I’m sure they’ll look after it very well. But actually, why don’t you say, I’ll have a sensible investment strategy, may even look the kind of return that they’re now seeking. Let’s say gilts 1.5, gilts plus 2, not— haven’t got to shoot the lights out. If you run the business forward and you get stuck into looking at the numbers, you’ll see that the chances of you generating more money than you need are very high. If you succeed in doing that, the question then becomes, what are you going to do with it? And to me, the answer is you should recycle that money in a way that really the people who set up the trust in the first place wanted to do. It looked after today’s people, and it started helping tomorrow’s people and people who are employed today. So this is, why not tap— and we’d like to use an image of a rubber tree, right? Why don’t you tap into that? And each year, maybe 2% of the assets could be used to further the interests of the members who’ve got pensions. When you actually run the numbers, it doesn’t take more than, say, 0.5% of the asset return a year to give the members a discretionary 10% increase each year. That is material. You could then look to, say, put the same kind of amount in supplementing what you’re paying on a DC basis, or even better, which I think is one of the coming things on a collective defined contribution basis, which if that comes through is I would highly recommend is something that corporates should be looking at doing. And then maybe, yeah, maybe money back to the corporate to use for general purposes. But fundamentally, see, you can play this long. When you start looking at the numbers, there is very little case for a serious corporate not to play this long. You’ve been dealt a set of cards if you’re the finance director or the board. One of those cards is a long history, in many cases, where you’ve had a pension scheme which can do great things, has done great things, and can do great things for you again. So don’t think it’s good enough to walk off the pitch.
Aoifinn Devitt: I can see that members first, which is often a philosophy we’ve talked about a lot when it comes to pensions— Penny Green, I was on this podcast speaking about that from the beginning. And equally, what I’m hearing strands of too is this kind of reinvestment in the UK economy, which we know is a strong linchpin of the government’s current policy. And on your statement on the C-suite pension strategies website, you have a quote which talks about adding scrutiny and incentives. And I think clearly scrutiny we would all agree with. Love to talk to you about what some of those incentives are. But let’s get just first on the scrutiny. You said to scrutinize actuarial work.
William McGrath: Actually, I think this is one of those quiet things which have been a complete disaster for the UK economy is the lack of scrutiny of actuarial work. There has been 3 reports produced, Penrose, and then Morris, and then Kingman, 3 reports in 16 years all concluded that the lack of scrutiny of actuarial work was a problem. There is the FRC, the Financial Reporting Council, is responsible for actuaries. They’re responsible for their standards, but they have no clout, and they don’t have the resource to do what they should. So even if you look at the kind of things they put out, very well produced, but if nobody’s looking, it’s no good. And you’ve only got to look at, say, the equivalent position in the States, where the Financial Reporting Council obviously should be taking a few lessons, I think, from the statutory bodies, Accounting Standards Board in the States, which said, if you haven’t got scrutiny, if you haven’t got discipline, everybody will ignore you. Absolutely. And the consequences of that, maybe even when John Kingman was pointing that out in 2018, I think the consequences of that lack of scrutiny have seen two things. One, the LDI crisis. And secondly, now, the bubble, which really has come around for pension risk transfer. And it’s not the people don’t follow the subject, or wouldn’t like to follow the subject. They’re just not given the data. And the industry has an incentive, really, on not telling you how the sums are done. And why I get very excited and banged on for the last couple of years is almost that there is a bellwether, a litmus test for what’s going on now, which is the Technical Actuarial Standard 300 version 2.1 is really well written. It tells you, you have to compare bulk transfers, give it to a life insurer, with running the scheme on. That was something that Jeremy Hunt, I think, did an excellent job, started to push for. If you don’t do the sums properly, and just try and cover that with some nice words from your favorite lawyer, that’s not good enough. Show us the analysis which shows that it, from a member’s perspective and from a corporate perspective, you are better off if you give the money to a life insurer than running the scheme on. It just isn’t true, because you need to look at the downside risk and then the upside opportunity. And what’s happened— and this is where I do get quite excited at the moment. I do think that the pension minister, Torsten Bell, has actually produced some policy nudges and is, I think, headed in the right direction. Basically, those policy nudges include things like the pre-’97 pensioners now that service in the future, if you fall into the PPF, that will be covered. That basically means the downside risk to somebody now is lower. And the other thing, which again, below the radar, but very significant, I think, is you will be able to make payments on a one-off basis to pension members. And the restriction about the authorized payment restriction is going to go. That is a massive point. Because basically a corporate, at the moment, if you give somebody extra £100 in pension, the actuary says, well, it’s not £100, it’s 25 years’ worth of £100, that’s £2,500. Oh, and can you give me the money now? So most corporates think, no, that’s not doing that. But here, there are ways around that already. But here’s a new piece of ruling, tax ruling, which will enable it so much easier to make payments to members. So start standing back and saying, ah, what is the fiduciary duty as a trustee of looking at this scheme and saying, actually, I could give you more? And that’s where I think a lot of people have started to alight on this. Hang on, just giving you what was sometimes called the pension promise, yeah, that’s fine. But that originally was designed to be inflation protected. And reality is, If you don’t protect a pension from inflation as a trustee, I think you’ve got serious stewards’ inquiry on why you’re not trying to pay an inflation-protected pension. That’s what Roy Goode, who wrote up most of this stuff 30 years ago, wanted. And that’s what people should be looking to do. And if there’s the ability to do it, you should be on the case. And I think once the trustees start to see that that is what’s happening, then I think corporates themselves will say, oh, okay, why don’t we look to value share between the parties? And yes, there should be something for the members, there should be something for today’s people, and there should be something for the corporates. So to me, going forward from here, given the changes, indeed the changes coming on fiduciary duty and other of the government’s, I think, good initiatives in this area, put those together, there’s the makings of a much better solution. And then you feed that through to all your kind of— an awful lot of your listeners will be working in asset management. Yeah, the asset managers should say, that’s interesting. We need to be much, much more proactive in this space. We ought to point out that we can give you good returns, which is obviously part of the thing, but also look at the ESG component. Where’s that money going to go? Why isn’t that money being invested more in the UK? And I think there’s a lot of those topics which people circle around endlessly and don’t ever hit the back of the net with it. I think there’s a lot of good work that has been done. And corporates should stop trying to see their pension fund as having somehow being outside their ESG responsibilities. No, it’s part of it. It’s just, it’s don’t look for an ESG carve-out on pensions. No. You should say, I’ve got x hundred million I could invest, I can do a couple of things. One, I can invest in a way which is aligned to the corporate strategy statements I’m making about my— who we are and what we’re trying to do as a corporate. Here is a real simple example of where you can show that in practice. So do it. And I think you can then say, yes, you can then play that up. I think the government should say, yes, I’m going to the point about incentives. I think there’s some very straightforward incentives the government could introduce, which is to say, look, if you invest more in a particular kind of way, whether it’s sort of a generalized ESG component or particularly in the UK economy, we can do two things which help you make the right kind of decisions. One can be we could further improve the PPF for those who are investing in the right kind of way. So maybe no haircuts for those who haven’t yet retired. Simple thing. If you’ve invested in this way, the trade-off is we will— the PPF will cover more of the liabilities should things go badly, which is, I think, not happening too much at the moment. And secondly, you should say to the life insurers as well, life insurance, yes, you can invest. Nobody likes being mandated to do things. But if you don’t invest in a particular kind of way with a certain level of UK productive assets in your portfolios, then that’s up to you. But you can’t expect the Financial Services Compensation Scheme to be free. Effectively, it isn’t. You will pay a levy, which is reflective of the fact that you are maybe investing a lot of money through Bermuda, which may or may not be covered by the FSCS or the PRA’s regulations. Here’s where you basically just edge people to make better quality decisions. And I think that is very doable.
Aoifinn Devitt: We’re going to take a quick break to hear from Evanston Capital Management, one of the sponsors of this podcast series. I sat down with Adam Blitz, CEO and co-CIO at Evanston Capital Management, and asked them about some of the nuances of their portfolio construction and why they sometimes like to select specialist or smaller managers?
William McGrath: We spend a lot of time on implementation and just simply when you’re a smaller manager, your footprint in the market is less. If you change your mind on a name, you can get out of it generally more easily. And again, most of these specialist managers tend to be smaller in terms of the assets under management, and they kind of go hand in hand with one another and that flexibility if you’re wrong on a name, or you just want to get out of a name, or you change your mind, or you want to size up a smaller-cap name in your portfolio, you just have more ability to do that if you’re a specialist manager who’s not managing a ton of money.
Aoifinn Devitt: And now back to the show. Well, clearly when you speak about pensions, we are bringing together many diverse stakeholders of different, perhaps different incentives, as you mentioned, different stakes and different levels of understanding. And you’ve written a piece, which I can put a link to in the show notes, about the management of groups. And I think, yes, it is perhaps set deep into old industrial norms and talk about iron founders, et cetera. But what are the lessons perhaps you have from that in terms of how some of these discussions should go going forward?
William McGrath: Yeah, I think it is fascinating, really, trying to pull threads together to run a group effectively. And not only in the financial services sectors I mentioned, like Clymel Bedsden or Lloyds Merchant Bank, where they were part of a bigger group. But when I work for industrial groups, realize how hard it is to get people motivated to have their own P&L and do all the things they should be doing, and at the same time see a wider collective interest. And that is, to me, gives rise to a couple of things that you can definitely do as a group. I think my take would be that you need a very powerful center, and that comes down to the people at the center, maybe even back to an individual, and I would cite a few people I came across that like Lord Rockley at Clymel Benson, but subsequently, I dealt with Peter Parker, Sir Peter Parker, who was the first chairman I worked for. They had abilities just to pull threads together. But probably the historical one, which I find the most interesting, was a chap called W.T. Wren who ran Allied Iron Founders from the ’30s through to the ’50s. And what was interesting about him, he did the two things which I think are very difficult in running groups. One is getting people to play together. The barons who run their own individual foundries didn’t want to see a great collective and get a team together that is really impressive. And that’s why that book is so noteworthy. A lot of the work is done is directly from board minutes at the time. So you can actually follow the story minute by minute. But the people behind it were noteworthy as well. So David Ogilvy, who became— went on to become the most significant figure of Madison Avenue in advertising, spent 10 years working for the group. And he produced papers which are not just good, they’re absolutely outstanding. And what makes them particularly interesting, they weren’t written retrospectively when he’d already become a star. This was about him on the way up, where the people he was writing about didn’t like what he said. So this was, this was real high-quality material. Actually, there’s one little anecdote which he said a quarter of a century after he wrote this paper for Allied Iron Founders. He said, first, it shows that at 25, I was impressively clever. And secondly, I’ve learned nothing new in the subsequent 27 years. And that was the guy that was behind Rolls-Royce advertising, all that sort of stuff, and behind obviously a big component now in WPP. So I think well worth looking at those things. But what are the messages? The center needs to be strong. The center needs to provide products, which is where Argo came into it, that everybody wants to be involved with. And you just, you need to have a very direct link between the center and the people doing the doing. So I’ve always been pretty anti-divisions. I think that is a problem. So you want to have a powerful center and then successful operations. Well, that’s, I think, obviously, looking deep history, but where does that sort of thing come up now and what we’re doing now? It’s the problem that the pension industry has got today. You look at how the industry is structured, lots of people doing great jobs, but we do have 7 regulators that are impacting on the DB pension scheme. They report to 3 different departments within government. And what is needed— that’s why I call it a JFAR czar— there used to be something called the Joint Forum for Actuarial Regulation. That needs a powerful figure. Could be Torsten Bell, could be a senior civil servant. But fundamentally, you need somebody that can see things in the round because you’ve got two things happening where you’ve got one investment strategy set by the PRA through life insurers and effectively, a different investment strategy set by the TPR, which basically means those working within the life insurance industry have a head start. Did you really mean to do that? It’s just the way things developed. What is needed is somebody to be looking at that. And then once they start doing that, they’re going to ask more questions. And then we’re back to the other thing you need, which is better regulation of the actuarial world. Because it’s obvious that no scrutiny is bad for you. Everybody said too much regulation, let’s get rid of it. Yeah, but if you don’t scrutinize it, it’s a real problem. And so, no, just get those sums done. Get the TAS 300, Technical Actuarial Standard 300, get that work on the table, make sure everybody’s seen it, because all you have to do is to say to all the actuarial consultants and their legal friends that that piece of paper will be on the record and will be asked for. And most of these issues in terms of poor quality information, the lack of people providing disclosures, it will self-correct. Because when people actually see the data, they’ll start making different decisions. So there are, I think, Good, straightforward, everyday management decisions that can be taken by a government if it becomes a little bit more agile, pull those threads together, you’ll start producing better results. And that feeds back to £1.2 trillion. It doesn’t need too much money being invested in a more positive way to more of it in the UK to see actually, we turn around what has been a problem for the UK, particularly the stock market, more sellers than buyers. Now, I spent many, many happy hours talking to stockbrokers in all the years I was chief of exec or a finance director. And yet broadly, you end up concluding after a while that what they’re telling you is whether there’s more sellers than buyers or buyers than sellers. If there are more people investing in this economy and seem to, then there’ll be more projects coming to the market, more listings. A more vibrant city. And the money is there. The fact we’ve overshot in de-risking, we’ll just correct it. If you start correcting it, we’re going to look to almost like a windfall gain in the way we’ve had a windfall loss. And I think that could be so good for the UK economy, so good for— I say a lot of the asset managers should be saying, yes, there’s going to be more money sustained within the UK looking for interesting homes, looking for kind of things like the rebalance Earth and all this kind of things. Yeah, they’re going to be wanting to fund those sort of projects. So this is where I think there can be a really positive story for 2026. It’s within, I think, everybody’s grasp. Even the actuarial profession should say, what’s happening at the moment where there is no statutory backing for the industry? There is nothing. It needs to happen. The government has it on the stocks. Well, I go back to my ARGA days. It’s very funny because the new regulator is going to be called the Audit and Regulatory and Governance Authority, so ARGA. So I make endless jokes about it. ARGA needs to be turned on. And when it gets up to heat, then you’re going to get real quality food coming out. So we think—
Aoifinn Devitt: It stays warm for a long time. It’s the sustained heat as well, right?
William McGrath: Oh, no, absolutely. It’s the same here. Warm the heart. Absolutely. You’re really up there. Excellent, excellent. So no, that is what’s— you get quality food. And I think we’re going to see better outcomes for the UK. And it can make a big difference to people. It pays for itself if you have better pensions. You’re going to end up with that extra half a percent or whatever going to people. And I think at the moment, what a breath of fresh air the deal that Aberdeen have just done with Stagecoach. That is game-changing because what it means is that the scheme is going to run on. And John Hamilton, who’s one of the key guys at the trustees, is outstanding. He will be keen on seeing that money invested in a positive fashion that helps the UK economy. And one of the things that just— how many times are people going to see this before the penny drops? Two-thirds of any surplus will be going to the members. That should mean that there are many people, even let’s say, as people who’ve done buy-ins or buyouts, the members should start, which is one of the things I think, members don’t be so passive, be active. Why can’t we have a deal like the bus drivers got? That should be a message from unions. It should be a message from the members and asset managers too. Don’t just accept your business is drifting off, or those old DB schemes are really closed as far as you’re concerned. Yeah, just keep hammering away at corporates and schemes saying, yeah, there is a better way, because there is.
Aoifinn Devitt: Well, a very strong ringing endorsement of some of your principles there. And I think I’d love to cover it much more. And we’d have to park the contribution to the industrial heritage for our podcast. We’ll have to have a part 2 to come back for. But just to, to finish up this one, just to end with some personal reflections, any high or low that you can speak to across your career?
William McGrath: I think when I look at highs, I can look back at a couple of deals I feel very proud that we did. When I was working in aggregate industry, what became aggregate industries, the merger of Camas and Barden, again, pensions was a key component of that. But we did create in aggregate industries, I think a really vibrant business within the construction industry. I think probably a couple of low points, I think, going back to when I was a finance director, rather nice line, we had too much debt. I had to go and see the bank, I had to go and see NatWest about getting a renewal. And they said, we were asking for a 4-year facility. And they said, William, you’re not a 4-year credit. But that took a lot of getting. We did manage to get out of that particular hole. But I think the other one, which is probably a difficult point, was really in my ARGA days, realizing that the way the actuarial numbers were going to work meant that we would have a real problem with the banking if we didn’t find a stronger parent. And when I look back at that, that was definitely a low point. We do need to find a buyer before the sheer level of contribution that the numbers will tell us are going to be needed was going to be a problem. So actually, we did address that. And what I think I do feel most— one of the things I do feel is a high that came out of that, I think we did put together a deal with the good people from Middleby and Tim Fitzgerald, their chief executive, as he is now, terrific grasp in the end of what it meant. We produced what is actually a counterfactual for all this stuff in the pension industry. In 2016, we froze all the assumptions. We broadly left the numbers, the amount of investment strategy on hold as well, just kept it ticking forward. And it does give you a counterfactual in that that scheme is now fully funded. And reality is, for most schemes, the right answer in the late 2016 and onwards was to do nothing. Nothing new. You’ve done your de-risking, just play it forward. And that’s why we did the interesting contrast with Honda Group, Europe, who were in the same position at the beginning of the time period and the same position at the end, they put half a billion into a comparable pension scheme in that time to get to the same position that the two schemes are in today. And that tells us, yeah, spend more time looking at the actuarial numbers, boys and girls. There is real value in understanding what they’re getting up to, and there’s real value, I think, in the actuaries asking themselves, can we do better for everybody? So I’ve seen the ups and downs of this, and it’s that thread back to when we started right back in the mid-’80s, when we actually got with Northwest Trust to actually got the scheme to invest in the business to help get over some financial problems. It needs all that creativity that can come from grasp of all these different subjects, corporate finance, pensions, HR, and strategy, and the wider benefit to the overall economy.
Aoifinn Devitt: Fantastic. And my last question then is a creed or motto. So clearly you have some deeply held belief when it comes to actuaries, pensions, to the industrial world. Anything you can leave us with in terms of a gem of wisdom that we should maybe all think about as we face the financial maelstrom?
William McGrath: No, I think the line I used to use a lot internally in dealing with things was, get a grip. And I think no subject should be— if you’re in a senior management position, no subject should be something you’re not prepared to get stuck into. Ask the follow-up questions, get a grip, have your own view, have your own angle on what you would like to see happen. And so one of the great lines of Sir Peter Mason, unfortunately no longer with us, but he who ran Northwest Holes, he used to say, your territory, not mine, which was basically meant he thought it through better than you had. But that’s a great line as well. But I think overall, get a grip.
Aoifinn Devitt: Well, I think we will get a grip. We will also read your piece about working in teams. And I think we’ll also give some important thought to that reminder to scrutinize. I think trust but verify, I think is something that we can all remember. Thank you so much, William, for your service to the industry, for your clear passion to finding the right answers, even if they’re complex, to bringing together groups disparate organizations and stakeholders, and for continuing to press this well beyond when maybe many would’ve given up. And thank you for coming here and sharing your insights with us.
William McGrath: It’s been a pleasure.
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 and 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 the organizations and affiliations of the host or any guest.
