John Man. We've been talking a lot over the last couple of years about the changing geopolitical situation. We've been talking about how the whole world and the financial world in particular, is at an inflection point and everything's going to change. And when we've been talking about it, one of the things that I'm afraid was not on our
list was a new Israel Hama's conflict. But this does have massive impacts on the area that we talk about on economics and on finance, and in particular possibly on the way that inflation will move over the next couple of years.
Right, Yeah, I mean it's all just more evidence of deteriory and overall kind of like geopolitical kind of sphere and more disruption to what the world that we kind of grew up and if you looked like, and what it no longer looks like, and what everyone's something to get used to it being. You invite them in, you know, a team, make it. You know, got a very long story.
Short is just that you know it's going to be more inflationary and more volatile and more disrupted and more kind of nasty surprises, which is not very cheerful, but that is the way it is.
It is.
And one of the things that I've been thinking about, you know, I think about this a lot is ESG investing and the way that environmental, social, and government factors taken into account when you invest.
And we talked after the war and the Ukraine began. We talked about had defense, which had long been considered something that you absolutely could not invest in because it was obviously bad, because owning shares in a company that creates things that kill people is clearly horrible.
And then after that war started, everyone started to look at it again and say, well, actually, you know, defense is really a social good. Having an adequate, adequate defense in place for your population is surely a very definition of a social good, assuming you believe in democracy, freedom, etc. Of course, which clearly not everybody does. And so we got to the point where we're like, well, in wartime, maybe defense is about as ESG as you can get.
And now everything is shifting as well in terms of energy and fuels, et cetera. And I got a note the other day from a fund manager explaining how investing in mining is now a good thing. And for years, of course, you and I have been told that you can't touch a mine with a barge pole because it's really dirty. And all the diesel big machines and the ecosystem destruction that's basically built in to mining, and of course the use of water. All these things make a
mining non ESG. And now of course there's energy security flies to the top of everyone's to do list. Mining is very EESG. What can be more of social good than mining for the messols that allow the energy transition to happen to the extent that it can happen. So ESG is kind of it's disappearing. It's disappearing into reality.
Yeah, yes, events have kind of overtaking it. It's I mean, the frustrating thing is this has been blindingly obvious from the start, you know, when all of these idiots were talking about stranded assets and all that sort of stuff.
When you were like, well, okay, maybe they'll be stranded one day, But first of all, when you get to the point where we don't need this stuff anymore, you know, And it's somewhat frustrating that we can end up being at the point where it's only once you know, like push comes to shove, the kind of logic starts to
kick in again. You know, we wasted an awful lot of time and an awful lot of paperwork because ESG was a useful way basically for you know, one group of people who virtue sign going for another another kind of like group of people in the financial industry, you find the sales pitch for John.
It's been the most exciting, if you're a marketing man in fund management, most exciting marketing campaign since the beginning of fund management. You know, the amount of money that is poured into this nonsense because a lot of it is nonsense. Let's be clear at this point, a lot of it's completely nonsense that it's poured into this nonsense since what twenty fourteen, twenty fifteen when it kicked off. This has been a marketing man's dreams, but it's also been deeply misguided.
Yeah, it's like a huge piste of time and I'm investment capital in the water cases. So it's it's good that we're coming out of this, but it's uh, you know, it all kind of pop up in other ways, you know, So it's like, so it's rebranded so that it's no, it's ESG. It's okay, it's good. It's good to Maine. As long as you're main in for lithium, you know that is that is you know, it's kind of you know, nobody's it's going to see in the Oh, yeah, it's good to mean for pool.
Yeah, you know, I think when we're very nearly there, because let's not forget that you need coal to make steel, and you need steel to put up a wind turbine. Not all coalers, not all steelers is from coal. But you need coal to make the majority of steel around the world. So I don't think it's very long before I get a note from a fun manager saying mining coal for good, feel good with coal.
Yes, yes, you can't be too cynical a bit there.
Stuff that absolutely right, you can't be too cynical. And in fact, I was talking to someone about it the other day and I was thinking, once, once you take this pragmatic approach to es gee, there's no limit, no limit of where it can end. You know. Take tobacco companies right, amazingly well run, survived, longer, chucked out more cash than anyone could could possibly have begun to imagine
when when the consequences of smoking became clear. So there's a lot of punches that's done really well out of that? Is that a social good? And we were told weren't we buy by Paul John the other day that the cash that they pour into our treasuries far was the medical cost of dealing with smokers and finances so many other things that the state do. Wow, what a social good you see? Once you get going, Once you get going, that there's no end. It all means nothing.
I mean you're basically saying the bicigarettes to save our NHS.
Yes, yes, that is what I said.
But tobacco companies stop, just.
Stop, just stop right, Okay, Moving on personal finance tip of the week, give me one John.
O Well inter streets, interest streets Allo. The long term out look for infleetion is obviously volataile earned up and down. At the moment, it looks as if the Bank of England is probably I think that the Bank England's done at five and a quarter percent. Obviously it may go
up a little bit further. But looking at the least we data and obviously we're we're recording this early, so we haven't had the inflation data for September yet, but chances are that it's going to that you can see that the bank is itching.
They kind of like.
Call an end to rate hikes now. And so we've seen NS and I the government bond kind of like retail facing bit remove its six point two percent interest straight.
Not get round to it. I did not get round to that.
I didn't. And this is what I'm thinking today is when we should be telling people, Look, okay, so maybe if you've not been getting around this stuff, you should start looking for your your one year fixed straight accounts. Now, if you've got a bit of cash, then you know it's probably time you have a look because you can still get if it's for a that for a tax paying account, you can still get one year at six
point one percent, which is half decent. I think that's going through raising, you know, they kind of that's the the place that does the it. It puts your money into the best savings account that you can find, or you can go for a fixed cash Isa Paragan does
one for five point five five percent. I'm just looking at money facts five point five percent with all the more Mansfield Building Society five point four we leeds in Yorkshire, so there's still you know, you can get a half decent rate and giving the inflation is probably gonna come down to blow five percent in the final quarter of this year, it's at least going to be getting a kind of real return.
So it's looking it's amazing Tasday's John that the best we think we can help for is to get a rid of interest. It is only slightly below the right of inflation.
Although this is slightly higher.
It will be.
It will it will be, it will be. So there's this John predicting inflation for you as well.
Dangerous come December.
All right, now, listen, I do want to make clear before we before we go on to our interview today, that we did record this interview a little while ago, so it was recorded before the Israel Helmuth conflict began. And that is why it doesn't mention it. Not because not because we didn't mention it. It just hadn't begun by dance.
It was recorded a little early. And this conversation that John and I are having it's also been recorded a few days before the podcast comes out, so obviously things of us moving and may have changed by the time it does come out. Welcome to Maren Talk to Money, the podcast in which people who know the markets, Explain the markets. I'm Maren Zumsetweb. This week we bring you a conversation with Douglas abbotead of UK Welfish Rooders and
Duncan Lamont, Global head of Pensions and Investments, also at Schroders. Duncan, Doug, thank you so much for joining us today. We really appreciate it. Great to be here.
Thank you for having me.
Yeah, thanks very much.
Yeah. We've been waiting, Duncan to have you on for ages. John and I mentioned you all the time like it's a mini data celebrity, and we talk about you off was when will we get them to come on? When will we come on? And finally you're here. So I hope you're really really good, because you're really disappointing. If you're not, I will do my best.
There's a lot to live up to there, I know, right.
What I want to want to start by talking about, Duncan is you've done quite a lot of work into the shrinking pool of equities in the UK where we are gradually de equitizing in the extent to which that matters. So I wonder if we can start by talking about what's actually happening. Where is the UK a qreed market going.
Yeah, so I think that there is an increased awareness about this, but I don't think people have quite got their head around the scale of what has been happening, both in the UK but also internationally. And maybe you can come on to the international element too. Just to give you some numbers, back in nineteen ninety six there was twenty seven hundred companies on the main market of the London Stock Exchange. Now there is one thousand and seventy seven, a sixty percent reduction if you look even
low longer time horizon. So since the nineteen sixties there's actually been a seventy five percent reduction in the number of UK companies. Add an Aim Hey for Aim for a few years actually was attracting loads of companies and actually that kind of makes it look a bit better. But the number of AIM companies has also follow by half now, so there really is a situation where companies have been rejecting a UK stock market listing both from
the and there's two sides here. One is less appetite for an IPO, but the other side is also a kind of sustained drip drip drip of de listings which is mainly from mergers and acquisitions.
Yeah, and we've seen quite a lot of that this year already, haven't We seen quite a lot of transactions that have taken companies off the market, and pretty much in no IPOs but one one ips. Yeah, they give you.
The de listing situation is interesting because it's been happening everywhere around the world. So I did some work looking at the number of companies that were listed on the UK stop market in twenty eleven and then what had happened over the following decade, like how many were still listed, what happened, what direction had gone in, And about a third of them had delisted over that period, and the overwhelming majority, almost all of them, it was because they'd
been bought. Not many companies just decide, hey, I've had enough, I'm throw in the towel in and leave the stock market. Most of it's because they're being bought. And this kind is so far so global. It's the same in the US, it's the same in Europe. Lots of delistings, lots of m and A. But the big difference in the UK actually is that who have been the buyers of those companies.
In the US, the biggest buyers of US public companies in the delisting trend have been other US public companies, So if you keep investing in the US stock market, you still kind of have exposure to those businesses that have gone just not on a standalone business. They're kind of subsumed in another company. In the UK, the majority of the people down the buyn have been overseas buyers, mainly US and Canadian ones. So what we have had is the UKPLC has been kind of seeping overseas into
largely American and buyers and private equity buyers. So UK investors no longer have the same access to those companies if they're investing in the UK stock market, and that is quite a different compared to what we see in other markets.
And can do you have a sense of why that is and why are our companies going abroad? Is it because that's so cheap? Because the UK market has been cheap for quite a long time, and so it's an easy thing to do to create growth of foreign companies just to snap up the cheap UK company and subsume intoin deal business.
Very much. Yeah, we've spoken about this. I know you've spoken about this on many occasions that UK companies are trading at evaluation discount to those around the world. If you look at kind of forward price earnings multiples, the UK stock market is trading at about almost a fifty percent discount to the US, twenty percent discount to Europe. It's not just about sectors. It's not just because we
don't have the tech companies the US has. Every single pretty much every single sector of the UK stock market trades at a pretty chunky discount to the US. Energy sector forty percent discount, Pharma biotech sector twenty nine a M is about a forty percent discount as well. Across
all of the sectors it's about thirty percent discounts. So wherever you are looking, we have very kind of obviously very successful, world leading businesses that are very performing, very well operationally, but are not necessarily being valued to the in the same way they would be if they were listed in other country.
And what do you put that down to, Well, I mean, I know what most people say that, oh, the UKs is a wreck. You know, we don't grow horrible inflation, we destroyed ourselves with Brexit, et cetera. But looking at the numbers coming through more recently, none of that is really really true. Our GDP our growth is no different to most other European countries, are inflation levels are converging
with other European countries. There's really nothing worse going on in the UK than anywhere else that you can really put your finger on, Nothing you can back up with data. So what is the problem here?
So the valuation discount we've always it did start emerging kind of post twenty sixteen, so there has been I think there has been an element of international investors in particular being less keen on the UK, and I kind of feel like there's maybe a bit of a situation that we've had with value investing in the same way that people have been saying it's cheap for a while, and then there were perhaps some investors who backed that view for a while. But the longer that valuation discount persists,
the people's patience runs out. So I think there's a bit of that been going on. But to give a little bit more of a positive side, So the M and A side means that other buyers, both private equity and over these companies are saying these companies are worth more than they are. The other people who recently have actually started getting very interested in buying UK shares is
companies themselves. So share buybacks in the UK about forty five percent of companies listed on the UK market last year bought back more than one percent of their shares in the previous year. In earlier years that figure was something like I'm just looking at a chart right now, we might be talking about twenty percent. So it's absolutely rocketed. So Directors of UKPLC has said, we think our shares are undervalued and we're going to start buying them back.
And that's not just the investment trust sector. Just we came because there's a lot of buybacks in the investment trust sector which could be skewing the numbers.
No, that's not just the investment trust sector at all. We're seeing there's been very large increases in buybacks across the UK corporate sector in general. So, and this is in previous years it was mainly the US where lots of the buybacks have but what we've seen more recently is that it's been picking up in a lot of non US markets, Japan as well as a market where we're seen buybacks. But I think there is an element here of directors saying well, actually we think our shares
are not necessarily fully valued. And people criticized buybacks for the timing of them sometimes, but hey, if your shares are undervalued, then that's actually the ideal time to be doing some buybacks. That can be quite a value generator in time.
Yeah. One of the long term criticisms of buybacks is that you quite often see them at levels that are definitely not cheap, and there's a relationship between top management long term bonuses and the buyback. So that's been a long term criticism. But you couldn't say that that was the case in the UK given the valuations.
But actually to put a bit of an international perspective on this as well, so some of this has been maybe a bit downbeat on the UK and saying and I think we self flagellation. I do feel like as a British pastime, like war is us Look how awful we are compared with every in the world stage. And actually this trend of de equitization, of companies not wanting to join the stock market, of companies leaving the stock market, it's global. There's nothing, there's nothing that's making us special.
And saying that we're having an awful situation and everybody else's is perfectly happy. The number of German companies is down forty percent since two thousand and seven. Like everyone said, puts the US on a pedestal and says how great it is, and it is having an increased share of kind of IPOs and of companies wanting to list there. But the number of US companies is down forty percent since the mid nineties. This isn't just a UK feature.
This is something that's happening globally, I think. And when we come onto this, a big part of this is the growth of the private equity industry.
Yeah, before we come on to that, I want to ask you possibly the most important question, which is this, why does it matter? Right? I mean, these are huge numbers. It's obviously a big shift, but people will be saying the companies continue to exist just in different ownly, ship abroad, at homes, it merged into other companies whatever. Why does it matter if there are a few elisted companies fall in.
If you are a company, it is very easy for you to raise capital wherever you want in the world. Now, like we've seen obviously lots of UK companies raising money in the US. But if the UK stock market ceased to exist, it wouldn't necessarily stop some of these large companies from being able to raise capital. If you're an investor, you can allocate money to funds, to ats, to individual companies anywhere in the world for relatively low cost these days.
That wasn't the case in the past. So actually, I don't think that it matters that much for individuals. I don't think it matters that much to companies. Where it matters much more is probably actually for the UK economy, the amount of conservices the industries that actually the financial services sector supports here. If we were to lose were standing on the world stage as a stock market, that's what would lose. And probably, actually I've been a bit
simplifying as saying it doesn't matter to companies. It doesn't matter. If you are a big international company with the household brand, you can raise money anywhere. It matters a hell of a lot more for your small and medcap companies. You're going less than America. They've never heard of you. That's going to be a much harder situation. So I think it matters for the ecosystem of small and mid sized companies that we want to grow in the UK. I
think it matters to the economy. I actually think it probably doesn't matter as much to investors as perhaps we sometimes claim it does.
Possibly, even though we work together, it might disagree on one aspect. I think the decline of the listed market probably is a problem for the average punter who has their savings over time and focused on the listed markets
or public securities. So if companies are coming to the market much later in their development, and I guess that kind of hyper gross stage that you see in companies just making funded by private capital, that means that kind of the bulk of the population you have are relying on the public markets to kind of help them generate a pot in retirement or generate you know, turn their savings into returns. Isn't getting access to that growth opportunity?
And I think we always look at the history of the equity market and returns from equities and so on as a as a factor as to why you should invest them in the long run. But if the equity market looks quite different, either there's less interesting companies in it, or the companies that are on the market are later stage and where they are in their cycle. That could be a problem for people in the long run as they're sort of trying to beat inflation or save in
the long run. So I think there's there's something about that. And actually, while I've been quietly listening in the background, I think one bit we've missed on UK so far in this discussion is actually that structurally we're seeing less domestic investment in the UK equity market from either retirement scheme, so we've had dB switching to more fixed income allications. We see we're seeing a shift from dB to d
C schememes. In terms of people who get advice, we're seeing a shift towards passive and global, and those two things are related, right, So those solutions that people are being put into don't include asset classes like private equity, infrastructure and real estate en mass, I think wealth managers probably are offering solutions that do that because of the investment the listed investment trust market and the strength of
that over the last ten years in the UK. But then also people are going more global and that's affecting the UK equity market, which kind of comes back to Duncan's point about having a throating economy. So I think there's quite a lot going on here, but the decline of the equity market, I think is it does have an impact if you think about where are people's long term savings being invested in. Have they got exposure to the exciting, innovative growthy asset.
Yeah, it also seems important to me on a social level. You know, quoted companies, we can watch them there. I have a certain level of crutiny both there from individuals and from the state financially operationally, and we can see what they're doing. It's much more transparent than companies that are private, and we lose that as companies leave the equity equity market, we lose that sense that we can effectively see the UK economy via listed companies. That matters too.
Yeah, hundred percent agree with that transparency to double edsord companies might not like it, but it's a great way to be able to hold management practices to account. It's harder when that's in the private markets. Albeit, then I suppose you can argue that the choice of who you invest with if you want to allocate to private markets, and then the types of investor they are and whether they care about particular things that align with your own beliefs.
That starts to matter more, but you don't have the same look through to the companies at an investor. The flip side probably is private equity investors get much much
more information than in public market investors. They can get access to regular cash flow projections, lots and lots of really in depth data that can help with their decision making, but it is more closely held between say the company the private equity invest It's not as visible and transparent for the kind of broader social goods that you were talking about.
Yeah, and it means that for the individual investor a middle man is required, and one of the things that we really like to get rid of in the men or middle men, or certainly the necessity for middle men. But if you're going to invest in unlisted companies as an individual investor, you really have no choice but to do it via a professional and that makes it different too.
Yes, Actually I completely agree with what Doug was saying. Actually, my points around it not mattering as much to investors were much more about the say the demise of the UK stock market relative to the global market still existing. I completely agree on the risks that might come from the public market being less relevant. If you take it to the extreme, it potentially feels inequality because those who have assets can access all of these exciting, sexy companies.
Your ordinary retail investors basically cut out of that. They're too small, they f either are too high, they can't
They basically don't get a seat at that table. So all the kind of have which is everybody with tons of assets, and here I actually include FIGN benefit pension funds, they get to access all the great areas you have not and in that and I'm going to include the fine contribution investors on the whole, not all of them, but it's a lot harder for them historically to have been able to access some of these private assets.
Yeah, so the growth, the growth goes, whether money or already is Okay. Well, there's not much we can do, the three of us on this podcast in thirty minutes about the decline of the number of listed companies globally. We have to take what we have for now. So let's talk a little bit about how the private markets work and how investors can or should be accessing the non listed markets. Doug, is that really all area?
Yeah?
So, I mean I think it's it's interesting and it's difficult, right, So I think there's a lot of interesting companies and there's a lot of interesting assets you can get access to you but you know, the private markets are I think that I think Duncan you might have some stats on this, but there's something like seventy five percent of
economic activities sits in the private markets world. But getting access to that is very difficult because they are assets which are complicated, their assets which are privately held, their assets that don't trade regularly, and the liquidity angle is the piece which a lot of people focus on, but actually, in many ways, the liquidity of these asset classes, because they have to trade between kind of willing bars and willing sellers and it's quite complicated, is where you often
get the premium in the long term thinking that supports kind of these assets. So it's difficult. In the UK, we have this remarkable market that has been booming until sort of about eighteen months to two years ago, which is the listed investment trust market that actually tackles that issue really well. You know, there you have listed companies where you have a selection of you know, good, average and bad managers who are doing different things around asset managers.
There's been some incredible success stories in that area and a huge amount of growth in terms of raising money and getting it into markets where anyone can buy a share and they can sell a share that gives them
access to private assets on a daily basis. Of course, the difficulty of investment trust is when there's lots of demand, they trade really well, and when there isn't as much demand or things change, the share price can controp quite dramatically versus the price of the asset that you might have exposure to you. So we've seen a big decline
in discounts in that particular area of the investment trust market. See, there is a really good vehicle there, but there's a whole bunch of new structures they're emerging, and there's a lot of support from the Treasury to try and give different types of access to private assets.
Let's just stick with the investment trust for a minute. There are an awful lot of private equity investment trusts in the UK, most of which are now trading at sub science of discounts to the stated NV. But the reason for that is because no one's convinced that the stated NEV is the correct sorry, anyv being net asset value. No one's convinced that the net asset value is correct given the sharp price and interest rates, suggesting that a
lot of these private assets should be revalued down. SI. Actually that's what's going on.
Here, right, Yeah, that's definitely a feature, man. There's also a you know, there's an element of how do you work that out? What does the share price accurately reflect what the NAV is? And that is quite difficult. You know, that requires research, that requires understanding what's going on. You know that that is not straightforward.
But it also involves private really managers confronting the reality of the new macroeconomic situation, which they'd be slow to do.
That's right.
And when you have a complete change in the regime around inflation and interest rates, that kind of completely changes the cost of capital on which you price everything, and that needs to filter through the system. And I think you know, one of the aspects of private assets versus public equities is that you know that takes time. That lag factor of where the pricing was and where it
should be does take a bit of time in that. Yeah, And the question is how far have discounts actually reflected where the pricing should be, how far are they actually too far?
And so on?
And I guess that's the difficulty for the private investor is that discount versus nab piece is quite difficult to navigate unless you kind of do your research and you're an expert.
But what's the answer. What's the answer, you're the expert. I think the.
Reality is is that there is no straightforward answer. I think what you have to recognize is that if you want exposure to liquid assets, it isn't as simple as owning a listed public company or a fund that trades daily and so on. This is a fact of life within the area. There's always going to be risks and so on. But what is interesting is I think an awful lot of people own property in the UK. Obviously a large non people want to own more property, sit
of the young people. But I think actually, if you think about private assets in the way that we think about real estate, most of us own a house. Most of us know that mortgage rates have gone up quite a bit. Most of us understand that probably things are coming off the boiler bit in terms of where real estate is, and that there's a dynamic there around what you think the house might be worth and what you might be bid for in terms of having an offer
on a house, and that's how private assets work. And actually, if we think of it in that way and realize when you're going into an asset class, when you're buying sharing one of these companies, that there may be a risk that things are overvalued and things might come down, or that if you're buying a share and the naves, that the naves are where they are and there's a big discount and the nabs may come down a bit.
If you think about it in that way, you know, you can get your head around it, but you do need to kind of people do need to recognize that, you know, this is an area where it's not straightforward and you need to think about more things that are going on, and also recognize that not everyone's purpose in this area, right. Some people are good, some people are averaged, some people are not so good in terms of what they're managing. And there isn't a capsule for private assets.
You know, when we think about the equity market, we talk about sectors, we talk about themes, we talk about mids caps, we talk about small caps, we talk about emerging developed and so on, Well, that's exactly the same in private markets. You can't sort of tar let's call private equity. You can't say that is all kind of uniform. You really have to do your homework in terms of
what you're trying to get access to. Essentially, So I don't think there is a perfect answer, Marion, but I don't think that means we should write these things off in the same way. There's lots of different ways of getting exposure to interesting investments in public markets.
It's the same with private So can I just offer a slight defense of some of the way that the private asset valuations work. So one of the criticisms is that the valuations are not updated often only enough because of various raidings, you don't really know the true market value. And people would then say the volatility is dampened because of that.
That is absolutely true.
The volatility is effectively smooth because there's lags and the way these are updated. However, if you look at public markets, public market prices swing around all over the place based on factors which are nothing to do with fundamentals. As human beings, we are all prone to fear and greed, and when there is panic in market and prices will fall sharply, and that doesn't necessarily mean the fundamentals of
the business have changed. And often these things have a habit of swinging back the other way once people decide that the world was not going to end. So whilst I think it is fair to say that private asset valuations are smooth and maybe under shoot the true volatility, I think you can also make an argument that public equity volatility is almost over egged by the behavioral biases that we exhibit. So I think that both are probably wrong. One is probably too low and one is probably too high.
But I think that it's the inability to sell private assets easily during kind of stressy markets stops us all from doing the stupid things we might otherwise be tempting to do. So actually that illiquidity almost insulates us from some of our own behavioral biases. So I think that's kind of often a bit glossed over when people are thinking about about volatility when it comes to private asset.
Yeah, it's a great way to protect ourselves from ourselves.
I know.
It's like a bet of friction is a good thing in that sense. Actually, a betfrection that stops just prevent you from the viney jerky reaction.
Interesting, and Doug, there's something else you want to talk about. I know, it's a new structure for private assets that our listeners may find interesting. Yeah.
So there's there's a new structure that's emerging in the UK which is called the long term Asset fund. Now, the idea here is that to create a structure which allows people some access to liquidity, so monthly or quarterly liquidity i e. You can get your money in or out fairly regularly, but not daily, and in return for that, you'll get access to a pool of private assets which will be a combination of things that are invested for the long term, the medium term or the short term
to kind of help with that liquidity. And the idea there is that you get much more exposure to a pure nav rather than having to worry about, you know, the discount premium problem we discussed before investment trusts. Now that's an emerging structure and the FCA have allowed that for DC schemes because they're trying to encourage DC schemes
to give people more exposure to this asset class. And they've also recently allowed people who are advised by a wealth manager or advisor to get access to this structure, and there's a few that are starting to emerge. It isn't established yet, but it's something that's coming. I guess the key point here is that you know, you need
to choose the horse for the course. If you are somebody who requires daily liquidity, the investment trust market does a very good job, but you need to do your research and be aware that you can have discounts and premiums, and equally, if you're best worried about liquidity and you've got a long term time frame, then the new structure
might be something that works really well for you. But the idea here is to try and give people exposure importantly to some of these companies, sectors, innovators that sit in the private world in order to enable them to kind of meet their financial objective. But I think that's the thing sometimes we forget, is we focus on liquidity and we focus on access and kind of the things
that might go. But the reality is what we're trying to do is say, there's an awful lot of interesting investments and innovation that sits in the private world, and we're kind of trying to make sure that we can bring people access to that in their portfolios. And so that's what these structures are all about.
Although it's like concern among the holders of pensions in the UK is that structure may be used to force them into investing in the private sector in the UK when they wouldn't necessarily have liked to. There's a type of financial repression built into that structure.
Yeah, I think that's how you use the structure, right, and that's kind of pension times to have a fiduciary GT and I think overall the government's trying to encourage and kind of and give new structures. I think obviously they have a Every pension fund trustee has a duty to their underlying members and so it needs to be
up to them how they think about this area. But I think our point of view would be let's make some structures available and then decide if you want to get access to private assets and use them, rather than you have to be forced into something like this.
A couple more questions for both of you. The first is, I know I said earlier that we couldn't fix the public markets in this podcast, but if there was one thing that either of you could do that might make public markets begin to be more attractive again. What would it be? Is there allegative change, is shift and regulation? What could there be that might bring people back to
the listed market? I mean our own view, by the way, John and I have been talking about this, and we have a slight sense that the shift in the interest rate environment might bring people back automatically.
The thing that I think we would need I would really love to see in this country, and I'm not sure how we engineer it, is that we have a culture I think where our attitude to risk is that should be minimized. So a lot of the way that people think about investing is trying to think about ways to remove all of the risks, which whereas actually I feel if we can have a culture which is much more were embracing, and I think with that it probably
comes with a better understanding from an earlier age. So somebody mystifying investing from people and they're still at schooliage rather than weaken until they're in their for seasons, they decay to talk to a financial advisor.
And the only thing I would say about that is that you're very young, right, so you know they do and we're you know, we're an aging society, and the older people get, the more frightened they are of risk perfectly reasonably. You know, if you're in your fifties or sixties, what do you want? You want a risk of capital. Also, you want a six percent dividend yield. I know what I'm going to want in my sixties, and it's certainly not going to be embracing risk in small, growing, unlisted companies.
I'm going to want my dividend yield and I'm going to want to protect my capital as best as possible. So in an aging society, there's always a bias against risk, and there is no getting away from that.
Well, they're interesting, there maybe none for another podcast. We know that people when they're at are consistently underestimate how long the honey their income for and probably don't take enough risk to keep their capital pool strong. But that's that's probably one for another day.
It is one for another day. They also don't take enough out of their part they you know, they don't have to stand the importance of dying broke. Everyone should die broken, of course, you wouldn't have to worry about inheritance. To excite that that list before we finish up you too, Duncan. One of the things that you do at short is that I absolutely love is that valuation table you provide
for us every every month. And when we look at that again, of course the UK is consistently looking cheap, cheap, cheap, But what are the markets look cheap on your valuation metrics at the moment? Fan emerging markets as well.
Emerging markets have paddy particularly bad period for quite an extending period now compared to developed markets, and valuations are quite a feeling there. I think Japan is a really interesting one though, and you know you've spoken about this before the fact that a large proportion of Japanese companies are valued at less than the book value with the accounting the value of their businesses and the regulator that you had said something Americans, it's explain your anstitution tails
for what you're going to do about it. And that's where were we didn't see more changes in share buyback, other worship held for friendly activities. So I think that Japan is people again been saying sheep for a while, but it don't feel like this year is actually having a bit of a resurgence.
Excellent, and the final question this is for both of you. Doug, you ready, okay, okay, I'm going to lock you in a run for ten years, well not really metaphorically. And before you go, you can only invest in one thing gold Bitcoin. Not strictly an investment, but you know what I mean. Gold Bitcoin. You can stick your money in a UK deposited account. What's it going to be? Gold? Good answer. We've had a couple of bitcoins recently. We're getting very confused.
Duncan yeah, go too.
Gold is kind of one of you would be bitcoin, but both Gold is absolutely fine with us. We've been we've been related by the bitcoin as recently. It's made John and I have to think about how we can tell people to invest in bitcoin, which is which is aw OWI thank you both so much for joining us. That was absolutely fascinating. And listeners, there you go. Japan is cheap, the UK is cheap, and you know gold.
Thanks for listening to this week's Maren Talks Money catch idea brief on this week's conversation on the Merrin Talks Money after show under our normal feed. Now that is only accessible to Apple new subscribers, but if you're a Bloomberg subscriber lookally after show online in the meantime. If you like a show, rate review and subscribe wherever you listen to your podcast. This episode was hosted by me Maren Sunset where but it was produced by Some Society.
Additional editing by Blake matlespcial thanks to Duncan Lamont, Doug Abbott and of course, as ever to John Steppek. Be sure to sign up to John's daily newsletter, Money Distilled, where you can hear something from him every day and it's always good. Link in the show notes