The term ‘professional investor’ can cover a multitude of sins but the sin I am interested in today is the way that, as a group, they often come across as having all the composure of someone in an old cartoon who is left screaming on a stool having just seen a mouse. Or me one night last week when something the size of a mouse, only with twice as many legs, scuttled across the bedroom floor.
An interesting example of this lack of sangfroid – the professional investors’, not mine – may be found in the most recent Systemic Risk Survey, which is carried out twice a year by the Bank of England. Among other things, it asks respondents to list, unprompted, the five risks they reckon would have the greatest impact on the UK’s financial system.
In second place this time on 57% – between ‘risk of an economic downturn’ (61%) and ‘sovereign risk’ (40%), which between them have topped this category in every survey since 2009 – was ‘geopolitical risk’. And yes, of course, with many news bulletins these days looking as if they have been directed by Quentin Tarantino, this hardly rates as terribly surprising.
But here’s the thing – in the previous eight surveys and working our way back in time, ‘geopolitical risk’ has scored 13%, 5%, 11%, 10%, 3%, 7%, 5% and, in the first half of 2010, an actual zero.
So, OK, they now appear to have woken up to the risks of Iraq, Syria, Ukraine and the rest, but I prefer my professional investors to be aware of such possibilities before rather than after the event.
Sure, perhaps if you are dealing with me on a social basis, I do not mind you struggling to retain more than three pieces of information about me – ginger, say, thinks he is funny and not keen on spiders.
But if you are running money, I would prefer you to be able to cope with the idea some risks do not flicker on and off like a broken light and that, back in 2010, it was possible a war could break out somewhere.
Actually, the Bank of England does not call its respondents ‘professional investors’ but ‘market participants’, which initially did have me wondering if all its surveys are carried out in Petticoat Lane or Portobello Road.
Then, however, I read this instalment’s 72 participants included “hedge funds, banks, building societies, large complex financial institutions, asset managers and insurers”.
It goes without saying I cannot believe any of the sophisticated souls who devour portfolio institutional were among them although conceivably you might be one of the handful of non-respondents who clearly had better things to do than aid the UK’s central bank in its quest for insight.
And while part of me feels that is a bit unpatriotic, the rest is quite impressed by such coolness. In fact, if you also had access to a size-13 shoe, you could be perfect to help me with a small domestic Concern of my own.
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