Last week the offices of BDO LLP on Baker Street, London, played host to our investor event, Where are the post-Brexit returns? More than 180 SyndicateRoom members came to network and hear our expert panel discuss where one can find lucrative returns in this volatile and uncertain post-Brexit environment.
Chaired by Kadhim Shubber from FT Alphaville, the panel was made up of Simon French, Chief Economist at Panmure Gordon; David Toplas, a seasoned angel investor who has managed £2.2bn in property funds; Dr Mark Payton, CEO of Mercia Technologies PLC; and our own Co-Founder, Tom Britton.
After an hour’s mingling over drinks and canapés, the audience was ushered into the presentation area and Kadhim opened the discussion, explaining that as a journalist, he tends to look for the horror in every situation – including the UK’s present investment environment.
‘To me it all seems apocalyptic… but is it so bad?’ Kadhim asked. ‘Should we all be afraid and should we have gold and guns in our bunker?’
Panmure Gordon economist Simon French stepped up to the plate.
‘I think what is remarkable is that the vast majority of the economist profession, ahead of Brexit agreed on something…’ – a murmur of laughter passes through the audience – ‘88% of economists thought that Brexit was a bad idea.
‘But is it that bad? I don’t think it is. There’s very little upside to see – the weakness in sterling is one that actually, given that most firms across most industries have supply chains and markets that are cross-currency, there is some sort of dilution of the impact of a weak currency, particularly when the rest of the world is all trying to weaken their currencies.
‘But what does it mean for the UK? I think it means quite a localised, slow deterioration of our cooperation – our cooperation with our biggest trading partner, the European Union, and a more protectionist vibe,’ explains Simon. ‘Brexit is just Britain’s version of what is a pattern that is happening in all economies at the moment, which is a frustration with the distribution of the fruits of globalisation.
‘There is a real problem at the heart of 30 years where capital – and this is where the investment thesis comes in – capital returns have exceeded labour returns.’
Kadhim picks up on the point and passes it to David Toplas, an expert in property funds and a seasoned angel investor.
‘Capital has had its day and perhaps it’s about time some more money started going to labour – do you think that’s the direction we’re moving in, David?
‘I certainly share some serious concerns about where we’ve got to in terms of distribution of wealth and sharing the benefits of globalisation,’ David responds. ‘I suspect most of us in this room look for the really smart, internet-based investment entities. Very few of them actually create decent jobs. Not for most people. [For example,] Deliveroo … is causing very significant issues even with those at the very bottom of the employment world and it is something that is not just UK in any way, shape or form.’
‘I think that structurally, we have some significant issues and investors will have to play a part. I certainly as an investor will be thinking much, much more about those sorts of issues and how they affect my portfolio and the sorts of things I might invest in.’
What about the general state of the sector?
‘Volatility has just gone through the roof,’ says David. Early this year he bought shares in Barclays Bank only to see the stock price drop from 220p to 160p January–March. ‘I lost 30%. Why did I lose 30% on buying a FTSE 100 company?’
This is compared to its post-Brexit figures that went up from 120p to 170p. ‘I bought post-Brexit and I’m up 30% on my portfolio. Now, I’m happy about that in a sense but I’m worried sick about that actually.’
And internationally – has the devaluation improved the investment environment to some extent?
‘Yeah,’ replies Dr Mark Payton, CEO of Mercia Technologies PLC, without hesitation before remarking that he’s very much a glass-half-full sort of person.
‘In finance it’s been really interesting … There is a lot of capital coming over into the UK.’
Recently back from Singapore, Mark explains that Mercia has been approached by foreign entities who are struggling to understand what to invest in and want to place their money behind specialised funds. ‘I think there’s a lot of opportunity for businesses to access the market through fund and fund managers, or directly from the corporate.’
SyndicateRoom Co-Founder Tom Britton, of a similarly sunny disposition to Mark, adds that alternatives may well be a potential source of returns and a way of helping manage risk – particularly in uncertain times.
‘Introducing alternatives to a portfolio can decrease volatility (less market exposure and correlation) and has the potential to offer increased returns.’
Tom here is referring to a piece published in the Wall Street Journal regarding research by Robert W. Baird & Co, which demonstrates that:
Replacing 20% of a traditional portfolio (invested 60% stocks and 40% in fixed income) with a broad mix of alternative products reduces volatility by approximately 10% and, after all fees and expenses are accounted for, slightly increases returns.
The panel was followed by five short presentations from companies listing (or soon to list) on SyndicateRoom. If you want to see what opportunities are currently available and be updated on future deals, sign up to the site – there’s no obligation to invest and no cost.
Join us for our next event, An evening with Simon Thorpe, which will take place 26th October in London. Find out more and register free here.