Saturday, December 17, 2011

TUC Trustee Conference 2011: Saving Capitalism

The presentation was actually called "How funds can benefit from dysfunctional markets - and help save capitalism".  You might enjoy the irony of someone speaking at a  TUC event about saving capitalism - but I couldn't possibly comment.

The speaker Dr Paul Woolley is an interesting bloke. A former stockbroker, fund manager and economist at the IMF. He is now a Senior Fellow at the LSE and set up his own research team there on "Dysfunctional markets". I believe he has funded this on the large amounts of money he made as a fund manager. 

He argues (convincingly in my view) that there needs to be a Revolution to save Capitalism. There are too many "bubbles and crashes" which ends up with fund managers being more wealthy than investors. Vast profits are made by the financial sector and not by shareholders. There is not mild inefficiencies but fundamental problems. Woolley talks about "Principles and Agents". Pension funds and shareholders (Principles) are basically ripped off by our financial services (Agents) who capture "excess profits". Fund managers are paid whether or not they do well. This is a moral hazard and results in bloated... short term-ism and instability. Regulation will not work since the Government is in hock to the financial sector. It is down to us (pension fund trustees and the like) to stop the abuse of our capital. We need to incentivise the UK industrial sector and shrink the financial. Say No to performance fees and No to any alternative investments which rarely delivering superior returns and can be cons. We need total transparency, full disclosure and the monitoring of all charges. Unless this happens it will mean the end of market capitalism. 

In the Q&A I asked him a question that since it would appear that many financial service interests are against us, whether it would be best for large funds such as the Local Government Pension scheme to employ directly their own advisers and fund managers (Australian model)? Paul was broadly supportive. He later finished by telling us that many of the current free market theories are "duds" and future generations will think we are off our rockers for believing in them

After the TUC Pension conference I went to a Guest lecture at the House of Commons organised by Fair Pensions by Keith Ambachsteer called "Can Pension Funds Shape the Future of Capitalism? Yes, we can!" Which I will post upon another day.

I also heard Paul speak at the LAPFF conference last month in a presentation called "What Pension Funds should do now" and make similar hard hitting arguments. Since then I have heard the ABI and others make similar arguments about us Principals being ripped off by Agents. I have brought up the issue at two different pension fund trustee meetings. This whole important debate (I sincerely hope) may finally have legs.


Anonymous said...

Woolley. Would that be the pit village near Barnsley where Arthur Scargill started work?

John Gray said...

"Woolley Colliery is a village on the edge of the Barnsley and Wakefield districts in Yorkshire, England. The village itself is in South Yorkshire whilst the former colliery is situated in West Yorkshire. Union leader Arthur Scargill started work at the colliery aged 14 in 1953.

The village is known locally as 'Mucky Woolley', a tribute to its coal mining heritage and to distinguish it from the more affluent village of Woolley situated 2 miles away. The village gets its name from the coal mines which were working there at least as early as 1850. About that time two rows of small terrace cottages were built for the workmen. Several coal seams outcrop in the hillside so coal was probably mined thereabouts for many years before that but only on a small scale until railway transport began. The pit was one of the largest in West Yorkshire; in 1980, it employed 1514 men underground and 428 on the surface.

The main mine began as a pair of tunnels into the hillside in the Barnsley Bed seam. As time went on, vertical shafts were sunk to get at the deeper seams. In the 1960s there were three shafts in the pit yard and a fourth, for extra ventilation, about a mile to the east. At that time around 17,000 tons of high quality coal were produced each week from four seams.

After the 1984-5 strike, the men from North Gawber colliery were also transferred to Woolley. The pit finally closed in 1987".