11. Black Swans, Natural Capital and Leadership with David Thompson, CIO at Zurich Insurance

David Thompson, Chief Investment Officer at Zurich Insurance Company Limited, joins us to discuss a career spanning investment banking, asset management and insurance investing. From writing 52 letters to land his first role at Lehman Brothers to leading one of the UK's major insurance investment portfolios, David shares the lessons that have shaped his investment philosophy and leadership style.

The conversation explores how insurers balance long-term liabilities, why diversification matters more than predicting "black swan" events, and why Zurich has committed capital to UK natural capital through woodland creation, peatland restoration and biodiversity projects. David also discusses responsible investing, manager selection, developing high-performing teams and the importance of curiosity as a career advantage.

• Key topics covered
  • David's journey from Lehman Brothers to CIO at Zurich
  • Why he wrote 52 letters to secure his first role in finance
  • How trading, asset management and asset ownership each shaped his perspective
  • Managing life, P&C and policyholder portfolios within an insurance business
  • Strategic asset allocation and working with external managers
  • Why Zurich invested in UK natural capital and biodiversity
  • The investment case for woodland creation and peatland restoration
  • Responsible investing: what works and where the industry still falls short
  • Preparing portfolios for uncertainty rather than predicting market shocks
  • Building cognitively diverse investment teams
  • Radical candour, Ikigai and developing future leaders
  • Why curiosity may be the most valuable skill in finance
  • David's thoughts on the future of the UK investment market
• Memorable quotes
  • "You never stop learning in finance."
  • "The best thing to do is to have a portfolio that's ready when uncertainty arrives."
  • "The only lasting impact you have in financial services is the impact you have on other people."
  • "Curiosity is just as important as IQ and EQ."
• Books and recommendations mentioned
  • Birdsong
  • Any Human Heart
  • The Black Swan
  • Blink
  • Who Moved My Cheese?
• Quick Fire
  • Favourite sport: Cricket
  • Favourite TV drama: Peaky Blinders
  • Favourite films: E.T., Oliver!, Ben-Hur, The Sound of Music
  • Favourite drink: White Burgundy
  • Favourite hobby: Acting
  • Leadership philosophy: Radical candour and Ikigai
  • Career advice: Stay curious and never stop learning.

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Transcript

SPEAKER_02 0:09

Welcome to the CIO Chair, a collaboration between the CIO Investment Club and Pension Insurance Corporation, hosted by me, Sean Thompson. And me, Hart Edge Singh. The CIO Chair's guest today is David Thompson, the Chief Investment Officer at Zurich Insurance Company Limited. David started in investment banking, trading, and then selling bonds. First at Lehman Brothers and then at ABN. He then moved into asset management and seven years ago became CIO at Zurich in the UK. He had a very privileged or fortunate upbringing as his parents, who were both primary school teachers, gave him a love of theatre, nature, and sport, and he continues to enjoy all three to this day. Welcome to the CIO Chair, David. It is a pleasure to have you here. And as I always say to our guests, I hope you are sitting comfortably.

SPEAKER_00 1:07

Sean, thank you very much. I am indeed, and Hart Edge looking forward to our chat.

SPEAKER_01 1:12

So we like to normally start with sort of some background of your journey in finance. So could you tell us about your journey? And I guess was finance always something that was going to be part of the plan?

SPEAKER_00 1:25

Not always. But when I was in my third year of studying economics, I thought being a trader, I would be involved in probability, in maths, in psychology, in economics. So I thought that kind of ties in with what I am interested in. So my best mate's brother was a bond salesman in the city. I said, How go about getting involved in being a trader in the city? He said, Well, he said, Look, you can write to all these banks, and he photocopied, as you as you do and did in those days, all the AIBD book, and he said, The ones with an asterisk in their name, send them a letter. So I wrote 52 letters, had 10 interviews, had two or three job offers, and took a job at Lehman Brothers. Wow, it's fifty fifty-two letters. I don't know why I remember that, but it probably because it was the number of cards in a playing pack. I don't know. But it was I remember writing 52 letters and thinking, hang on, there's 52 stamps I've got to buy. So that would be um and uh 52 envelopes, so it'd be in excess of £100 these days. So for a student, the equivalent, that's probably quite a lot of money. But I did it and um and and sent those off and uh started at started at Lehman in the 1980s, which I'm guessing is slightly different to what the city is like these days.

SPEAKER_01 2:46

I think so. Could you tell us uh about about that? And in particular, you know, how did you fashion the role? How did you sort of get through the door?

SPEAKER_00 2:55

So I had an interview like everybody else. They called people in for an interview, they said, okay, you're gonna be interviewed in the morning, then we give you lunch, then we can shoot off. So are you you sat it was not there's nothing formal. You sat next to people on their desk as they were trading and and being on the phone to people and what have you. So you talk to them, and if you left a good impression, they might say at the end of the day, we quite like this chap or this lady or or whatever it would be. And then off we'd tootle into this palatial dining room for a fantastic lunch. And I thought, This is this is the life. I'd never seen anything like it before. You know, the gentleman in the full butler kit would come along and say, Sir, could I get you a drink? And you say, Well, I suppose so. I've had my interviews, but gin and tonic would be rather nice. So gin and tonic, and then there was fish for starters, and you'd have a you'd have a glass of white wine with that, and then there was this great big tuna dos of beef. You'd you'd get through that with a couple of glasses of red, and then they'd bring out the brandy or the armiac and the and the and the cigars. I'm thinking, this is this is just beyond belief. So I thought I'm gonna just jump on the tube and go back and have a little bit of a nap. But they said, right, um, if we can get back to the trading floor and and carry on with the interviews. I thought, oh dear. And so I thought this wasn't part of the plan. So luckily, my um friend who grabbed me, my friend now, he wasn't my friend at the time, but he grabbed me and said, just sit next to me, don't move, don't say a word. So he uh he sort of took me under his wing a little bit, and I think I was lucky enough to be to be offered a job. And the person I started on the same day back in back in the 80s, we're still friends, uh, still friends today, and the person that sort of put took me under his wing, we're also still friends. So uh that just shows how you got uh you can get long-lasting friendships from your probably more likely in your first job when you're all of a similar age than later on in your career, because I I looked around the desk when I started, about 20 or so people on the desk, and the oldest person was 28. So as you might imagine, we had um we had a good time and we'd work hard and we'd we'd play hard.

SPEAKER_01 5:00

That's that's incredible. And and obviously you were uh at Lehman, and then you also spent time in asset management and asset ownership. So that that unique journey of being involved in each facet of the uh trade lifecycle, what perspective has that given you?

SPEAKER_00 5:16

I suppose it gives you an understanding of the job that every person on the chain does. So what the asset owner is responsible for, then what the asset manager is responsible for, and then what the trading desk does. So I think that's having a holistic view of how money gets from where it is to where it is needed, if you like. Uh that's what the city does, and that flow has to be as liquid and as and as as fluid as possible to make things work.

SPEAKER_01 5:51

And is there any part of that process which you were particularly excited by, or is it different times, different, different roles?

SPEAKER_00 5:59

I think that's Arteza's a great way of thinking about things, and I think it's also the stage of life one is at, because being a trader when you're in your early 20s is is fantastic, and you think there's you presume life is like that, and you think this is what everybody does, surely, and is interested in. So you have something of a narrow view of the world, and the important thing is that you you buy things and sell them at a higher price, and that's pretty much all there is to it, and and you can be very focused on a small bit of the world, but then as you perhaps grow a little older, you think, well, um maybe I should just think about things slightly differently and and look at the broader context and how assets are managed for who and and what do they need and what are they what are they trying to get out of it. And then um now as an asset owner we've got the responsibility for managing our own assets but also managing the assets of um of other people. So that's that's quite a responsibility. And and when you're thinking about these are people's pensions, and if you do a good job for them, they'll have a more comfortable retirement than they would otherwise. So it's important, and I think the journey is perhaps more to do with the the stage of one's life and the context and the way you would look at things then than anything else, but it does give you that overall view of what managing assets and what the purpose of the city is all about.

SPEAKER_01 7:25

Yeah, I think that's a fantastic perspective. And obviously, you've you've done different things, and you know, we heard about 52 letters, which is a staggering, staggering number. Are there any character traits or habits that you've tried to keep that have sort of opened up this many opportunities for you across uh across your journey?

SPEAKER_00 7:44

So I I don't think it's any different these days, and I think just talking to young people that are trying to get a job in any field, it's incredibly difficult. Because bear in mind when I was trying to get a job, I wrote to pretty much every bank, not really knowing which of the banks were good, which of the banks weren't good. I didn't have much of an idea about that. But they didn't expect me when I turned up at the interview to know much about them, really. Um and they didn't expect me to know too much about trading and sales and and banking and all the rest of it. Whereas now, when we interview people, you expect them to have a pretty good knowledge of what's going on, you want to know which part of the firm they want to work in, and the competition isn't only from people that might be at London or from Oxbridge or whatever, but that there are people from around the world coming for jobs in in London and around the country coming for jobs in London. So I think it's much more difficult these days for younger people to get on the ladder, as it were, and to get an understanding of what it is they would like to do. So I I'm I I'm sort of excited for them because it's an exciting time, but also quite fearful for what the future might hold for them for several reasons.

SPEAKER_01 8:57

So Zurich Insurance has multiple business lines, and and you're obviously CIO air, so you've got property and casualty, life and policy holder funds. Do they get managed separately given their differences or or are they managed on one platform?

SPEAKER_00 9:13

No, they're all managed separately because we've obviously got different liabilities for a life book than we would have for a P and C book, but nevertheless they've all managed in the same framework, making sure that we've got assets available to pay liabilities as and when they come due. So on the balance sheet side, we of course consider ALM as you would expect, and capital as you would expect. And on the policyholder side, with our managed fund, our responsibility is to determine the strategication between equities, bonds, and property. So it used to be 70% equities, 20% bonds, 10% property, which was easy, I could remember that. But we're reducing the property and increasing both of the other two, so it'll be about 72, 22, 5, and 1% in cash. So things change, and then within the equities, we we determine at what what part of the world they should they should be, whether it's US, Japan, Europe, UK, emerging market, uh etc. And the same with the same with the bonds. Uh the property's all in the UK because it's reducing portfolio, so it's reducing allocation, so it's all in the UK. And as you know, property is not that easy to come in and out of. So in answer to your question, they're all managed differently, but with the same framework, PNC life, and then the managed funds, which as you point out is policyholder funds.

SPEAKER_01 10:41

And sort of the the listeners of the podcast love this question because it sort of helps people understand um what the CIO role is and it sort of varies across organisation. What do you do day-to-day and like where do you spend most of your time? Gosh, that's a very good question.

SPEAKER_00 10:57

Uh, there's a quarterly cycle of ALMICs, which are the Asset Liability Management Investment Committees for both the P and C book and the Lifebook. There's a board for the Lifebook, there's risk committees that happen reasonably often, and then there's other ad hoc events that will happen as well. So there isn't a there isn't a standard day, but if you think of things going in those quarterly cycles, preparing for those and then following up on those, then on top of that, we've always got to make sure the SEA is where we would want it. We have to understand what the managers are doing because we outsource all our assets. We've probably got about 20 mandates that we give to other managers. So we have to make sure that we understand what they're doing, how they're behaving against the benchmark, are they behaving as we would expect them to do? So that's another 20 meetings a quarter. So you can see how the time gets taken up, and then you've got to have time for thinking and meeting people, and and there may be some management, there may be some interviewing that you need to do. Uh so all of those things need to need to fit in, which they do, which is uh which is nice. And then there's um some of some of there's some working from home, there's some working from the London office, some working from the Swindon office. So it's nice and varied, which is super important.

SPEAKER_02 12:18

Of those 20 asset managers, David, is that 20 across all three uh entities?

SPEAKER_00 12:24

Yeah, sorry, it's 20 m mandates across all three, and some of them will be managed by the same manager. So it's 20 mandates, so that might be GILTs, it might be for the PNC, GILTs for the Life Book, corporate bonds, US equities, a couple of managers there, European equities, Japanese equities, uh, ABS infrastructure. And now, excitingly, we have a manager that's managing some nature assets for us, which is uh which is really wonderful.

SPEAKER_01 12:57

Oh well, we'd love we'd love to hear about that. What are the nature assets and and how do they add to your mix?

SPEAKER_00 13:02

So I'm delighted that pricked your attention, Artaj, because I'm I could talk about this for hours. Um we started looking at this about five or six years ago and thought that it's a it's a wonderful opportunity to invest in nature, to invest in some natural capital that will benefit nature, but also give us some long-term assets that will match our liabilities. And it's a fantastic diversifier because if you're looking at peatland restoration or woodland creation or biodiversity net gain units, these things have zero correlation with the equity markets or which way interest rates are going. So a tree will continue to grow regardless of what's happening in the markets, and that will generate carbon credits over time. So we started looking at how we could do this. We talked to lots of different managers with lots of different ideas as to how they could invest in nature, and we finally invested in May. We signed on the dotted line in May to invest in the Big Nature Impact Fund. And the Big Nature Impact Fund has a first loss piece from DEFRA, the Department of the Environment, Farming and Rural Affairs, so the UK government. It's uh investing, as I say, in woodland creation, peatland restoration, and some biodiversity net gain. So that is super exciting, and it's a an opportunity to do some good with the the balance sheet assets, but also to give us a diversified set of returns that will also help us with our ALM. So it ticks all the boxes.

SPEAKER_02 14:41

How long did it take you to sort of decide upon that strategy? Um, because obviously I suspect you do have responsible investing. Um, it plays a part within your decision making. But why why suddenly sort of look at this area within your investments?

SPEAKER_00 14:59

So it was not suddenly at all. It's something that we've been looking at for five or six years, and so we'd honed in on wanting to do something that would be beneficial for nature, beneficial for society, and we thought the best thing to do was to do something in the United Kingdom because we understood the uh legal risks, the political risks much better than if we invested in the global south. So that's why we focused on the United Kingdom. We'd already in the United Kingdom have two codes we have the Peatland Carbon Code and the Woodland Carbon Code, so that's something that's been uh set up in conjunction with the IUCN, the International Union for Conservation of Nature. And also we've had BNG in England set into law last February. So for both those reasons, all those reasons I should say, uh we felt that investing in England was the best thing to do, or in the United Kingdom, but England to begin was was the was the best thing to do. We also like the fact that we'd be able to actually see the assets and see them improve and see woodland being created, see peatland being restored, seeing the water quality improve, seeing biodiversity improve on the moorlands. So that's also very exciting. But that was the journey that we went on to get invested in to finally get invested in nature, which is which is super exciting.

SPEAKER_02 16:28

That's fantastic. That's absolutely brilliant. Thank you.

SPEAKER_01 16:31

So when you look at your portfolio as a whole, how do you think about your success? Obviously, you've got different time frames to manage to, but uh what are your primary sort of sort of KPIs or things that you personally look for?

SPEAKER_00 16:46

So the KPIs, we have uh net investment income target, which won't be unfamiliar to many insurance companies. So the important thing is that we generate returns from income. Uh that's on the balance sheet side for both the PC side and for the life balance sheet. It's slightly more complicated for the unit link book in that we want to do well for our policyholders over the long term. So we set a strategic asset allocation, and we would like our managers or the manager of the managed fund to beat that strategic asset allocation. And of course, they can do that in two ways. One is by overweighting the US or overweighting UK or Europe or overweighting bonds or equities compared to our strategic asset allocation, or they get good bottom-up returns from their fund managers. That would be in, let's say, that they they outperform the index uh in Japan or in the US, in the UK, in Europe. So those are two ways that they can do well, but we would consider ourselves doing a good job on that if we do well relative to our peer group on a risk-adjusted basis, and that's for us getting a good long-term outcome for our policyholders who expect growth over the medium term, which are are just words, but we've got to give that some sort of measurement, and for us that's beating the peer group or getting a a superior risk-adjusted return to the peer group, and also beating the strategic assallocation that we set our we set ourselves.

SPEAKER_01 18:22

That's great. Now, the the next sort of part is like how do you go about making decisions and and you know what's your process behind it? And one question that keeps coming up, because everyone describes each new event as a black swan event, but how how do you think about some of the unexpected events that sort of fit outside of you know the normal distributions?

SPEAKER_00 18:44

It's it's a very good question. I mean, I have got an interest in nature, as Sean said at the top, and having been a birdwatcher from the age of seven, I knew about black swans because we had them in our local park and I knew that they came from Australasia. Um so I thought, well, that's interesting because the black swan is only unusual if you don't expect it to happen or don't expect it to be there because you think all swans are white. Um, but if you think that things are going to be more the world is becoming to more VUCA, if you like, much more volatility round, then these unexpected events are more likely to happen. And I think it's extremely difficult to say, well, I think A will happen, and that will mean B will happen, and that will mean C will happen, and then D will happen, and that will cause the market to do E. That's very complicated. You've got to get four things right, and then you've also got to the fifth thing as a result, will happen. It's really tough. So I think the the best thing to do is to try to have a portfolio that would be ready as best you can when it does happen, and and don't panic. So I think everybody knows that having a diversified portfolio, you don't have all your eggs in one basket, and that's that's all really you can do. You can't say, well, I think the next black swan event will be XYZ. That's a bit of a fool's game, and it might be better just thinking, well, the market's gone down 25 times by 10% in the last 90 years, it's gone down by 20%, 16 times in the last 90 years. So maybe it's going to happen once every six years. So if it happens once every six years, well, I've just got to be ready for that when it does happen. But bear in mind also that in the following six years it probably goes up by 80%. So I think it's important to expect volatility in the market and downside volatility, not panic when it does happen, and if you're brave enough to add a few assets when spreads are wide, when markets gone down, if you can, and it's not always easy because of the risk models that are always looked at, and there's correlations all over the place, but if it's possible, then to add a little bit of risk when things are looking the ugliest. That's of course much easier said than done.

SPEAKER_01 21:07

I think that's uh you know, that that's a great framework, and I think that you obviously need people who buy into that framework. So, how do you construct a team that you know keeps that sort of calm during choppy waters?

SPEAKER_00 21:20

I think it's important to I remember when I was trading and there would be some enormous volatility in the market, and if you called your boss and the boss was panicking, and that was often a boss in New York at the time, it wouldn't be good. But if they were relaxed and they just said, Look, these things happen. In my career, this has happened fifteen times before, it'll happen again, so it's not the first time it won't be the last. That does give you a little bit of perspective. So I think it's very important to have that come down, and if they see you really worried about what's gone on, that's not a good situation to be in. So I think constructing a team, you you can't never construct a team. From scratch. But we all, I think most people recognise that a diverse team, a cognitively diverse team, will, if they're managed well, make better decisions, bringing different perspectives all the time. So I think that's important, but it does need to be managed well, because otherwise, people that have different ways of thinking about things won't be able to communicate. So to get the best out of them, everybody has to understand the way everybody else operates, and that will enable a team to make better and longer term decisions and be able to just take the time to think about things and and challenge each other in in a polite but firm way. And that's the again, that's not easy, but you've got to establish that before you need it. You've got to establish the trust before it's actually a time when people have to be calm and have to be working together in a difficult situation.

SPEAKER_02 23:00

What's the sort of process that one might go through when you're looking at possibly adding, uh ignoring the the nature strategy which you've just gone into, but looking at something else, what was the process of actually going through what your allocation was and deciding on whether or not you should be looking to add or indeed uh reduce an allocation to an asset class?

SPEAKER_00 23:23

So we're going through that process at the moment, and we'll be adding in a particular geography of the world, and we're fortunate to have a very good manager selection team in Switzerland. So we inform them that we're looking at a particular asset class, and it might be somebody else in Germany, let's say, that's looking at the same asset class, and so we'll combine, and instead of having a 500 million mandate, we'll have two loss of 500 million, so it's a billion mandate, and that of course gives us um we can have a mandate much there's people will pay much more attention, it's a billion rather than 500 million. Um, so we're going through that process at the moment, and we just think, well, shall we diversify the sort of manager we've got? And we're we're thinking that maybe we could do with a bit more of a quantitative manager in this particular equity strategy. So that's what we're doing at the moment. So we're looking for a manager that's in a particular style, in a particular geography. Our colleagues in in Zurich will put something out in one of the one of the one of the systems, and then we will hopefully narrow that down to a short list of three in or four in conjunction with our manager selection team, and then go and see each of them, and then between us we'll decide which one we think is better on a whole stream of criteria, all the way from philosophy and process to people to responsible investing, and all of the above, score them, and we'll all score them independently, and and then hopefully we'll come out with somebody that we'd like to appoint. And then we go and do a deep dive and a due diligence, a day of due diligence, and then we appoint that manager.

SPEAKER_01 25:11

One sort of follow-up question to that. A lot of people, a lot of managers have a sort of clearly stated investment beliefs or andor investment philosophy. How important is that for you in terms of deciding whether a manager is the right fit or not?

SPEAKER_00 25:26

It's really important because if you don't have the same philosophy and values, it is difficult to see yourself working with somebody in what you hope will be a long-term partnership. However, that doesn't mean that they should have a particular way of managing assets. It's not that we would say, I want you to see a company four times a year and do this and do it, and have a process that we would absolutely do ourselves, and all the managers should have different processes that would give us much needed diversity. But certain things, the responsible investing, the way they treat their staff, the way they bring up people within the organization, all of those things point to a value system that we think in the long term is beneficial to the performance of the firm, which means that it's beneficial to the performance of the portfolio, so that those things we think are are very important. There's just a few examples.

SPEAKER_01 26:29

Yeah, no, of course. And and you mentioned responsible investing. How do you, from a sort of top-down perspective, think about responsible investing? And then then how does that message flow through to the individual assets being purchased?

SPEAKER_00 26:42

So that is really topical at the moment. Really topical, but with what's going on around the world with auto authoritarian governments. And of course, I'm slightly guilty of thinking, well, surely finance can do everything because it's where the money is. So surely we can act and determine what the behaviors are of not only companies but of governments. Well, clearly that's not worked too well, because if you think how well have the how well has the industry done in the area of responsible investing, and a lot of people would give the industry about seven, they'd give their own firm maybe an eight and eight and a half, and they'd give themselves a nine, nine and a half. And you think, well, if that's the case, why are we in a climate crisis? Why are we in a biodiversity crisis? Why have we got billions of people in abject poverty around the world? So we've not really done that good a job, have we? If that was the end objective to responsible investing. If the objective is to sit simply have products available that people can invest in, well, maybe. But that's probably not what the KPRs should be or ever were, of the industry. But I am conscious of the fact that I'm thinking that if all you have is a hammer, every problem you see is a nail, in that maybe I think that finance and the financial world can do too much. And maybe I'm looking at it through roast-tinted spectacles, thinking that all we have to do is wave the magic wand of billions of dollars and things can get changed, but clearly that's not been the case, and it's much more difficult, particularly in the United States at the moment, to get any changes from the top in the governance around what's happening in the United States. That's clearly not happened, and I think we can see that things just happen in a in a fiat way.

SPEAKER_01 28:41

So when you think about the the role of alternatives in the portfolio, and you have you've talked about um natural capital, how are you thinking about that? And are there any other sort of asset types that that you invest in outside of the typical um equities, bonds and real estate?

SPEAKER_00 28:58

We do invest in infrastructure, we do invest in private debt, we invest in um private assets. And so that does play an important part because as it becomes more difficult to get net investment income, these have to play a significant role. And of course, there's been a lot of noise about private assets at the moment, so the importance of understanding them has never been higher. And the individually regulators don't want to be the ones that are left behind. So it's important to understand what you have in your portfolio. Um, but alternatives definitely play a part in the uh in the portfolio, particularly on the P and C side. So we have some infrastructure in the in the life book, in the life balance sheet, and some private assets on the P and C side. So that's important and it'll continue to be important to us over the next three, five years and even longer.

SPEAKER_01 29:51

Are there any sort of either behavioural or underwriting or sort of manager changes that you're making whilst this is topical? So here I'm just thinking about you know some of the redemption conversations uh within or the extension of private equity life cycles.

SPEAKER_00 30:10

Yeah, um, I think when it comes to that, we are also fortunate to have a private debt team that offered out of Zurich looking very closely at all of the private debt managers. And it's important to have private debt managers that are very thorough in their in their underwriting and also using teams with their own dedicated research, the larger firms that have got strong research capabilities in all the areas, in all the sectors, that's always going to be important, and maintaining underwriting discipline. Um, I don't think that's anything you wouldn't expect to hear. But as long as that is maintained and you don't say, well, we can get an extra 20 basis points if we just loosen off what we're doing at the moment, I think that's when it gets dangerous. So I think it's understanding that it's right to be involved in the markets, but not push the envelope too far.

SPEAKER_02 31:06

And and when it comes to investing in the UK in particular, what's your thinking at the moment?

SPEAKER_00 31:12

So we have an allocation to the UK um equity market, a pretty sizable allocation to the UK equity market. Uh we invested in UK corporate bonds, we've obviously got an investment, well not obviously, but we have an investment in in GILTS as well. So we are and we've invested in UK property. So we've got a pretty heavy investment in the in the UK. I do think that there are other things that that could be done in the UK to increase the demand for UK assets. I find it amazing that we can all invest in ISOs and there's no obligation to invest in FTSE 250 or or smaller UK companies. We get it, we can get a tax break from investing in US companies or Japanese companies. And it does seem strange that some of that behaviour isn't nudged in the direction of companies in the UK that would need some capital, um, given that the government does have a dual mandate, if you like. One is to get growth and one is to make sure ensure that people can save for their retirements. So an ISA is good for that. But given that there should be a dual mandate on that, then maybe uh pushing people into the UK would be would be beneficial. It's interesting that in in Japan they have the NISA named after the ISA, nippon ISA, and 92% of that goes into Japanese companies.

SPEAKER_02 32:34

Tell us a little bit about your leadership style. Uh you know, I'm sure you must have one, um, and I'm sure you put it into practice daily. Uh, but tell us a little bit about what that might look like.

SPEAKER_00 32:46

Gosh, I've not really thought about this, to be honest with you, Sean. But I think if I had a leadership style, it would be that I want to try my best to listen. And I know that a boss can alter can alter the your approach to work. So I I would I think most people leave a company because of the boss rather than the company. Um so I I would hope that it's a style where there is where possible radical candor, so that people feel free in being absolutely open. Uh, we are really fortunate that we've got a great team here, and it it's not as easy if you don't have a great team, but having a great team, it's much easier to to manage to lead. So so I'd I'd say that it it's 50-50, and to try and have a situation where you can have an open conversation, they can always feel that you're available to listen and and offer suggestions, and they have a clear understanding of what it is that we're trying to do, that's important, and that they can trust you. And and those are things you you develop over time.

SPEAKER_01 33:52

Is radical candor something that um you know a pr a previous uh colleague that you've worked with or worked for has sort of shown you as the way, or is that just uh something that has been an emergent property over time?

SPEAKER_00 34:04

Well, I think you often come across things in that somebody else has said, Well, look at this, this is good, and you think, well, I'm not sure it is. And then but others over time you think, yeah, I agree with that. That seemed that's that does seem good. And if you think of the good friendships or good working relationships that you have, I think one consistent theme amongst that is that you can be absolutely honest with that person, and that is not easy, and it takes time, and sometimes you'll never get there for whatever reason. That two people just can't get it, which is which sometimes happens. But when you have the best relationships, you can be honest with them, they can be honest with you, and they know that you have their best interests at heart. Sort the wheat from the chaff and with a breath of kindness blow the chaff away. And that's I think where you want to aim to get to, and it's not easy, and you'll get bumps in the road or what have you, but if you can get there with your team, you'll get to a good place, and you'll get to a place where people will realize what you're trying to do, and they'll go the extra mile a little bit as well. Um, and the other one we've we've used in the team is a Japanese philosophy called Ikigai, which is doing what you love, doing what you're good at, doing what you can be paid for, and doing what the world needs. And if you can have all those four things, then you enjoy your life's work much more. And so in the team, we've tried to say, well, if there's something you don't like doing, tell your boss maybe somebody else does like doing it. And then we've tried to get people to end up doing what they enjoy doing, and it's amazing that that has worked pretty well, and people enjoy coming to work. So that's that's the aim. The problem is that when some people are good at something and they're not they don't really like doing it, so so they get given more of that, of course. But apart from that, it it does work, um, it does work very well.

SPEAKER_01 36:04

It's clear that sort of developing relationships and developing talent is something that uh is important to you. Can you tell me about how you go about that? How do you develop strong relationships or how do you develop people in in their careers?

SPEAKER_00 36:18

Um, I think you have to have an idea as to what they want to get out of their career, where they want to get to, how ambitious they are. And ambitious is a dangerous word because the more ambitious somebody is, then you think, well, that's better. If somebody's not quite that ambitious, well, that's not so good. But you've got to understand that not everybody is going to necessarily have a chance to get to the top, and you've also got to have the relationship that sometimes it might be better that they move on and take an opportunity elsewhere. And if you can get to the stage where they would trust your advice on this, that's a strong place to be as well. And it just happens that so I enjoy, because I'm a people person, I enjoy people and and seeing people develop. And if you think about I often think as I come to towards the end of my career, not yet there for quite some time, but towards the end, you think look back and you think, well, I can't wander around and say, Well, I built that building. If I was an architect, I might say that. Or if I'm a uh a gardener, I could say, look at that garden. I've I've designed that garden, it's fantastic. And look at that, I planted all those trees over there. But in and I was talking to a friend of mine who'd recently retired from financial services, and said, No, it's not like that in financial services. We don't do anything like that in financial services. The only impact you can ever have is the impact you have on other people and their careers, and that's all you can get out of it, I'm afraid. So you better make the most of it. So when you look back, and if there's one, two, three, five, ten people that can say, Um, I enjoyed working with them and they were they were good fun and I learned something, or I I just enjoyed the time with them. Well, that's all you can really get out of a career in in financial services, in addition to the fact that you've hopefully performed well and and given good returns to your policyholders, which of course is a uh is a plus, but the most important thing is the impact you have on people.

SPEAKER_01 38:08

So, David, what are the best things about working in the finance industry? And particularly if I'm a new graduate, should I be excited about getting involved?

SPEAKER_00 38:17

You should. You should. The best thing is that you never stop learning and you never stop having an opportunity to learn. And finance is an area that you can operate in if you are a mathematician, a physicist, an engineer, historian, English graduate, economics graduate, somebody with an interest in psychology. All of these are skills that you could really develop and really use if you had an interest in joining the finance industry. You might think that sounds strange because everybody has to be an economist, surely, to know what's going on in the world of economics. No, not at all. If you understand history, then you will know things don't necessarily repeat, but they certainly rhyme. If you understand psychology, you will understand the way that people think. If you understand maths, goodness me, there's a lot of maths going on at the moment in the way that we invest with quantitative managers. If you understand engineering, you'll be able to develop all sorts of things that will solve problems, because engineering is about solving problems. And then if you're a linguist, you'll be able to communicate with people around the world. And that's so important. If you speak French, German, Spanish, Italian, the ability to talk to people from different cultures and understand different cultures will always be important. So I think for me, if you're in finance, you will never stop learning. You will never stop learning. So when you stop learning, you may as well pack in because there's so much going on all the time, and nobody knows what's going to happen next. So it's a fantastic world to be in. Markets are incredibly interesting, and they always have been, they always will be. And you can learn bits and pieces from every conversation you have. And I learned four different things pretty much. If I've had a good day, it's because I've learned something new. If I've not learned something new, that's not been a good day.

SPEAKER_01 40:14

So a lot of people are sort of doomsaying about you know technology and the fact that it might end up significantly changing um uh people's roles or or or the industry as a whole. But what traits do you think transcend uh technology and will continue to be valuable in the future of finance?

SPEAKER_00 40:35

So it's still extremely important to be able to tell a story, get on with people, work with people, listen to their point of view, understand what they're saying, understand why they're saying it, have empathy, and all those things can make you realize why somebody wants to do something, whether that's why they want to invest in a particular asset class or not, or why they hold a view about a particular firm or a particular person. So having empathy is incredibly important, telling stories and having an interest, having curiosity. So we often talk about IQ and EQ, but I think there's another one, CQ, which curiosity quotient. So if you're not interested in stuff that's going on in people, in where they're from, in their backgrounds, in how they got to where they are, then I think you'll struggle in in many areas, not if whether you're in finance or or whatever career you're in. But if you've got an interest in people, and maybe I'm I'm biased, because I think people are fascinating, but if you've got an interest in people and what they're doing and why they want to do it, then I think that'll be superbly important for finance.

SPEAKER_01 41:53

And and sort of, you know, you've talked about Hobson's choice, but are there any either fiction or non-fiction books which has really sort of inspired your thinking?

SPEAKER_00 42:06

Yes, a lot of them. And I think again, it's so difficult to think of one book or one podcast. So people say, Well, what what should I read? What one thing should I read? If I want to understand people's psychology, which book should I read? And I'm thinking, well, you need to read lots. You can't just read one. If you want to read about how to become a good golfer, you don't just read one book, you read ten. You keep reading them, you keep going back to them. And I think that's what I would say about podcasts and books. You need to read about history, you need to read about economics, you need to read about psychology, you need to read about finance itself, which companies have done, which companies haven't done well. You need to read about strategy. All of the above have an impact. So it's no good just thinking, this one book, you might think of you mentioned the Black Swan earlier, or Blink, or people often refer to Who Stole My Cheese, and etc. But you can't just have one book that you say this is the one to read. Read that and your problems are over. It's not like that. And I think you have to keep learning, keep reading, keep going back to the books as well and thinking, that was a good book I read for ten years, I'm going to reread as well. So I think that's what is important. I think it's just to continue the curiosity and continue to look for other books in areas and other people's viewpoints that you don't necessarily agree with and try to understand where they're coming from. For my sins, I listened to a three and a half hour podcast, three and a half hour yes, podcast with um with Tommy Robinson. Um now I'm not making any judgments, but I'm just saying I probably don't agree with many of his views, but nevertheless, I think it's important to listen and try to get an understanding of of where they're where people come from and what people's thoughts are about the state of the world, and then perhaps you can get an understanding of where they are.

SPEAKER_01 44:00

coming from from a very wise perspective. And before we go over to the sort of uh the quickfire round, the world famous quickfire round, I think I think the the question is, you know, what would you like your legacy to be as a CIO?

SPEAKER_00 44:15

I think we've we've sort of discussed this already, Hartish, and I think doing things if we could see more firms invest in UK nature, that would be a wonderful thing. That would be really satisfying and to get get it more considered as an infrastructure and more of a mainstream investment that we have got to pay for that would be a a great legacy. But again, just to have people that are scattered around the place and say, well, yeah, I enjoyed I enjoyed working with David. It was it was fun. It made me laugh now and again and um and we might have learned something or I taught him something which obviously you know we we've all learnt from people in the past and it's been they're the best people to have around and and still today we all gr well I do I gravitate towards the people that I can learn things from the way they think the way they are.

SPEAKER_02 45:03

Listen David it's been an absolute pleasure um talking to you um really enjoyed it thank you so much we always end um our sessions with the favourites round um so basically it's a quick fire you mentioned already you like sport but what's your favorite one? Cricket. Cricket.

SPEAKER_00 45:22

Oh so you're you're missing the second test as we speak on it yeah I watched the highlights last night well I watched the highlights this morning at about three in the morning because I couldn't sleep so I turned the television on it was Uzbekistan versus Colombia at 3 30 in the morning so I thought no I'm going to watch the cricket highlights so I'll watch the cricket highlights. Well d well done for getting up at that time I didn't intend to I just did I couldn't sleep so you watch I know it's not uh cricket but did you watch the England game last year? I certainly did yes I went out for dinner and I asked my wife if she'd put the television on pause the television on pause so when I came in at quarter past ten we watched it sort of live you know you was just so it was great we could speed through the hydration breaks and uh that was marvellous it was what a fantastic game. Oh it was amazing at long last we seem to have actually come back from games where we seem to be uh giving up uh in terms of our defence yeah she said uh my wife said do you think England can win the World Cup I said well in the in the betting I said in the betting they are eight to one now eight to one she says well you know I don't understand betting what does that mean I said well it means if you put a hundred pounds on for England to win the World Cup that means you lose a hundred pounds well said uh right favourite film or TV drama Peaky Blinders okay I've I've not actually ever watched Peaky Blinders oh my word Sean and then favourite films I'm gonna say E.T. And Oliver and Ben Hur. I have to say David you old softy yeah that's right sound of music as well whose favourite drink I think is gonna be a nice glass of French burgundy white burgundy chills nice perfect time of the year for it as well um favourite book favourite book I'm gonna go with one of Charles Dickens's no no a favourite book is Birdsong unquestionably birdsong birdsong birdsong yes bird song it's uh it's just wonderful okay I have I I have to say I haven't come across that but that's just probably because I I was never educated well um but I will certainly look that up now that uh you've mentioned it the other my second it's it's a tie tide probably is any human heart William Boyd wonderful um well we've you you might already mention it but favourite hobby acting acting perfect brilliant um and I will one day try to come and see you um on that stage that's very kind I think I think one of my moderators came to see you one once recently yes so I understand so I understand she did because she lives not too far she lives in Hartford and she came and she did indeed she came to see Hobson's choice so that was uh wonderful yeah listen David absolute pleasure thank you so much for your time uh we look forward to speaking to you again soon and you thank you both thank you so much for listening be sure to stay tuned in the meantime follow the CIO Investment Club on LinkedIn Threads and X to stay in the loop about our upcoming guest interviews on the CIO Chair Podcast.

SPEAKER_02 48:43

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