Richard Tomlinson: A CIO role is one of those roles of an asset owner where your age is your tailwind in some ways. There are so many mistakes that you can make. The more mistakes you’ve made in the past, the better you can do your job going forward. So the big one for me is keep it simple, stupid, KISS. And if something can go wrong, it probably will go wrong. And think about the different scenarios. So it’s things around those things that are my big learnings as an investor.
Aoifinn Devitt: I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people and their stories. This series is supported by BenefitStreet Partners. BenefitStreet Partners is a leading global alternative credit asset manager offering clients investment solutions across a broad range of complementary credit strategies. Including direct lending, special situations, structured credit, high yield bonds, leveraged loans, and commercial real estate debt and equity. This episode is also supported by PIMCO, a global leader in active fixed income with deep expertise across public and private markets. PIMCO invests their clients’ capital in income and credit opportunities that span the liquidity spectrum, leveraging their decades of expertise navigating complex debt markets. I’m joined today by Richard Tomlinson, who’s Chief Investment Officer at Local Pensions Partnership Investments. He was previously Head of Portfolio Advisory and a partner at Allborn, where he spent over 6 years, and prior to that was Head of Multi-Strategy and Absolute Return at Old Mutual Asset Managers. Welcome, Richard. Thanks for joining me today.
Richard Tomlinson: Thank you, Aoife, and thanks for having me on the show.
Aoifinn Devitt: Well, we’ve known each other certainly since your time at Local Pensions Partnership Investments, but I’d love if you could just take us back into your background a little bit to talk about what brought you to finance, but also the experiences you had within different kinds of firms that maybe informed your approach today?
Richard Tomlinson: Yeah, of course. So I probably start with in university. So I was in university in the mid-late ’90s at Cambridge, studied engineering. And for people who are around at that era, that period was fascinating. Not that dissimilar to now where there was a period of significant technological change and optimism and everyone was going to be an internet entrepreneur and people were making lots of paper fortunes. And interestingly, one of the parallels I can reflect on then, there was At the time, people were worrying about the sort of major management consultancy firms, they just couldn’t hire people because they kept losing them to startups. No one wanted to work for McKinsey because they wanted to work for a later startup. It does feel a little bit similar to what we’re seeing now, but who knows? History doesn’t repeat itself, but it does often rhyme. But as part of that, I didn’t, if I’m honest, I didn’t really get the whole milk round thing. I was probably a bit young and immature, and I ended up starting my own business with a business partner. And we did that during university, and I think it was the first year. That Cambridge University Entrepreneurs was run. We were runners-up. And off the back of that, we ended up talking to the NEC in Birmingham, and we turned up in our trainers and our university minibus and tried to tell them that they should buy a large structure off us. And essentially, they laughed at us. Your business is silly, guys. You’ve gotten little. You don’t really know what you’re doing. We’re not going to give you £100 million to build a new structure. But I like this chitspa and the confidence to turn up here, as I say, in your trainers and university minibus and tell me you’re going to change the world. Can I hire you? So I ended up working my first job at the NEC Group in Birmingham. But actually it does tie back to what I do today because part of that job was looking at large-scale development projects. I was building financial models for essentially building new event centers around the world and how that can spur economic development. So it’s quite similar to some of the things we look at today, but from the other lens. 9/11 happened and the world changed a bit and I ended up working in finance and I worked for a little company called GNI Fund Management where I needed to basically earn a different kind of living. And that was an early invest management role, and that then led from one thing to the other. So that then led into Old Mutual, which is the parent company, and that developed into running a multi-manager hedge fund portfolio till 2007, 2008. And then again, the world changed during the GFC, and I ended up leaving at that point and spent a few years running my own money, trading my own money, and being an independent consultant. And then at some point, round about 2010, I realized I needed to get another job. Maybe we’ll come back to some of the learnings I picked up during that period. I worked for Auburn Partners for a period, which was hugely influential from my perspective. I got to work with colleagues, worked for people who I’d say were high integrity, and showed me a lot about how to work, to think like an institutional investor. Because I got to work with some of the smartest minds from the asset owner community and work with them on their portfolios. And then about 2016, 2017, I started talking to what is now the CEO of LPP, LPPI, Chris Rule. And had a conversation and eventually ended up joining LPP to work on local government pensions. And that’s where I, I am today.
Aoifinn Devitt: Fantastic. Well, I certainly will come back to those learnings during that period because I think anyone who’s had a career in finance will have had times of plenty, times of challenge. But I’m particularly interested in the entrepreneurship point because you now as an allocator are on the receiving end of many pitches from firms, large and small, new and old. And I suppose, what did that teach you about the reality of being in a startup? How does it inform how you approach maybe a larger company, but which was not too long ago a startup itself?
Richard Tomlinson: Yeah, I think if I’m honest, I’ve always grown up with an entrepreneurial environment. My father always ran his own company, small business engineering. So I was always used to the idea of doing everything yourself and having to take that total responsibility and starting a business and running a business. It’s really hard. If you don’t make it work, you don’t get paid. So I think it was that idea of having to be a jack of all trades, which is interesting because a lot of traditional career paths, you start off as a specialist and it’s only when you get really senior do you start having to think cross-functionally and you have to learn things. Whereas part of the skill of running a small business is you have to work out what— how to get some accounts or marketing or PR. And I think from running my own businesses in the past, I got used to thinking across the whole gamut of things at a much younger age than maybe I would have done if I’d gone into a traditional corporate role. And then when you come back into those senior leadership roles, you’ve kind of already got many of the skills that are built up for that cross-functional leadership piece. So yeah, I think it’s really helped from that perspective and the ownership and the get up and go. You can’t, can’t rely on others.
Aoifinn Devitt: For sure. And then getting to your investment beliefs today. So I suppose some of us kind of carry around a DNA when it comes to how we approach investing. Obviously there’s adaptation built into the circumstance, but what would you say are some of your core beliefs that you’ve carried through your career?
Richard Tomlinson: Yeah, there’s a few key things I’d highlight. One is don’t try and be too clever. Yeah, when you’re young, you think you know it all, and you build these models and tools, and half the time, you realize you’ve invented a perpetual motion machine or whatever. You wildly overestimate your intelligence. So you think you can— you’re smart in the world, and quite often, you find with experience, the market humbles you, let’s say, and you realize that the world isn’t quite so easy to make money. So to be humble, and I think that’s certainly come through. I think I’d raise certainly investment beliefs now. You’ve got to think longer term, that if you are be very clear on what edge you have, and you’ve got to refine that. And I think where I look at investing is your ability to make calls. You might be— if you’re really good, you might be right 55% of the time, maybe 60% if you’re really, really good. But you stay in business by, again, being humble at the market, telling you’re wrong, being position sizing, and managing that exposure. So again, don’t try and be too clever. Don’t bet the farm. Stay diversified. Look long term. And think very carefully about what your mandate is and how you align your activity and your beliefs with that mandate and what levers you can pull. It’s really easy to think that you’ve got more degrees of freedom are better, but that can lead you into so many more mistakes as well. It’s almost like stick to one or two things that you can do and be very clear on them and don’t try and get too clever because that’s where you can end up in a really challenging situation. And as an institutional investor, I think it’s looking over the horizon and as I say, looking through the noise. I know that’s a cliché, but it’s true as well. Just look through the noise and try and think How might this play out if I’m stood 5 years forward looking back? And keep challenging yourself. And the final point I’d make is the world is dynamic. As a simple throwaway comment, I’ve been working on this analogy for a little while, for a few days. My daughter’s school said, do you want some stick insects? And basically they’ve bred and we’ve got loads of them. So my daughter said, can we bring some stick insects home? I thought, that’s easy. I used to have stick insects, probably late ’80s, in my room when I was a kid. You just throw them in a box and you throw some put leaves in and leave them there. Little did I realize the guidance now for keeping stick insects is suddenly wildly more than that. You’ve got to get different kinds of leaves, they’ve got to come from somewhere away from a road, and you’ve got to change them every 3 days and spritz them. And I’d say that’s like investment management. Yeah, 15, 20 years ago you could probably make money by, by stuff, and it went up in value or whatever it would be. Now it just keeps getting harder and harder, and that is how I would describe investing. You’ve got to work really hard to maintain edge. And just keep going and keep improving. It’s just not like it was 20 years ago.
Aoifinn Devitt: No, no, no. As far away fields indeed are greener. And moving that then so into this sort of set of whether it’s constraints or opportunities that you face at LPPI now, clearly you’ve just undergone and are undergoing tremendous amount of change as you grow your client base from 3 to 9. And just the organization is going through changes on many fronts. What would you say is at the forefront of your mind if we can maybe think about short-term and long-term here? Long-term vision, short-term priorities, in whatever order you prefer.
Richard Tomlinson: Well, I’ll start with the short term. Short term is do what we said we would do. I think it’s Charlie Munger would say one of his core principles was that to succeed in jobs and life, it’s if you simply just do what you said you would do, that’s a pretty good place and you’re likely to do all right. I think in one of his almanac he said that. I couldn’t agree more. And that’s very much where we’re coming from in the near term for the Fit for the Future changes that we committed to do certain things to our existing and our new partner funds. And holding ourselves to account and executing, getting that done. And we’re well on the way on that journey. And that means, as I say, implementing or bringing on the new 6 whilst maintaining the levels of service to the current 3 and putting in place a future platform or a future plan that enables us to implement the portfolios for all of those partner funds in a high-quality way, in line with what we said we would do, in line with the bill, and enables them to meet their goals. So we’re there to guide them, support them, to enable the partner funds to— I would always frame the LGPS mission as pay all pensions as they fall due, affordably and efficiently. So we’re there to enable them to do that. In the long run, it’s essentially an extension of that long-term goal. So if I think about it from a partner fund’s point of view, it’s to enable them to meet their liabilities, to pay pensions as they fall due, provide a governance structure, provide guidance, provide support, advice, and enable them, as I say, to meet their goals in a way that they feel is well governed. And aligned with what they’ve asked us to do, and we deliver on that. So that’s the long term. If I think more internally, what do I want to do within LPPI? What do I see as my role? It’s obviously deliver those corporate goals, deliver investment performance, do it in a way that’s aligned. But also I think there’s more. There’s build a high quality organization that has longevity, that has a culture that perpetuates way beyond me. And fundamentally, and it’s simple stuff, is to grow more leaders, is to build a team that the people that you build that succession plan and your role is to grow more leaders so that it becomes resilient or it’s resilient to whether I’m around or not. And I’m very comfortable that we have built a really capable team. But it’s not just myself and the senior leaders now. If you go one level down to the people that report to me, you have very, very serious, competent people who can get stuff done. And even one layer down from them and even one layer down from them, we’ve built that bench and we’ve got leader upon leader coming through the ranks now to be able to build that long-term resilience to stakeholders.
Aoifinn Devitt: We’re going to hear from one of the sponsors of this series, Benefit Street Partners, BSP. I sat down with Rich Byrne, President and CEO of BSP, and asked him about the growing awareness of the private credit asset class from a time when people barely wanted to speak about it until today.
Speaker C: Today, it’s the only thing people want to talk about, which I think is funny because I’ve gone full circle. Full circle. So, maybe that’s the time you should think about skating to where the puck’s going. I think private credit is still an attractive relative value, certainly is relative to the liquid markets. But for example, one thing that we’ve been focusing on is maybe the better relative value today is real estate credit, real estate lending.
Richard Tomlinson: Why?
Speaker C: Because the real estate market has gone through a lot of turmoil. The office sector has all but imploded. You know, in many parts of the country, interest rates having gone up has, you know, impacted negatively real estate values. There’s a lot of carnage. And as a result, you know, we love dislocation because often it creates the best opportunity.
Aoifinn Devitt: And now back to the show. I know as part of the Fit for the Future and probably even predating that, you have looked at the Canadian model as well as looking around the world at other models. Of managing pensions on this scale. What would you say you have taken note of in terms of would love to have, or must mistake made, or avoid that, or maybe that’s not quite for us?
Richard Tomlinson: Yeah, I think it’s— that’s a really interesting question, Nathan. I think, and this is very actively debated in policy circles in the UK, but certainly I think you could look at the Canadian model and say the LGPS is being pushed to go more Canadian and look like the Canadian model. Then others would say Ah, but there are some challenges with the Canadian model, which I fully agree with. The way I’d think about it is to say there’s some parts that you want to learn from, and then you want to implement them in a way that is sympathetic or aligned with the LGPS. It takes into account the specifics of the LGPS and what the goals are and the constraints of that scheme and the UK. For example, what I mean by that is I think there are some things that the Canadian model does well, which is delegation, for example, whilst maintaining accountability to the ultimate asset owner, which would be the pension funds themselves. I think that works well. I think there’s a degree of internalization that the Canadian model does well, which I think we can do well. However, I would then start breaking that down by asset class. For example, I think internalizing some parts of infrastructure, say core infrastructure, where I think it’s originate, buy well, and be a good steward of the asset, I can see how that’s credible for us to do. The bits where I would probably shy away from is disintermediating private equity managers in that what you might call the classic— and I’m doing the inverted fingers thing— investing in change type stuff, which I don’t think fits well in an LGPS model. And they say we can explore that in a moment if you think that’s of interest. I think so. That would be where I differ. And other things where you see some of the very large asset owners globally, they’re building offices overseas. I don’t ever see us doing that. I think we would always look to partner with local expertise. And I think so to me it’s a matter of cherry-picking the bits that work in our context and looking internationally for best practice, implementing it efficiently, but then also not being a slave to following a model that the bits that don’t work in our context.
Aoifinn Devitt: I think that’s an intriguing path to go down, if you don’t mind us going down that path for a second, in terms of the— you mentioned constraints and working within your constraints. And sometimes that actually, we all know, analysis paralysis as well as choice paralysis can actually be, be very challenging. So some constraints are very good. So maybe could you just elaborate in terms of things that you just don’t think are a fit, given there has been that move to internal investment management, desire to obviously scale, enjoy lower fees. Where do you think maybe the limits of just the resources, the capacity that maybe just are focusing on your comparative advantages may bring?
Richard Tomlinson: Yeah, absolutely. So for example, I think I touched on the examples of direct infrastructure. I can, that makes sense to me because the part of the advantage comes from scale. So why would you hand that over to someone else in that asset bucket? Whereas I quite often describe myself as if I talk about the ultimate strategic asset class, I’d probably say it’s listed equities, the ultimate Tactically, asset class is credit. Now, you could say, why don’t you run credit in-house? I’d say, well, I can’t see how we could get edge. How can we compete? And the reason I say that is, for example, in big chunks of the credit universe, the edge comes from having a global platform and being able to really modulate where you invest through that global opportunity set. And that means a global platform, a global reach, a huge scale— or sorry, very specialist— and systems and data and people in each different area. There’s no way we can compete with some of the larger managers in that. And I think you would just end up doing a subscale job of that suboptimal role. So for me, I think it’s, you’ve got to be credible. So you’re only going to want to do things where you can look yourself in the mirror and say, do I, are we credible? Can we deliver value for my stakeholders in doing that? Not because it’s something interesting or ego-driven. So that’s where I think credit. Another example I tend to give would be derivatives overlays, FX overlays. I think the control environment you need is significant and the You sometimes have to pay people very well for those roles. And I don’t think that really fits. It’s that you can pay someone externally who’s incredibly specialist at doing that one thing, let’s say FX overlay, you can pay them a relatively small fee. The probability of them making a mistake on it is very low relative to what we would do. And if you do make a mistake, the cost of it can be huge because the notional’s massive. That’s not a risk-reward I like. I’d rather pay someone else to do that specialist. So that, it comes into that, you know, some triage of opportunity, risk, credibility, and being candid, your ability to pay people market-based compensation. The investing in change ones are difficult because sometimes some of the pay packets can be very large, people need very incentivized packages. It doesn’t necessarily fit in our world. And then not least, with some of the, some of the PE strategies, there can sometimes be reputational risk associated as well, which doesn’t necessarily fit very well with our framing, let’s say. So it’s very holistic how we think about it.
Aoifinn Devitt: Really interesting. And I’d just love to go down then two paths, which I think probably are very unique to the LGPS, particularly when it comes to the divergent and diverse demands for sustainable investment approaches, depending in your case by 9 different policies potentially, and equally the strong drive around local investing. So how do you see your pool’s role allowing your individual clients to express their preferences with those two in mind?
Richard Tomlinson: It’s really interesting because on the one hand, the view of pooling is to, you know, come together collegiately to create scale and scale economies. And local investing in some ways provides a challenge to that, as does RI sustainability, ESG beliefs. However, I, I tend to view it as a, you know, a Venn diagram. There’s significant commonality that you can get, and you can drive those scale economies, but there does need to be compromise at some point. There has to be some compromise and it’s finding that balance and it’s delicate. I think one of the things we start off with is sustainability, RI, ESG conversation. If I’m honest, I think there’s been a lot of muddled discourse on this where people are saying you can have it all and I don’t have to worry about what takes primacy, financial return or ESG. It’s just all, it doesn’t make sense when it comes to the nitty-gritty of the underwriting that is often compromise needed. So I would say, always say to people, think very carefully about where you sit as an organization. And in all likelihood, put a spectrum of capital in front of them and say, are you a financial investor, pure financial on the far left, right the way through to philanthropic? Where do you sit? And they’ll probably point, if I’m honest, most of the LGPS really should be pointing at the ESG integrated bucket. That’s pretty much what the regs say in terms of framing. And that’s what I would say as you do in the core portfolio. The core portfolio being the bit of the portfolio that is there to pay pensions as they fall due, efficiently and affordably in the long run. And that’s going to be the bulk of your capital, 90, 95, something like that. The other bit of the portfolio, the satellite bit, where you can be more precise and say we want to take other things into account, which then either double, triple bottom line, or certainly have equal primacy or even takes primacy over the financial piece. That could be local, that could be some impact lens, fine. Then you redesign that part of the mandate, being very precise of what you say good looks like. So what is this thing actually trying to do? And then I think you can have a legitimate, honest underwriting process that even if it doesn’t work out in 5 years’ time, you can pull up the memo and everyone say, yeah, that’s what we said. We said it was going to have impact. We’re going to make that in the context of the financial return piece. The challenge is then doing that scale when you have multiple different legs of different partner funds, and that’s what we’re working through. I think there are ways to do it. But it’s going to need some thought of how you create structures where you can create local portfolios for each individual partner firm that align with their local investing goals that aren’t totally inefficient. And, but I think there are ways we’re working on and, yeah, using a common platform and there’s various ways of doing that, but it is challenging and it will probably want— it’s going to need compromise from at some level.
Aoifinn Devitt: Well, uh, two quite divergent areas there. And, and one of the areas I think you’re very I think comfortable playing a role as in the marketplace of ideas. You have increased and growing LinkedIn presence where you frequently surmise, I expect to see stick insects appearing there in the near future. And the analogy there, you draw connections from your personal life here to what you’re reading to what’s in the, in the markets. What themes maybe have resonated or are on your mind there in terms of maybe problems that we as an industry need to think about? And I think maybe whether this be something of a the active-passive debate that rages, or whether it’s to what, what we look for in an outsourced partner or provider. Anything you’ve written about recently that has really lit your followers on fire that you think is an important theme?
Richard Tomlinson: I think the active-passive one gets people going. I think always, because I’ve got an open-minded view. You get some people who say the only way to invest is passive. Some people say the only way to act— invest is active. My view, neither’s right. Where I would pick holes from an intellectual point of view— I’ve been quite blunt about this— is where people are packaging stuff up that is clearly an active strategy as passive, and then people aren’t doing full diligence on it. So they’re saying it’s, it’s passive fund, we’ll just put some money into it. Oh, this is the thing I want exposure to. And if they haven’t got the really detailed understanding of what sits under the bonnet, you end up saying, well, but that’s not really a passive strategy. Someone’s made a huge series of active decisions. And in 5 years’ time, you could have two things that at the very high level of a passive investment doing the same thing of supposedly vastly different outcomes. And the example I give people is to say, well, value investing in equities, it’s value, isn’t it? It’s easy, it’s just value. And then you say to people who go and design me a value factor and define it in sort of some kind of systematic quantitative way, some people will look at price to book, some people look at price to sales, some people look at PE, some people look at dividend yield. Well, which one? Depending on which one you look at, you could have vastly different outcomes. Do you start capping which industries you take exposure to. So what I’m getting at is even though something is supposedly passive, it’s not really. And I think we’ve kind of gone the whole circle, whereas when I started my career, quantitative active equity investing was have some factor risk, bundle up a couple of factors into a portfolio, either long-short or long-only, and sell that as an active fund. That now gets sold as passive, but it’s like, well, it’s not really. Now it’s just should be sold as low-cost active management. In my mind. And sometimes people call it dynamic beta, I know. But so that to me is something that certainly there’s a lot of discourse, and I think there needs to be much more intellectual honesty around it about what it really is. And I would call the same thing out on sustainability, actually, much more intellectual honesty on that. And on the outsource point, yeah, people get vexed about that. And actually, the other one people seem to— that’s clearly very topical is the investing in the UK and how that aligns with fiduciary responsibility, government intervention, and all of that. So yeah, that’s one that gets people going.
Aoifinn Devitt: Indeed. Well, I think, you know, we are to an extent building this bridge as we cross over it in the sense that it is a very much a live ongoing issue with the government and their policies changing. But I think keeping pace with that, it is never dull. I’d love to move to some personal reflections now. So I think you’ve touched on, you know, career in finance, which has had its ups and downs as many of our careers have had. Would you say there are any particular highs and lows there? And with respect to the lows, any lessons learned?
Richard Tomlinson: I often say in these conversations, I’ve got plenty of scar tissue. And I think there is, as an investor, sort of, how do I put this, that a CIO role is one of those roles of an asset owner where your age is your tailwind in some ways. Just there are so many mistakes that you can make. The more mistakes you’ve made in the past, the better you can do your job going forward. And I think some of the things I’ve talked about, I frequently say this, that one is, certainly I think in 2008, 2009, I didn’t understand the importance of systemic risk well enough. I didn’t understand that when systems threatened, societies are threatened. People can rewrite the rules of the game. You could almost say that this might be taking place in the Middle East now. These— we’re dealing with systemic level risks and the rules of the game are getting rewritten consistently. Things that you thought couldn’t happen simply are happening. And as an example, I listened to a podcast 2 days ago with someone who was clearly expert on Iran, clearly expert, and was saying— the podcast reported 5 days prior and was saying, no, no, no, no, no, the Strait of Hormuz is not closed. The Iranians are not trying to close the Strait of Hormuz. It is a misunderstanding. It’s all about insurance. And this thing was released 5 days after it was recorded. And I’ve just been going, well, that’s not quite what the news is saying. So I think there’s this idea of once the system is challenged, people can do things that they never thought possible. Rules of the game can be written and be very careful. And, you know, certainly happened in ’08 because I would argue the financial system was bust. Rules of the game got rewritten. You got this huge risk rally. I don’t— I’ve got no crystal ball what happens going forward. That’s certainly one of them. I’d say certain times in the past I’ve dramatically overestimated how clever I how clever I think I am, like the arrogance of youth. You think you know everything, and in reality, I look back and think I knew nothing. But maybe that’s sometimes great things get created by young people saying, I can do this, I see no barriers. So there’s certainly elements of humility. Yeah, so the big one for me is keep it simple, stupid, K-I-double-S. And if something can go wrong, it probably will go wrong. And think about the different scenarios. So it’s things around those things are my big learnings as an investor.
Aoifinn Devitt: One of the things I also like to ask about is mentorship, because clearly we function in teams. You’ve mentioned Charlie Munger. I think you’re an avid reader. We listen to a lot of the luminaries, but equally we find heroes amongst us. Have there been any particular mentors or influential people in your career that you can mention? And this does not have to be an exhaustive list.
Richard Tomlinson: I’ve had many mentors over the years, people who’ve had a significant impact on my outlook. And I’ll start with when I was about 16 or 17, I worked in a restaurant. I was a pot washer in a local restaurant, and the head chef was probably, I don’t know, probably about the similar age to what I am now, maybe. And Yeah, when you’re that sort of age, you’re mid-late teens. He was very influential and just helped me understand a lot about the world. And as I was scrubbing pots after he put things on them and you know that. So that was certainly one person that helped me along my way. And then through my career, multiple people have taken an interest in me from— I talked about G&I Fund Management at the start of this conversation. The CEO at the time essentially backed me and promoted me to move into the parent company and mentored me into my first senior leadership role, essentially, which was 2005 or something. And a big chunk of that was we were in a meeting and he said, we’re going to a pitch meeting, and he said, are we prepared? I said, well, prepared everything I know about, but there’s all the stuff I don’t know about that I haven’t prepared. And apparently that resonated with him and he felt that that was the sign of someone who could lead in the future. So he certainly mentored me early on and promoted me to my first leadership role. And someone who’s been quite influential, who’s been very influential on me, another boss of mine who, you know, you also know Aifinn very well, Joe Murray. I’ll happily name-check him, but Yawen was my boss for a period back many years ago at AllMutual and certainly taught me calmness and how to think about stuff and structured thinking and lots of other things. And he’d probably, he’d probably be, what’s the word, deeply embarrassed that I mention this now. You know, he’s a very humble individual, but certainly he was influential on me. And actually a lot of the senior leaders, the founders and leaders at Allborn, many of those people, I consider them high-integrity individuals who are super smart and have helped me on the way and showed me how to I learned from them how to think about institutional investing, the complexities of it, acting with integrity, and doing the right thing even when that’s difficult in the short term.
Aoifinn Devitt: Well, delighted to hear Johan called out. I agree with you, it’s an extraordinary experience to be led by Johan and truly makes you appreciate all that is good in leadership, I think, working under his tutelage. So thank you for supporting that. My last question is around any piece of advice, whether it’s a creed or motto that you live by and you would advise us to bear in mind, or advice you might give to that young 16-year-old pot washer. Anything you know now you wish you had known then?
Richard Tomlinson: Yeah, well, I think what the things I’d normally make is trust your instincts and act in a high-integrity way, because if you sacrifice your integrity early on, it does come back to bite. It can come back bite you in the future. Treat people correctly, right? You know, look after people because you never know who’s going to be your boss or who has influence on you in the future. And that’s a slightly cynical way, but also do the right thing for the people. And I think thirdly, the one that I think is important, both from a markets or investing and a career point of view, is try and have the wind at your back. Don’t push water uphill, whichever cliché you want to use. And by that, what I mean is you think about the structural drivers. So in your career, think about where the growth areas are and try and be aligned with them, because it’s much better to be an average performer in a growing segment than a top performer in something that’s in structural decline. An example from my career I give is some of my friends, my wife to a degree, journalism. It was just so difficult to make a living as a traditional print journalist because it was always in decline. And that has changed so much. And that was a very difficult career path. Whereas in investing, you know, in my career, I’ve tried to find the growth area, and obviously of late that’s global asset owners and similar. And I think from an investment portfolio point of view, it’s the same. If you can get that 5, 10-year view of that big picture framing right, you can make— you don’t always have to be perfect in your implementation if you’re pointing in the direction of the big structural drivers. So that, those to me are the 3 big learnings I would point to.
Aoifinn Devitt: Well, so yeah, being in the right place at the right time. And I think if we think about the time we’re in here, This is a tremendous time of change for the underlying beneficiaries, for the administering authorities, for asset owners in the UK. As I mentioned, we are— it is a dynamic time, it is uncharted waters, and it is a vulnerable time. And I want to thank you because as a leader, I think you have come to this time with a certain amount of vulnerability and transparency that we see through the LinkedIn posts, through the desire that the arm reached out for dialogue, for debate, to have your own ideas challenged. And I think that that kind of leadership will be so valued in the years ahead. So thank you for coming here and sharing your insights with us.
Richard Tomlinson: Thank you so much for having me on the show, Aoife. Much appreciated.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces podcast. If you liked what you heard and would like to tune in to hear more inspiring investors on their personal journeys, please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice. And all views are personal and should not be attributed to the organizations and affiliations of the host or any guest.
Richard Tomlinson: A CIO role is one of those roles of an asset owner where your age is your tailwind in some ways. There are so many mistakes that you can make. The more mistakes you’ve made in the past, the better you can do your job going forward. So the big one for me is keep it simple, stupid, KISS. And if something can go wrong, it probably will go wrong. And think about the different scenarios. So it’s things around those things that are my big learnings as an investor.
Aoifinn Devitt: I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people and their stories. This series is supported by BenefitStreet Partners. BenefitStreet Partners is a leading global alternative credit asset manager offering clients investment solutions across a broad range of complementary credit strategies. Including direct lending, special situations, structured credit, high yield bonds, leveraged loans, and commercial real estate debt and equity. This episode is also supported by PIMCO, a global leader in active fixed income with deep expertise across public and private markets. PIMCO invests their clients’ capital in income and credit opportunities that span the liquidity spectrum, leveraging their decades of expertise navigating complex debt markets. I’m joined today by Richard Tomlinson, who’s Chief Investment Officer at Local Pensions Partnership Investments. He was previously Head of Portfolio Advisory and a partner at Allborn, where he spent over 6 years, and prior to that was Head of Multi-Strategy and Absolute Return at Old Mutual Asset Managers. Welcome, Richard. Thanks for joining me today.
Richard Tomlinson: Thank you, Aoife, and thanks for having me on the show.
Aoifinn Devitt: Well, we’ve known each other certainly since your time at Local Pensions Partnership Investments, but I’d love if you could just take us back into your background a little bit to talk about what brought you to finance, but also the experiences you had within different kinds of firms that maybe informed your approach today?
Richard Tomlinson: Yeah, of course. So I probably start with in university. So I was in university in the mid-late ’90s at Cambridge, studied engineering. And for people who are around at that era, that period was fascinating. Not that dissimilar to now where there was a period of significant technological change and optimism and everyone was going to be an internet entrepreneur and people were making lots of paper fortunes. And interestingly, one of the parallels I can reflect on then, there was At the time, people were worrying about the sort of major management consultancy firms, they just couldn’t hire people because they kept losing them to startups. No one wanted to work for McKinsey because they wanted to work for a later startup. It does feel a little bit similar to what we’re seeing now, but who knows? History doesn’t repeat itself, but it does often rhyme. But as part of that, I didn’t, if I’m honest, I didn’t really get the whole milk round thing. I was probably a bit young and immature, and I ended up starting my own business with a business partner. And we did that during university, and I think it was the first year. That Cambridge University Entrepreneurs was run. We were runners-up. And off the back of that, we ended up talking to the NEC in Birmingham, and we turned up in our trainers and our university minibus and tried to tell them that they should buy a large structure off us. And essentially, they laughed at us. Your business is silly, guys. You’ve gotten little. You don’t really know what you’re doing. We’re not going to give you £100 million to build a new structure. But I like this chitspa and the confidence to turn up here, as I say, in your trainers and university minibus and tell me you’re going to change the world. Can I hire you? So I ended up working my first job at the NEC Group in Birmingham. But actually it does tie back to what I do today because part of that job was looking at large-scale development projects. I was building financial models for essentially building new event centers around the world and how that can spur economic development. So it’s quite similar to some of the things we look at today, but from the other lens. 9/11 happened and the world changed a bit and I ended up working in finance and I worked for a little company called GNI Fund Management where I needed to basically earn a different kind of living. And that was an early invest management role, and that then led from one thing to the other. So that then led into Old Mutual, which is the parent company, and that developed into running a multi-manager hedge fund portfolio till 2007, 2008. And then again, the world changed during the GFC, and I ended up leaving at that point and spent a few years running my own money, trading my own money, and being an independent consultant. And then at some point, round about 2010, I realized I needed to get another job. Maybe we’ll come back to some of the learnings I picked up during that period. I worked for Auburn Partners for a period, which was hugely influential from my perspective. I got to work with colleagues, worked for people who I’d say were high integrity, and showed me a lot about how to work, to think like an institutional investor. Because I got to work with some of the smartest minds from the asset owner community and work with them on their portfolios. And then about 2016, 2017, I started talking to what is now the CEO of LPP, LPPI, Chris Rule. And had a conversation and eventually ended up joining LPP to work on local government pensions. And that’s where I, I am today.
Aoifinn Devitt: Fantastic. Well, I certainly will come back to those learnings during that period because I think anyone who’s had a career in finance will have had times of plenty, times of challenge. But I’m particularly interested in the entrepreneurship point because you now as an allocator are on the receiving end of many pitches from firms, large and small, new and old. And I suppose, what did that teach you about the reality of being in a startup? How does it inform how you approach maybe a larger company, but which was not too long ago a startup itself?
Richard Tomlinson: Yeah, I think if I’m honest, I’ve always grown up with an entrepreneurial environment. My father always ran his own company, small business engineering. So I was always used to the idea of doing everything yourself and having to take that total responsibility and starting a business and running a business. It’s really hard. If you don’t make it work, you don’t get paid. So I think it was that idea of having to be a jack of all trades, which is interesting because a lot of traditional career paths, you start off as a specialist and it’s only when you get really senior do you start having to think cross-functionally and you have to learn things. Whereas part of the skill of running a small business is you have to work out what— how to get some accounts or marketing or PR. And I think from running my own businesses in the past, I got used to thinking across the whole gamut of things at a much younger age than maybe I would have done if I’d gone into a traditional corporate role. And then when you come back into those senior leadership roles, you’ve kind of already got many of the skills that are built up for that cross-functional leadership piece. So yeah, I think it’s really helped from that perspective and the ownership and the get up and go. You can’t, can’t rely on others.
Aoifinn Devitt: For sure. And then getting to your investment beliefs today. So I suppose some of us kind of carry around a DNA when it comes to how we approach investing. Obviously there’s adaptation built into the circumstance, but what would you say are some of your core beliefs that you’ve carried through your career?
Richard Tomlinson: Yeah, there’s a few key things I’d highlight. One is don’t try and be too clever. Yeah, when you’re young, you think you know it all, and you build these models and tools, and half the time, you realize you’ve invented a perpetual motion machine or whatever. You wildly overestimate your intelligence. So you think you can— you’re smart in the world, and quite often, you find with experience, the market humbles you, let’s say, and you realize that the world isn’t quite so easy to make money. So to be humble, and I think that’s certainly come through. I think I’d raise certainly investment beliefs now. You’ve got to think longer term, that if you are be very clear on what edge you have, and you’ve got to refine that. And I think where I look at investing is your ability to make calls. You might be— if you’re really good, you might be right 55% of the time, maybe 60% if you’re really, really good. But you stay in business by, again, being humble at the market, telling you’re wrong, being position sizing, and managing that exposure. So again, don’t try and be too clever. Don’t bet the farm. Stay diversified. Look long term. And think very carefully about what your mandate is and how you align your activity and your beliefs with that mandate and what levers you can pull. It’s really easy to think that you’ve got more degrees of freedom are better, but that can lead you into so many more mistakes as well. It’s almost like stick to one or two things that you can do and be very clear on them and don’t try and get too clever because that’s where you can end up in a really challenging situation. And as an institutional investor, I think it’s looking over the horizon and as I say, looking through the noise. I know that’s a cliché, but it’s true as well. Just look through the noise and try and think How might this play out if I’m stood 5 years forward looking back? And keep challenging yourself. And the final point I’d make is the world is dynamic. As a simple throwaway comment, I’ve been working on this analogy for a little while, for a few days. My daughter’s school said, do you want some stick insects? And basically they’ve bred and we’ve got loads of them. So my daughter said, can we bring some stick insects home? I thought, that’s easy. I used to have stick insects, probably late ’80s, in my room when I was a kid. You just throw them in a box and you throw some put leaves in and leave them there. Little did I realize the guidance now for keeping stick insects is suddenly wildly more than that. You’ve got to get different kinds of leaves, they’ve got to come from somewhere away from a road, and you’ve got to change them every 3 days and spritz them. And I’d say that’s like investment management. Yeah, 15, 20 years ago you could probably make money by, by stuff, and it went up in value or whatever it would be. Now it just keeps getting harder and harder, and that is how I would describe investing. You’ve got to work really hard to maintain edge. And just keep going and keep improving. It’s just not like it was 20 years ago.
Aoifinn Devitt: No, no, no. As far away fields indeed are greener. And moving that then so into this sort of set of whether it’s constraints or opportunities that you face at LPPI now, clearly you’ve just undergone and are undergoing tremendous amount of change as you grow your client base from 3 to 9. And just the organization is going through changes on many fronts. What would you say is at the forefront of your mind if we can maybe think about short-term and long-term here? Long-term vision, short-term priorities, in whatever order you prefer.
Richard Tomlinson: Well, I’ll start with the short term. Short term is do what we said we would do. I think it’s Charlie Munger would say one of his core principles was that to succeed in jobs and life, it’s if you simply just do what you said you would do, that’s a pretty good place and you’re likely to do all right. I think in one of his almanac he said that. I couldn’t agree more. And that’s very much where we’re coming from in the near term for the Fit for the Future changes that we committed to do certain things to our existing and our new partner funds. And holding ourselves to account and executing, getting that done. And we’re well on the way on that journey. And that means, as I say, implementing or bringing on the new 6 whilst maintaining the levels of service to the current 3 and putting in place a future platform or a future plan that enables us to implement the portfolios for all of those partner funds in a high-quality way, in line with what we said we would do, in line with the bill, and enables them to meet their goals. So we’re there to guide them, support them, to enable the partner funds to— I would always frame the LGPS mission as pay all pensions as they fall due, affordably and efficiently. So we’re there to enable them to do that. In the long run, it’s essentially an extension of that long-term goal. So if I think about it from a partner fund’s point of view, it’s to enable them to meet their liabilities, to pay pensions as they fall due, provide a governance structure, provide guidance, provide support, advice, and enable them, as I say, to meet their goals in a way that they feel is well governed. And aligned with what they’ve asked us to do, and we deliver on that. So that’s the long term. If I think more internally, what do I want to do within LPPI? What do I see as my role? It’s obviously deliver those corporate goals, deliver investment performance, do it in a way that’s aligned. But also I think there’s more. There’s build a high quality organization that has longevity, that has a culture that perpetuates way beyond me. And fundamentally, and it’s simple stuff, is to grow more leaders, is to build a team that the people that you build that succession plan and your role is to grow more leaders so that it becomes resilient or it’s resilient to whether I’m around or not. And I’m very comfortable that we have built a really capable team. But it’s not just myself and the senior leaders now. If you go one level down to the people that report to me, you have very, very serious, competent people who can get stuff done. And even one layer down from them and even one layer down from them, we’ve built that bench and we’ve got leader upon leader coming through the ranks now to be able to build that long-term resilience to stakeholders.
Aoifinn Devitt: We’re going to hear from one of the sponsors of this series, Benefit Street Partners, BSP. I sat down with Rich Byrne, President and CEO of BSP, and asked him about the growing awareness of the private credit asset class from a time when people barely wanted to speak about it until today.
Speaker C: Today, it’s the only thing people want to talk about, which I think is funny because I’ve gone full circle. Full circle. So, maybe that’s the time you should think about skating to where the puck’s going. I think private credit is still an attractive relative value, certainly is relative to the liquid markets. But for example, one thing that we’ve been focusing on is maybe the better relative value today is real estate credit, real estate lending.
Richard Tomlinson: Why?
Speaker C: Because the real estate market has gone through a lot of turmoil. The office sector has all but imploded. You know, in many parts of the country, interest rates having gone up has, you know, impacted negatively real estate values. There’s a lot of carnage. And as a result, you know, we love dislocation because often it creates the best opportunity.
Aoifinn Devitt: And now back to the show. I know as part of the Fit for the Future and probably even predating that, you have looked at the Canadian model as well as looking around the world at other models. Of managing pensions on this scale. What would you say you have taken note of in terms of would love to have, or must mistake made, or avoid that, or maybe that’s not quite for us?
Richard Tomlinson: Yeah, I think it’s— that’s a really interesting question, Nathan. I think, and this is very actively debated in policy circles in the UK, but certainly I think you could look at the Canadian model and say the LGPS is being pushed to go more Canadian and look like the Canadian model. Then others would say Ah, but there are some challenges with the Canadian model, which I fully agree with. The way I’d think about it is to say there’s some parts that you want to learn from, and then you want to implement them in a way that is sympathetic or aligned with the LGPS. It takes into account the specifics of the LGPS and what the goals are and the constraints of that scheme and the UK. For example, what I mean by that is I think there are some things that the Canadian model does well, which is delegation, for example, whilst maintaining accountability to the ultimate asset owner, which would be the pension funds themselves. I think that works well. I think there’s a degree of internalization that the Canadian model does well, which I think we can do well. However, I would then start breaking that down by asset class. For example, I think internalizing some parts of infrastructure, say core infrastructure, where I think it’s originate, buy well, and be a good steward of the asset, I can see how that’s credible for us to do. The bits where I would probably shy away from is disintermediating private equity managers in that what you might call the classic— and I’m doing the inverted fingers thing— investing in change type stuff, which I don’t think fits well in an LGPS model. And they say we can explore that in a moment if you think that’s of interest. I think so. That would be where I differ. And other things where you see some of the very large asset owners globally, they’re building offices overseas. I don’t ever see us doing that. I think we would always look to partner with local expertise. And I think so to me it’s a matter of cherry-picking the bits that work in our context and looking internationally for best practice, implementing it efficiently, but then also not being a slave to following a model that the bits that don’t work in our context.
Aoifinn Devitt: I think that’s an intriguing path to go down, if you don’t mind us going down that path for a second, in terms of the— you mentioned constraints and working within your constraints. And sometimes that actually, we all know, analysis paralysis as well as choice paralysis can actually be, be very challenging. So some constraints are very good. So maybe could you just elaborate in terms of things that you just don’t think are a fit, given there has been that move to internal investment management, desire to obviously scale, enjoy lower fees. Where do you think maybe the limits of just the resources, the capacity that maybe just are focusing on your comparative advantages may bring?
Richard Tomlinson: Yeah, absolutely. So for example, I think I touched on the examples of direct infrastructure. I can, that makes sense to me because the part of the advantage comes from scale. So why would you hand that over to someone else in that asset bucket? Whereas I quite often describe myself as if I talk about the ultimate strategic asset class, I’d probably say it’s listed equities, the ultimate Tactically, asset class is credit. Now, you could say, why don’t you run credit in-house? I’d say, well, I can’t see how we could get edge. How can we compete? And the reason I say that is, for example, in big chunks of the credit universe, the edge comes from having a global platform and being able to really modulate where you invest through that global opportunity set. And that means a global platform, a global reach, a huge scale— or sorry, very specialist— and systems and data and people in each different area. There’s no way we can compete with some of the larger managers in that. And I think you would just end up doing a subscale job of that suboptimal role. So for me, I think it’s, you’ve got to be credible. So you’re only going to want to do things where you can look yourself in the mirror and say, do I, are we credible? Can we deliver value for my stakeholders in doing that? Not because it’s something interesting or ego-driven. So that’s where I think credit. Another example I tend to give would be derivatives overlays, FX overlays. I think the control environment you need is significant and the You sometimes have to pay people very well for those roles. And I don’t think that really fits. It’s that you can pay someone externally who’s incredibly specialist at doing that one thing, let’s say FX overlay, you can pay them a relatively small fee. The probability of them making a mistake on it is very low relative to what we would do. And if you do make a mistake, the cost of it can be huge because the notional’s massive. That’s not a risk-reward I like. I’d rather pay someone else to do that specialist. So that, it comes into that, you know, some triage of opportunity, risk, credibility, and being candid, your ability to pay people market-based compensation. The investing in change ones are difficult because sometimes some of the pay packets can be very large, people need very incentivized packages. It doesn’t necessarily fit in our world. And then not least, with some of the, some of the PE strategies, there can sometimes be reputational risk associated as well, which doesn’t necessarily fit very well with our framing, let’s say. So it’s very holistic how we think about it.
Aoifinn Devitt: Really interesting. And I’d just love to go down then two paths, which I think probably are very unique to the LGPS, particularly when it comes to the divergent and diverse demands for sustainable investment approaches, depending in your case by 9 different policies potentially, and equally the strong drive around local investing. So how do you see your pool’s role allowing your individual clients to express their preferences with those two in mind?
Richard Tomlinson: It’s really interesting because on the one hand, the view of pooling is to, you know, come together collegiately to create scale and scale economies. And local investing in some ways provides a challenge to that, as does RI sustainability, ESG beliefs. However, I, I tend to view it as a, you know, a Venn diagram. There’s significant commonality that you can get, and you can drive those scale economies, but there does need to be compromise at some point. There has to be some compromise and it’s finding that balance and it’s delicate. I think one of the things we start off with is sustainability, RI, ESG conversation. If I’m honest, I think there’s been a lot of muddled discourse on this where people are saying you can have it all and I don’t have to worry about what takes primacy, financial return or ESG. It’s just all, it doesn’t make sense when it comes to the nitty-gritty of the underwriting that is often compromise needed. So I would say, always say to people, think very carefully about where you sit as an organization. And in all likelihood, put a spectrum of capital in front of them and say, are you a financial investor, pure financial on the far left, right the way through to philanthropic? Where do you sit? And they’ll probably point, if I’m honest, most of the LGPS really should be pointing at the ESG integrated bucket. That’s pretty much what the regs say in terms of framing. And that’s what I would say as you do in the core portfolio. The core portfolio being the bit of the portfolio that is there to pay pensions as they fall due, efficiently and affordably in the long run. And that’s going to be the bulk of your capital, 90, 95, something like that. The other bit of the portfolio, the satellite bit, where you can be more precise and say we want to take other things into account, which then either double, triple bottom line, or certainly have equal primacy or even takes primacy over the financial piece. That could be local, that could be some impact lens, fine. Then you redesign that part of the mandate, being very precise of what you say good looks like. So what is this thing actually trying to do? And then I think you can have a legitimate, honest underwriting process that even if it doesn’t work out in 5 years’ time, you can pull up the memo and everyone say, yeah, that’s what we said. We said it was going to have impact. We’re going to make that in the context of the financial return piece. The challenge is then doing that scale when you have multiple different legs of different partner funds, and that’s what we’re working through. I think there are ways to do it. But it’s going to need some thought of how you create structures where you can create local portfolios for each individual partner firm that align with their local investing goals that aren’t totally inefficient. And, but I think there are ways we’re working on and, yeah, using a common platform and there’s various ways of doing that, but it is challenging and it will probably want— it’s going to need compromise from at some level.
Aoifinn Devitt: Well, uh, two quite divergent areas there. And, and one of the areas I think you’re very I think comfortable playing a role as in the marketplace of ideas. You have increased and growing LinkedIn presence where you frequently surmise, I expect to see stick insects appearing there in the near future. And the analogy there, you draw connections from your personal life here to what you’re reading to what’s in the, in the markets. What themes maybe have resonated or are on your mind there in terms of maybe problems that we as an industry need to think about? And I think maybe whether this be something of a the active-passive debate that rages, or whether it’s to what, what we look for in an outsourced partner or provider. Anything you’ve written about recently that has really lit your followers on fire that you think is an important theme?
Richard Tomlinson: I think the active-passive one gets people going. I think always, because I’ve got an open-minded view. You get some people who say the only way to invest is passive. Some people say the only way to act— invest is active. My view, neither’s right. Where I would pick holes from an intellectual point of view— I’ve been quite blunt about this— is where people are packaging stuff up that is clearly an active strategy as passive, and then people aren’t doing full diligence on it. So they’re saying it’s, it’s passive fund, we’ll just put some money into it. Oh, this is the thing I want exposure to. And if they haven’t got the really detailed understanding of what sits under the bonnet, you end up saying, well, but that’s not really a passive strategy. Someone’s made a huge series of active decisions. And in 5 years’ time, you could have two things that at the very high level of a passive investment doing the same thing of supposedly vastly different outcomes. And the example I give people is to say, well, value investing in equities, it’s value, isn’t it? It’s easy, it’s just value. And then you say to people who go and design me a value factor and define it in sort of some kind of systematic quantitative way, some people will look at price to book, some people look at price to sales, some people look at PE, some people look at dividend yield. Well, which one? Depending on which one you look at, you could have vastly different outcomes. Do you start capping which industries you take exposure to. So what I’m getting at is even though something is supposedly passive, it’s not really. And I think we’ve kind of gone the whole circle, whereas when I started my career, quantitative active equity investing was have some factor risk, bundle up a couple of factors into a portfolio, either long-short or long-only, and sell that as an active fund. That now gets sold as passive, but it’s like, well, it’s not really. Now it’s just should be sold as low-cost active management. In my mind. And sometimes people call it dynamic beta, I know. But so that to me is something that certainly there’s a lot of discourse, and I think there needs to be much more intellectual honesty around it about what it really is. And I would call the same thing out on sustainability, actually, much more intellectual honesty on that. And on the outsource point, yeah, people get vexed about that. And actually, the other one people seem to— that’s clearly very topical is the investing in the UK and how that aligns with fiduciary responsibility, government intervention, and all of that. So yeah, that’s one that gets people going.
Aoifinn Devitt: Indeed. Well, I think, you know, we are to an extent building this bridge as we cross over it in the sense that it is a very much a live ongoing issue with the government and their policies changing. But I think keeping pace with that, it is never dull. I’d love to move to some personal reflections now. So I think you’ve touched on, you know, career in finance, which has had its ups and downs as many of our careers have had. Would you say there are any particular highs and lows there? And with respect to the lows, any lessons learned?
Richard Tomlinson: I often say in these conversations, I’ve got plenty of scar tissue. And I think there is, as an investor, sort of, how do I put this, that a CIO role is one of those roles of an asset owner where your age is your tailwind in some ways. Just there are so many mistakes that you can make. The more mistakes you’ve made in the past, the better you can do your job going forward. And I think some of the things I’ve talked about, I frequently say this, that one is, certainly I think in 2008, 2009, I didn’t understand the importance of systemic risk well enough. I didn’t understand that when systems threatened, societies are threatened. People can rewrite the rules of the game. You could almost say that this might be taking place in the Middle East now. These— we’re dealing with systemic level risks and the rules of the game are getting rewritten consistently. Things that you thought couldn’t happen simply are happening. And as an example, I listened to a podcast 2 days ago with someone who was clearly expert on Iran, clearly expert, and was saying— the podcast reported 5 days prior and was saying, no, no, no, no, no, the Strait of Hormuz is not closed. The Iranians are not trying to close the Strait of Hormuz. It is a misunderstanding. It’s all about insurance. And this thing was released 5 days after it was recorded. And I’ve just been going, well, that’s not quite what the news is saying. So I think there’s this idea of once the system is challenged, people can do things that they never thought possible. Rules of the game can be written and be very careful. And, you know, certainly happened in ’08 because I would argue the financial system was bust. Rules of the game got rewritten. You got this huge risk rally. I don’t— I’ve got no crystal ball what happens going forward. That’s certainly one of them. I’d say certain times in the past I’ve dramatically overestimated how clever I how clever I think I am, like the arrogance of youth. You think you know everything, and in reality, I look back and think I knew nothing. But maybe that’s sometimes great things get created by young people saying, I can do this, I see no barriers. So there’s certainly elements of humility. Yeah, so the big one for me is keep it simple, stupid, K-I-double-S. And if something can go wrong, it probably will go wrong. And think about the different scenarios. So it’s things around those things are my big learnings as an investor.
Aoifinn Devitt: One of the things I also like to ask about is mentorship, because clearly we function in teams. You’ve mentioned Charlie Munger. I think you’re an avid reader. We listen to a lot of the luminaries, but equally we find heroes amongst us. Have there been any particular mentors or influential people in your career that you can mention? And this does not have to be an exhaustive list.
Richard Tomlinson: I’ve had many mentors over the years, people who’ve had a significant impact on my outlook. And I’ll start with when I was about 16 or 17, I worked in a restaurant. I was a pot washer in a local restaurant, and the head chef was probably, I don’t know, probably about the similar age to what I am now, maybe. And Yeah, when you’re that sort of age, you’re mid-late teens. He was very influential and just helped me understand a lot about the world. And as I was scrubbing pots after he put things on them and you know that. So that was certainly one person that helped me along my way. And then through my career, multiple people have taken an interest in me from— I talked about G&I Fund Management at the start of this conversation. The CEO at the time essentially backed me and promoted me to move into the parent company and mentored me into my first senior leadership role, essentially, which was 2005 or something. And a big chunk of that was we were in a meeting and he said, we’re going to a pitch meeting, and he said, are we prepared? I said, well, prepared everything I know about, but there’s all the stuff I don’t know about that I haven’t prepared. And apparently that resonated with him and he felt that that was the sign of someone who could lead in the future. So he certainly mentored me early on and promoted me to my first leadership role. And someone who’s been quite influential, who’s been very influential on me, another boss of mine who, you know, you also know Aifinn very well, Joe Murray. I’ll happily name-check him, but Yawen was my boss for a period back many years ago at AllMutual and certainly taught me calmness and how to think about stuff and structured thinking and lots of other things. And he’d probably, he’d probably be, what’s the word, deeply embarrassed that I mention this now. You know, he’s a very humble individual, but certainly he was influential on me. And actually a lot of the senior leaders, the founders and leaders at Allborn, many of those people, I consider them high-integrity individuals who are super smart and have helped me on the way and showed me how to I learned from them how to think about institutional investing, the complexities of it, acting with integrity, and doing the right thing even when that’s difficult in the short term.
Aoifinn Devitt: Well, delighted to hear Johan called out. I agree with you, it’s an extraordinary experience to be led by Johan and truly makes you appreciate all that is good in leadership, I think, working under his tutelage. So thank you for supporting that. My last question is around any piece of advice, whether it’s a creed or motto that you live by and you would advise us to bear in mind, or advice you might give to that young 16-year-old pot washer. Anything you know now you wish you had known then?
Richard Tomlinson: Yeah, well, I think what the things I’d normally make is trust your instincts and act in a high-integrity way, because if you sacrifice your integrity early on, it does come back to bite. It can come back bite you in the future. Treat people correctly, right? You know, look after people because you never know who’s going to be your boss or who has influence on you in the future. And that’s a slightly cynical way, but also do the right thing for the people. And I think thirdly, the one that I think is important, both from a markets or investing and a career point of view, is try and have the wind at your back. Don’t push water uphill, whichever cliché you want to use. And by that, what I mean is you think about the structural drivers. So in your career, think about where the growth areas are and try and be aligned with them, because it’s much better to be an average performer in a growing segment than a top performer in something that’s in structural decline. An example from my career I give is some of my friends, my wife to a degree, journalism. It was just so difficult to make a living as a traditional print journalist because it was always in decline. And that has changed so much. And that was a very difficult career path. Whereas in investing, you know, in my career, I’ve tried to find the growth area, and obviously of late that’s global asset owners and similar. And I think from an investment portfolio point of view, it’s the same. If you can get that 5, 10-year view of that big picture framing right, you can make— you don’t always have to be perfect in your implementation if you’re pointing in the direction of the big structural drivers. So that, those to me are the 3 big learnings I would point to.
Aoifinn Devitt: Well, so yeah, being in the right place at the right time. And I think if we think about the time we’re in here, This is a tremendous time of change for the underlying beneficiaries, for the administering authorities, for asset owners in the UK. As I mentioned, we are— it is a dynamic time, it is uncharted waters, and it is a vulnerable time. And I want to thank you because as a leader, I think you have come to this time with a certain amount of vulnerability and transparency that we see through the LinkedIn posts, through the desire that the arm reached out for dialogue, for debate, to have your own ideas challenged. And I think that that kind of leadership will be so valued in the years ahead. So thank you for coming here and sharing your insights with us.
Richard Tomlinson: Thank you so much for having me on the show, Aoife. Much appreciated.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces podcast. If you liked what you heard and would like to tune in to hear more inspiring investors on their personal journeys, please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice. And all views are personal and should not be attributed to the organizations and affiliations of the host or any guest.
