LSE 00:01
You are listening to Investing Matters brought to you in association with London South East. This is the show that provides informative educational and entertaining content from the world of investing. We do not give advice, so please do your own research.
Peter Higgins 00:18
Hello, and welcome to this very special anniversary episode of the Investing Matters podcast. During this episode Dave Mutton, the Chief Operating Officer of London South East and I will share with you the history of the podcast, principles, background and discuss the 10 episodes so far, our top five favourite episodes and what our global Investing Matters podcast listeners can look forward to in 2023.
Dave Mutton 00:45
That's great. It's really great to be here. And I can't believe it's been over a year since we actually first talked about this, and then decided to do it and what a fantastic year it's been. We've had some amazing guests on the podcast, with really, really interesting interviews, you know, we are so pleased that London South East, what you've done to really tease out from these guests are what they really think about investing and what Investing matters means to them. So it's been fantastic and we're looking forward to even more episodes to come.
Peter Higgins 01:17
Thank you very much. I'm hoping that in 2023 we'll take it to another level. My hope is that we're going to have some more guests from the likes of USA, Australia, Canada and obviously some of our homegrown talent in the UK as well.
Dave Mutton 01:31
Fantastic. Well funnily enough I've got here, the top 10 episodes so far from this first year. So our best episode is episode 12 Mark Dampier, who is former research director at Hargreaves Lansdown and then our fairly recent episode Gervais Williams is at number two from Premier Miton then Chris Dillow, economics writer, Reg Hoare who was at MD of MHP Communications.
Number five is John Stepek used to be at Money Week and now at Bloomberg. And then the next number six George O'Connor now at Goodbody Stockbrokers, Alex Schlick from Yellowstone advisory. Janet Mui, Brewin Dolphin, RBC Brewin Dolphin, I should say now, and Edmund Shing, BNP Paribas, and Tim Rogers, former CEO of AB Dynamics.
I mean, that's our top 10 Episode list, what a diverse range of people we had in there. And they've all had some amazing feedback as well. We got great engagement online through our social channels on Twitter, and LinkedIn and Facebook. And yeah, it's been it's been fantastic. Listening to different perspectives on the whole topic of investing.
Peter Higgins 02:46
Thank you. I think the beauty of what we're trying to do here at the Investing Matters podcast is to bring that diversity because there's so many different ways of investing, or trading. And by having individuals that are journalists, economists, fund managers, and other people that have written books about psychology, or are global investors, we enable the audience to learn far more than they would by speaking to one group of individuals all the time. And that's what we've been trying to do to educate all of the listeners to the Investing Matters podcast and the global audience that we're trying to reach.
Dave Mutton 03:21
Absolutely. And that's exactly the brief that I think I gave you over a year ago. Now we want to create that timeless content that is valuable to the listeners, if they listen today, or listen in two years or five years, because it's about how to invest not what to invest in. You're never gonna get a stock tip on this podcast you know, and it's about think about how to invest, why to invest, when to invest and of course when not to invest.
Peter Higgins 03:47
Absolutely agree with you.
Dave Mutton 03:50
Great, well, I think what would be really interesting for our listeners will be to dive into our five favourite episodes. I think you and I talked about this earlier, and we come up with five so we'll we'll kick off with the best episodes.
So today's number one Mark Dampier, a former Research Director, Hargreaves Lansdown, it would be great Pete if you can remind us about your conversation with him, what you talked about, and what you think is the highlight of that episode, and then we'll hear a clip.
Peter Higgins 04:18
Yeah, the thing what I found most fascinating about Mark was his natural awareness of what had been going on regarding Hargreaves Lansdown and the fact that he was willing to share what was going on there. And obviously we spoke about the Woodford debacle which was on everyone's mind, it's the elephant in the room regarding Hargreaves Lansdown, but also, it was very personable and open and candid about the difficulties of being a entities of the size of Hargreaves Lansdown.
So that's what I found fascinating about Mark, and he actually enjoyed it. He ended up saying “I actually enjoyed that interview with you, Pete. Thank very much”. And he got to the point where he's saying, I'm going to make sure I speak to some of my friends and invite them onto the show to be interviewed so that I was really quite relieved, really it went so well.
Dave Mutton 05:10
That's great. I mean, I think for me, from my perspective, for investors to hear somebody with such a history in the investing sector, talking, frankly and openly about investment technique, and what he's done in these different roles was was great. And I exactly, you talked about the Woodford scandal, you know, he pulled no punches, you know, he talked about it very openly and honestly about how it all unfolded. And I think the really important lesson as well is it doesn't matter how good you are doesn't matter how well you've invested in the past, everybody can make mistakes. And, you know, it's, it's a real sobering lesson to think about that. So just be very careful. Do your own research. And you know, it's your money you're playing with, so he could do the right thing.
Peter Higgins 05:53
Absolutely. And then fact is that even the experts, which, you know, you look at Neil Woodford, he was like the number one go to fund manager, absolutely. Not necessary, made a mess of it. But he was learning lessons as he was going along, because moving from the blue chip sort of entities that had always invested in and then moved into loss making companies and startups. And that's where you've got the losing your edge from your expertise. So that was a big lesson learned by Neil Woodford in that account.
Dave Mutton 06:23
Absolutely. I saw a presentation a few years back, where somebody outlined that exactly how the portfolio evolved over the time of Woodford, and how it changed from that very safe, very stable portfolio companies. And they got far more risky over time. And it was almost like, he had to double down on those investments to try and recoup the losses. And it was just making things worse and worse and worse.
Peter Higgins 06:48
So as diluting the quality. So he had some really good quality companies and was forced to sell the quality companies to underline the smaller ones that he had. So as you say, the dilution of the quality got further further down. And that's what happened there. So yeah, some great lessons learned from Mark and he was very candid about it, which I really appreciated.
Dave Mutton 07:05
We had some great feedback on Twitter for this. So… fascinating interview with a man who first may be realised equities aren't the only lunch post GFC. And not sure what that meant, definitely worth a listen.
Peter Higgins 7:19
Great Financial Crash.
Dave Mutton 7:21
Right, right. Got that okay, what a fantastic guest particularly enjoyed the explanation of the Best Buy list concept. I remember we had about that. So a fascinating career and insights. So yeah, the really good feedback on Twitter, and it's great to see our audience engaging with it's actually what's really interesting for me on social media, is what we've seen very clearly is some of the guests on the podcast themselves are now engaging with later episodes of the podcast. And we're building this whole community around the Investing Matters, of like minded individuals who want to share their expertise, share their knowledge, and actually help and grow people's understanding of what it means to do effective investments.
Peter Higgins 08:01
Yeah, I think the individuals that are in the City that are compassionate, and are giving and I keep using this, this line on Twitter, about kindness matters, they actually get that, you know, in order to grow a community, what you have to do is enable them to become better at what they're doing. And everyone's got a goal of reaching financial freedom. So if you can enable that, and it doesn't matter whether it's someone's investing in stocks, funds, or investment companies, you still got them in the community, they're not going into a casino, gambling, and then leaving it, they're actually staying in the community for longer. And everyone gets that. And I think the quality of the guests we've had so far have inspired us to go, well, maybe we should go and see if we can get interviewed on the Investing Matters as long as I have these platform as well.
So that's building community of itself. So they're engaging, they're reaching out, they're retweeting some of the stuff. That's nothing to do with those, like, I've been on the podcast, and I like that new guest, I'm gonna retweet and share it. So it's been fantastic like that.
Dave Mutton 09:00
Right? It's sharing the important lessons, isn't it? Okay, so I think we should listen to a clip from Mark Dampier.
Peter Higgins 09:06
So I want to talk a little bit because obviously, the elephant in the room is towards the end, where the media got ahold of all what was going on with all thingsWoodford that he developed his fund, he went solo, he built it up, the media took it up, and then the media essentially brought it back down to earth again, so share what you can and just let's talk a little bit about the the, the a) the Best Buy list, which is always caught brought a bit of contention. And be a little bit about the Woodford fund if we may?
Mark Dampier 09:41
Yeah. Yeah, I'm a bit limited, I guess. But I suppose I suppose I'd actually start off with saying, just using a phrase. That fund manager actually sent to me during the more you know, he said Mark, you try and do the best for clients, but it just doesn't always work out that way. And effectively, it's that simple in one respect.
I mean, I often feel like saying, yeah, we, you know, we obviously want to do our we want to do our best. But sometimes you read stuff in the media, you think, actually our starting point appears to be, well, actually, we deliberately tried to find the worst fund possible and put clients into it. I mean, there's there's no, there's absolutely absurd to, to even go there.
So, you know, I know Neil Woodford for over 30, well, over 30 years, I first met him, I didn't know, by the way, I didn't know he's not a friend or anything like that. Just a business person that I that I knew in the business, like I know, I've known Nick Train even longer actually, in that way. But I've never met him socially, either. But they were great fund managers. And I have to say, I don't really want to sit here and defend it, Neil completely, because he obviously made a huge cock up. But what I will say is it up to the gating, and he'd made 26 times your money, I think this is all from my memory. So against the market of 12 times, which is a pretty extraordinary game. But he was up, he did get himself into a, into a, obviously into some kind of mess.
But I think the media are finishing this really more on this at the moment. And so if he started it, the media finished it. And one of the things I should have probably learned or known to seem that I've been dealing with media for a long time. Is, is that, that they they have got a very big influence. So I don't think they always realise how bigger influence they they had. But all it's all I'd say is that if you replace Woodford’s name with Lloyds Bank, you would either run on Lloyds Bank, in my view.
So that's, perhaps I'll leave it there. So it's always a humbling, investments are a humbling experience. Maybe that's what I should have started off with, when you first asked me, that's, that's one of the things you learn that, yeah, you want to be right all the time, but you're not going to be and you're always going to learn. And I've said I'll, in another interview with you, I can go through the learning bits as well, that, you know, that we've learned from that. But, you know, it was, it was not a great experience, to say the least, it did bring some tears, and some of those were mine.
Peter Higgins 12:30
No, Mark, I really appreciate you sharing that it's very, very kind of you to go and share anything with me regarding that. So I know it's been very, very difficult for you and, and family as well.
Dave Mutton 12:39
Great. So next on our list of favourite episodes, I put down George O’Connor, who's currently an analyst at Goodbody Stockbrokers and I think it was a fascinating interview that you have with George. I mean, personally, from my perspective, I've worked in tech companies for more than 30 years, right from the very early days of e-commerce. And so I really related to the companies that George was talking about and the challenges. And it's also from a tech point of view, I was one I'm a big fan of science fiction, I think you know that and it's always fascinating to see things from science fiction coming into the real world. And you know, being the classic one everyone talks about is the the Motorola flip phone was inspired by the communicator from Star Trek, but there are so many other bits of technology that are being brought into the real world by tech companies that we read about in science fiction. So it's always fantastic.
Fantastic to see things on the tech side of things. What I really liked about this interview with George was you were talking about the tech lifecycle, and it was really interesting to understand, you know, you'd need to be clear where the company is that you may invest in where it is in that lifecycle, you know, is it in that growth phase? Or, you know, how big is it addressable market? And, you know, what's the level of competition, that they may have before they succeed? So that was great for me, what did you like about that interview?
Peter Higgins 13:58
It was actually quite a radical thing he said to me during the time we were interviewing, and is when he pulled out and he says actually Pete,I actually like, profit warnings. And I was like, what? Like profit warnings? But it made sense.
If you've got a really good company, and it's had a bump in the road, but everything's still in place, then you're going to get the share price declining, but it's a fantastic opportunity for the contrarian to go in and actually buy as he called it a shedload of the stock. You know, so if the share price was at a pound and suddenly because of something that's a momentary thing, momentary problem dropping down to 50 pence, you can buy in twice as much as you wanted before, so to be opportunistic, so I thought that was a really good sort of gem for our investors to and listeners to think about. If the company is still solid still got all the right foundations and there's a profit warning technology or not, could be an opportunity for you to go, go and research that company and investigate it further and buy. That's really good.
Dave Mutton 14:57
I mean, the bottom line there is understanding the fundamentals.
Peter Higgins 15:00
Understanding fundamental and doing lots and lots of research and not being guided by anybody else, but your own independent research of your own.
Dave Mutton 15:08
Great. The feedback we had on this was very good. In fact, this is an example where we had some feedback from Reg Hoare, who was a guest on Episode 16 on the podcast, “A big thank you to George and LSE, for providing educational content to private investors, key learning run your winners, and the tech sector is looking cheap.”
If you take a long term view, obviously, that may not be relevant when you're listening to this podcast. But it is very, very good feedback.
Peter Higgins 15:34
Appreciate your candor mate. I mean, you mentioned your superpower there and with regards to curiosity, so I'm gonna expand on that a little bit, if I may. Which aspects of software and information technology, do you envisage as invesors we need to look forward to the most you know what's going to be the one that's, you know, the internet of 1990-2020, what we're looking at, in your space that investors, we should keep it really big eye out?
George O’Connor 16:03
Okie dokie. So first of all, thank you for talking to the lifecycle model of technology, it's a view, I absolutely support and subscribe to and in that we've seen waves of tech. And you'd say, well, for sort of no growth or a tech analyst, you're going to be looking to track the wave that that is absolutely the case. And I fully support that. One of the reasons why I'm so excited at the moment, is that there's so much happening at the tech infrastructure level. Now, the UK has not been great historically, in terms of tech infrastructure. Typically, tech in UK is really around the sort of the application of technology rather than the creation of it.
However, if we back off onto our lifecycle curve and look at infrastructure, we can see that in terms of cloud infrastructure, we look at it in terms of quantum computing, we look at it in terms of blockchain, we look at it in terms of security and privacy. And we also look at it in terms of 5G in each of these areas, we can see accelerators, and these accelerators will then come to fruition in terms of new use cases, and absolutely new startups and and new companies. And for me, you can criticise me, Peter and say, George, do you know I've heard about all of these before? And I'm gonna say absolutely, you've heard about all of these before, but the whole sort of time is right, we've wasted two well, two and a bit years and in terms of COVID and pandemic and and lockdown. But if we look at the pattern of usage that really accelerated from COVID .
So for example, work from home, so we can do this have this conversation pretty much anywhere. And those forces are now being unleashed. So you had the eminent and thee hugely impressive, Reg Hoare on last week and in the old days, you would have had to go around to Reg’s hallowed offices. And now you can speak to Reg on the end of a connection and he's possibly golfing in Andalusia, or he's sitting in his swim shorts beside his swimming pool. And that is that is just a wonderful world that we are living in.
We can work longer, harder, but be more productive. And do it so much more on on our terms. It's it's a magical world where we are embarking into absolutely your timing today is horrific, and NASDAQ is down 30% year to date, in terms of our own UK market, software and tech services down 29%, FTSE 100 is all over the place. But down 3%, but this is a great time to have to have a reset tech valuations came off the boil last October so we're used to it, we know exactly what we're doing in terms of valuations and stuff that was expensive, is now so much cheaper. And we also know why is it cheaper? So huge opportunities abound.
Peter Higgins 19:14
Yeah, I think it's a very interesting point you make there regarding that almost a hype cycle regarding what's goes on regarding certain trends in technology in another industry is as well, and we've got so much going on regarding the technology space.
Dave Mutton 19:30
Okay, moving on then so the next episode that we chose was a really interesting one from Janet Mui.
Now at RBC Bruin Dolphin they were acquired by Royal Bank of Canada earlier this year. What I really liked about this episode was I think was a combination of somebody with incredible knowledge and experience, but who is also a great communicator.
I think one of the challenges in any sector, especially in finance, is having a good communicator. To who can explain things to investors in a way that is easily understandable and relatable.
Well, I think Janet does a great job with that. And I especially liked her passion for ESG investing. So environmental, social, governance and she talked if I remember right about setting standards and developing standards for ESG, so that individual investors can actually trust what they hear about ESG. We hear about, you know, companies, greenwashing, and having so called standards, but they're not really. So I think that was a really, really interesting episode. And another great interview from yourself. So what was it that you took out of that?
Peter Higgins 20:41
Similarly, the ESG aspect, I asked her about that, and she replied, “well, I think ESG is an unstoppable trend. So it's clear that you know, the amount of money that's going to be going into that space.”
And I think the beauty of it is, that more and more investments are going to go into that space. And what you touched on as well, is that actually, the war in new in the Ukraine has accelerated the shift to green energy. And we're all we all know what's going on now regarding energy prices, and so on and so forth. So it is absolutely spot on. So it's a unstoppable trend.
Dave Mutton 21:12
Yeah, fantastic. Some of the feedback that we had. So there was a great one here.
“A big thank you, to Janet, and to Peter, key learning change to a growth and open mindset. Fixed Mindset is not good. And market downturns are an ideal time to invest. If you take a long term view.”
It's about that, you know, keeping that open mind isn't as you say, it's when is as much an important question as what to invest in. Okay, let's hear a clip then from Janet Mui.
Peter Higgins 21:45
Janet, you've got a great interest and passion for all things ESG and ESG Investments. What are your thoughts regarding the ESG sector, the growth? And also what's happening in the capital markets regarding it?
Janet Mui 21:58
Yeah, well, I think ESG is an unstoppable trend. I think it is getting increasingly clear, right? I think, from the regulatory point of view, we are just getting more and more regulation demand for ESG related disclosure, more investments will be going into the field, I think the war in Ukraine further accelerates the shift to green energy. So that certainly helps with the ‘E’, environmental related investment is really the the key of the ESG investments of our business is the investment theme of environmental is just more apparent than the S or the G, I think more more or more and more investment will be going to renewables.
This is unstoppable right with everyone trying to transition away from fossil fuel and more. So with the war going on, it will be a multi-year process and is not going to be a near term, you know, near term growth style is suffering at the moment. So the ESG related style also related to the growth style is also suffering. But the longer term trajectory remains intact, supporting from both of you know, consumer preference point of view, regulatory point of view, and just the need to transition to green energy. So I think we're very positive on the sector.
Peter Higgins 23:23
Okay, so the FCA published the ESG integration to UK capital markets report recently. So which Richard Stone, the chief executive of the Association Investment Companies responded is vital that investors can trust ESG data and ratings which are increasingly used in investment decision making.
So we strongly support the FCA is view that greater regulatory oversight is essential to provide reliable and objective information. How is the regulatory status quo at the moment? And does it need to be improved?
Janet Mui 23:58
Yeah, I think there's still I think, a lot of discussion and lack of clarity on the standardisation of how you look at ESG. Right. There's a number of providers that provide some more quantitative analysis of ESG. But I don't think there's really a gold standard like a standardised approach that is approved by a single body that is applied globally, it is just not there. So I think a lot is still up to the investors’ interpretation itself. So that makes the calibre of those ESG professionals so important, you know, there can be a wide disparity of those people in the field of those who really know what they're doing versus those who may be very likely to subject to greenwashing potentially, which is increasingly a problem and which is being really actively invested by regulators more and more so, so I think there is opportunity when there is such discrepancy and lack have clarity going on so that the best of the field will certainly benefit from the trust of the public and I think, yeah, definitely more needs to be done in order to create that trust, trust in the public.
Peter Higgins 25:16
Love that reply, now, can you share with us how Brewin Dolphin are working within that space? And what you and your team are doing? On the ESG front, please?
Janet Mui 25:26
Yeah, certainly, we integrate ESG in our investment process. So it's, it's a few pillars really is like, we consider ESG criteria in all our investment aspects. We also offer more specific ESG driven investment that people you know, they want to have a higher standard, or they really want specific ESG goals, then they can also access those investment, we have a dedicated team to select the funds, and put them together in a portfolio that people can choose. I mean, also, from a corporate perspective, we also you know, we're dedicated to ESG, like we, we sign up for net zero.
So, it's really embedded in both from an investment perspective, or whether you're talking about day to day, the running of the corporation perspective. And we have expanded our team in the ESG area. And we also have many processes, you mentioned about the trust. So we have a number of processes in place, like controversy tracking, for example, that really enables us to distinguish between the genuine ESG focused companies versus those who are not.
Dave Mutton 26:45
Okay, so we're on to number four on our list. And that is John Stepek, Executive Editor of Money Week at the time of the interview. But now I believe he's moved over to Bloomberg now. What was it about that interview that you remember best?
Peter Higgins 27:00
I think was what he was, to two aspects, it was talking about the magazines, because obviously is a magazine guy at Money Week. And he was saying, “if it's on the front cover, it can be very, very contrarian.”
So therefore, keep an eye on what's on the front cover. And usually it's it's this case of either it's a bull market, that means that it's the markets possibly peaked. If it's a trend, that's usually a trend that's going to be rolling over shortly. And I think the other aspects was talking about markets. By the time we were speaking, the Dow was up 900 points one day, 1100 points down the next day. And it was basically saying, This is what I'm talking about, do not be a day trader, you know, always look to do look at the fundamentals and invest long term. I think that was really, really quite poignant thing to be thinking about. Just stay in the market and not get shaken out. But don't trade, invest in the market.
Dave Mutton 27:51
Yeah, I think the point about the magazines is really interesting. I found that as well. I mean, it's, it's the mass market magazines aren’t they? If the mass markets are talking about it, you've probably missed the boat, you know, on the smart money has been moved out again. And so it's doing your own research.
Again, it's keeping you ahead of the trends. And always, I think there was a comment he talked about with with some of the magazines, look to the back pages, ldon't look at the lead stories, because the lead stories are the ones that are now mass market. Yes. But look for those stories that are upcoming and the new trends. And that's where the interesting developments could be. So that was quite interesting. I think for me, it was just a fascinating insight to get that journalists point of view, especially around the 2008 crash, which I know you talked about a lot and his perspective on that they were talking to fund managers and analysts all around then as it was a building up to the crash, and nobody could believe that the banks could could collapse.
I think there was some conversation that you had with him about that, you know, it's almost a generational thing is, if you've never experienced that in a generation, then it's like it's gone from the collective memory of investors. This can't happen cannot but actually look back in the past.
It's happened before it'll happen again, again, you know, and and you also talked a bit about the sort of psychology of investors as well to remember, yeah, he was very good. Another, you know, some great comments on Twitter. And, you know, someone commented here and picked up some great points on markets during periods of volatility. And again, talking about what we're talking about. It's being aware of market developments and where you are in that market cycle, and all the different trigger points. And you and I have a conversation online, if you remember about the lipstick index, remember that?
Which, if you've not heard of, apparently there's some correlation between the sales of lipstick and market instability and markets falling that the sales go up, because people focus on the little things that make them feel good, although, you know, very interesting. Great. Okay. Well, let's hear a clip from the interview you did with John Stepek.
Peter Higgins 30:09
This is one of my questions, John, you're in there 2005. You there, you get promoted, it's 2007. And things start to go pear shaped. You've seen all these things going wrong.
You're seeing the signs, you're writing about it, you're showing all these investors out there and fund managers that read the magazine, because they clearly did. And they were doing it that time as well. And still do. We've seen all these warning signs is for MoneyWeek.
We've seen all these warning, you and Merryn and all the other team saying watch out, watch out and everyone’s going we're not listening. Why do people and psychology again, ignore the signs and always bullish until the very last minute John?
John Stepek 30:53
I think the industry obviously has a just has a bullish bias because I do remember we had regular round tables, so monthly kind of chats with fund managers that we put in the magazine, and they do remember that all the fund managers at that point, but clearly very uncomfortable, they were clearly worried. But it's almost like, well, what you can do, you know, if you're an equity income fund manager, you can just say, actually, I'm really scared, I'm going to sell all my stocks and sit in cash, because you know, you've got a remit to follow, I think it's very difficult for people in the industry to escape the fact that their job is to buy stocks, basically, and hold on to them. So I think there's that there's the industry side, as for individuals, I mean, this has been I think individuals have a bit of an advantage over professionals or it's the advantage that they have is that they don't actually have any portfolio remit beyond make sure your money grows.
And they also don't have any external pressure in terms of a boss saying, you know, you have to turn around this quarter, you have to make x percent.
But the problem is that it's very hard to escape the momentum. Because I mean, it's about like the today, growth did so well, for so long. And deflation, for so long has been the big threat, that people simply cannot adjust to the idea that is all going to be the other way around. Because what has what has worked for so long, and we just have a tendency to keep extrapolating.
And then when the turning points come, all of the things that you've relied on become useless, basically, because nobody really knows what an inflationary environment is going to be like. And also, I mean, in 2008, the idea that banks would go bust was unthinkable. Most people hadn't seen a major bank pop its clogs since you know, at least the 1980s.
So I think that's the other thing, there's kind of, there's a lack of memory that these things have happened before. And then we go in as if it's something completely fresh. So I think that it's a, it's very difficult to turn course, after being on it for so long.
Peter Higgins 33:22
Absolutely. And people have difficulty with it. And they tried to just focus on where things were going well, and forget about the bad times, you know, psychology wise.
Dave Mutton 33:32
Okay, on to the last of our five chosen episodes. This one was very early on Annabel Brodie-Smith, I think it was episode five or six from the Association of Investment Companies. Now what I really liked about this is it really simple things for investors, she gave a great explanation of the difference between a trust and the fund and also talk about you know, open ended funds. And that was very interesting and there was a conversation with you about VCTs and the advantages the tax breaks for venture capital trusts.
So in that sort of information you know, as an investor if you're really not sure what it is having I think I've mentioned earlier about having great communicator and in finance and Annabelle does a great job of explaining complex areas in a very easy to understand way that is just so helpful if you're a new investor to sometimes you might be embarrassed to ask the questions you're doing the research you're reading all the information but you just don't really get it. Annabelle helps you understand these things. So that was great for me.
Peter Higgins 34:36
Yeah, when I interviewed Annabelle I've known her for a little while, and she's so passionate about what she's what she's does. So we're doing it for quite quite a while and I actually interviewed her well before I'd interviewed Mark Dampier, which came much much later on, and I broke that interview, trying to get her relaxed because she was a little bit nervy and I've said this to her, with regards to what Mark had said, and I started interviewing, I said, this is a shout out from Mike Dampier to the Association of Investment Companies, and the trade association that represents most investment companies and basically was calling the work and body of work that she does that they are the SAS of the trade association. And I thought that was so brilliant, and it absolutely just made her day, you know, so she does some, some fantastic work and has done it for 25 years and grown the organisation immensely.
Dave Mutton 35:31
Absolutely. And she's also been an avid follower of the Investing Matters series and engages with a lot of the episodes so thank you Annabelle, for that. And we'll listen to your clip in a moment, I just want to share this from Twitter. We had someone comment - “A brilliant listen and interesting about the debates between growth and dividends”.
And very much my own perspective, you know, most of the investors that I talk to, a lot of people absolutely go for growth. And then there's a whole section that just grow for dividends. And I think probably a mix of the two is probably the best solution. But it is definitely two different camps and two different strategies. So yeah, yeah, it was a great conversation.
Peter Higgins 36:08
Indeed, I think one of the additional things that she's done as well, this is maintain a relationship with us at Investing matters, because she retweets and shares some of the content, because it's all about education. This is very, very passionate about the whole educational side of things. But that's really good.
Dave Mutton 36:23
Excellent. Okay, well, let's hear the clip from Annabelle.
Peter Higgins 36:29
Annabel, I want to move a little bit slightly across a little bit and talk about Venture Capital Trusts now. Yeah. VCTs. Yeah. VCTs. A lot of people moving into that, the importance of that, and the benefits of that. Can you share that as well?
Annabel Brodie-Smith 36:41
Oh, yeah. Well, venture capital trust. I mean, for investors, they have very generous tax breaks, you know, you get 30% upfront capital tax relief, if you hold that for five years. So upfront capital gains 30% relief, I can actually explain that a little bit better, you know, your rate of income tax relief is 30% back straightaway.
You can invest up to 200,000 pounds every year, but you must hold those VCT shares for five years to qualify for that income tax relief. Also, importantly, any of the dividends you receive are tax free. And that makes a big difference. But I think the best thing about them, actually, and obviously those generous tax breaks are very important is that they are invested in the UK’s smaller, fast growing, ambitious companies.
And those are the companies that are going to grow and support the economy in the future. Interesting returns of venture capital trust managers all the time. They seem not surprisingly lots of opportunities in technology and health care at the moment, which makes a lot of sense.
But you know, those sort of companies have big economic and social benefits. For the UK, they have been investing in these small types of companies, making sure they're strong through the pandemic. And they will be continuing to do that. So I think for investors, you know, there's a great, generous tax breaks, but they also have strong performance. And you are actually helping the economic and social benefits for the economy so that they are very, very interesting in investments.
Peter Higgins 38:29
Yeah. And the thing that says the same regarding the investment companies, per se, really. And when we last spoke, we're talking about anniversaries and all the rest of it. And you've been going since 1868. So, you know, a lot of these investors are long-term investors, which takes me straight on to the dividend heroes and explaining to our investors what they are, and some of the strongest ones that have been going forward now 50 plus years, some of them in fact.
Annabel Brodie-Smith 38:53
Yeah, well, this is actually very important. And again, it's a very important difference from open ended funds. Because investment companies have got a unique feature, where they can hold back up to 15% of their income.
Every year, they hold it, they've in reserve in the revenue reserve. And then when times get tough, and boy did times get tough last year, we all know about drag about it, when times get tough, they can use this revenue reserve to boost their dividends. And that's the reason why investment companies were given over 1%.
Last year 85% of them increased or maintain their dividend, whereas just 23% of the equivalent open-ended funds did. So it's really, really important. We have 18, dividend hero investment companies, and six of those have been increasing their dividend every year, for over 50 years. And investors find this incredibly reassuring, you know, proof is all good when it comes but you know, actually have the reliability of that income. It means a lot and growth is good when it comes but we never know when it's not going to come. And then at that stage those dividends really pay off.
Peter Higgins 40:16
Absolutely. I mean, this is the beauty of compounding the portfolio compounding the investments in the portfolio.
Dave Mutton 40:23
Okay, so that was the clip from the interview with Annabel Brodie-Smith. Now there are top five but we've had at the time of recording this 27 episodes, I think of the of the podcast so far. So there have been a few other great episodes. And what I'd be thinking as well as going forward, we want to have an even more diverse range of guests on the programme. And a perfect example is, you know, recently you interviewed John Salako, former Premiership footballer now working in the field of business and investing, and another fantastic interview a lot about football if you're a football fan, but there's some real nuggets about determination and focus and everything that he had to do in his career and how we took that into the world of business now in investing. So that's, for me, was another great episode I would definitely recommend people listen to.
Peter Higgins 41:14
Yeah, I think that one of the beautiful things about John was obviously the Premier League football player for England, but also the fact he got in early in the property game, and it was investing in property. And we know that a lot of our investors know somebody or have tried it themselves in the property game. And it's not for everybody, it's quite difficult. So the transition from being a professional athlete, to then getting into investing to then get into presenting, and all the other things that he's involved in, I just thought was amazing, and just showed what can be achieved from, you know, from just having the wherewithal to persist and have the perseverance and I think all investors need that. Because the markets will always try to just shake you out and try and force you to quit. And that's what he was about that interview was about sharing the need of how to stay at something longevity wise, and then be a success.
Dave Mutton 42:07
Very much. So did the dedication and commitment and perseverance. It's the word to use. Whichever one would you pick out as an episode?
Peter Higgins 42:16
I just loved the interview with Stephen Kelly. Because it was a humble background, he was having to work from the age of early teens to generate money for his family's home, as his dad got poorly. And going from there, to being at the top of the game, Oracle,Chordiant, Microfocus, Sage, and then building a charitable foundation to help so many different people around the globe. And then thinking about how I can do something more. So now he's working with the likes of Tech Nation, and actually is inspiring and nurturing a whole different swathe of startups and entrepreneurs to actually develop their own business and what he's passionate about now, it's about making the UK the tech superpower going forward. So I just loved that interview, was the longest one I did.
Dave Mutton 43:09
It was 90 minutes.
Peter Higgins 43:11
For someone to give us that amount of time. Because that was very generous, was fantastic. So you know, just love individuals like that, who are wanting to give and want to nurture and wanting to actually say to everybody else, you know, give your time, show kindness, and the possibilities are endless.
Dave Mutton 43:30
Absolutely. So I'm going to put you on the spot. Now, who's your target? Who would you like to get on the programme next?
Peter Higgins 43:36
Ah, that's a really good question. I would love to get some of the fund managers that are in America, and I've got some time to work on that right now. I'm not gonna name names off the top of my list regarding UK fund managers, although some people will say he's no longer a fund manager would be Neil Woodford and working on that as well. But I'm looking forward to interviewing, hopefully, we get it across the line, some really, really significant individuals across the whole spectrum of the investment industry. And I'm gonna keep those names under my hat for the time being, because I like to do things and then that people see them afterwards and then go, Oh, I didn't expect to see that person. And we're gonna have some interesting guests in 2023.
Dave Mutton 44:16
Fantastic. So obviously, if you're listening to this episode, we'd love to hear your thoughts as well. You know, who would you like us to have on the programme? Who do you want to hear from about Investing Matters and what it means to be a good if not great investor and how to constantly improve? So do engage with us on our social media. You can do it on Twitter, on LinkedIn or Facebook and let us know who you'd like on the programme. Great. Well, I'm just gonna say thank you very much to you Peter, I was delighted that you took up the offer a year ago when we talked about being the host the programme, fantastic results so far. Looking forward to the 2023 episodes. And here's to a very positive future and learning more about Investing Matters.
Peter Higgins 45:05
Thank you, Dave. I'm looking forward to it as well.
