What's the mood like here in Davos? Well, it's interesting.
I think people came in to this week feeling maybe a bit gloomy.
But the data points that have been coming through this year on the economic
side, maybe not been quite as bad as people expected.
And although I've seen some reports that say, you know, the mood here is very
optimistic that this week, I don't think that's right.
But I think definitely at the margin, people are thinking, well, well, maybe
we're avoiding the really bad scenarios, the really deep recession risk, maybe
the risk of that's got a little bit less.
So I think people are probably leaving a little bit more positive than they came
in. I think that's a good thing.
Or, you know, capital allocators ready, asking the right questions about where
capital needs to go next. Now, I think that is a super interesting
question, because I think when we look at the set of conversations I've had
this week and I've had conversations with at least five or six different
regulators, I think there is a bit of a disconnect between the fear of systemic
risk, the continued drive from a kind of macro prudential point of view to to get
as much risk out of the system as possible against the fact that if we're
going to continue to accelerate plans on decarbonisation, to get capital, to get
into some of these projects and some of these initiatives so that we can really
start to move on the decarbonization agenda.
Also, Ukraine up there is going to be a rebuilding agenda on Ukraine coming
through over the next few years. If we're gonna get the capital for that,
it needs to come from somewhere. And if you're constantly trying to
squeeze the risk out of the financial system, no risk, no return.
So I think there is a disconnect. And I think this week we've seen some of
these conversations try to be initiated to bridge that gap, which is it's really
constructive. How do you square that circle?
Well, I think you need to think about what sort of risks.
I mean, the question I posed to more than one regulator this week is what
sort of risk are you willing to tolerate?
Why do you want that risk to be so? You know, is it.
Is it leverage? Is it a liquidity risk?
Is it volatility risk? Is it absolute risk of capital loss?
What risk are you willing to tolerate? You can't take it all over the system.
How much and where and think through that framework.
Because if we have a little bit more guidance on that framework, whether it
applies to banks or insurance companies or asset management companies or
anywhere else. Think about where that risk should set.
And then we can start to figure out how we get the capital to the right places
within that context. But I think we need to square that
circle. And you think we'll have answers pretty
soon. Oh, you're talking about regulation,
right? I think you're better pretty soon on
that. But I think we can see a little if we
can see a little bit of a change in thinking and approach.
I think the FSB, another regulatory umbrella like that, can help us think
through where do we want that risk to be?
And then we can start working on constructive suggestions.
What's your outlook for active investment managers in 2023?
I have an active investment manager for the most part.
Therefore, of course I'm positive, but I think it's been fascinating.
I think you have if you look at the C suite and the companies that we follow,
the many thousands of companies that we follow around the world, companies have
had to deal with a lot over the last three years.
They're very seasoned. They understand how to react quickly
when they need to. That muscle is really well-developed and
it's more businesses are more resilient than they were for sure.
So what we can see is that as the world chucks different things that are
sometimes called it, we're in like this kind of multiverse, everything,
everywhere, all at once. Stuff keeps happening, right.
Companies are better at adapting. And we are seeing you move to
digitization, the move to automation, building and broadening supply chains.
That's happening quite quickly for active managers.
We can differentiate between the companies that really get it and are
moving fast on some of this stuff versus some of the others.
And that is a great environment for an active manager.
So I think we're pretty positive. We do see stuff coming through now that
we get quite excited. Did you have hiring plans or will you
get bigger? So hiring is interesting because I think
everybody knows everywhere. Actually, war for talent has been really
tough. Some of that.
So some of the challenges have been actually how do you hire people and what
not finding the right person to find is right.
You know, we are increasingly tech businesses and we're putting a lot of
emphasis on that now. If you go back or speaking to the head
of one I.T. services companies, your company
yesterday, a year ago at this time, they were experiencing well over 30 percent
attrition by the end of the year and 20 percent first quarter actually has
started. It's like 11 percent annualized.
And I think that's quite interesting. So I think the hot the attrition
environment has improved. That means you don't need to hire as
many people because you're not replacing those that have gone.
But I think it also shows you that this sort of spur towards automation, which
when unemployment is as low as it is, you need that automation, that
productivity improvements. I think you see a changing shape in our
industry. And that's that's kind of what we're
seeing with where it is. It a bit of a change in the jobs that we
have now. But you know that the sort of broad,
broad picture is pretty steady. How are you thinking about compensation?
This is kind of a hot topic. Yeah, well, you know, it's it was
obviously 20, 22 was a tougher year from.
Session that than than the previous year, which was it was a terrific year
for us. It was one of our best years ever.
So it was tougher this year. But, you know, ah, ah, ah, ah.
People, they understand that it's a kind of profit share kind of model and that,
you know, in good times they do well and in bad times have more difficult times
than they'll do a little bit less well. So, you know, in general, I think our
compensation round was was well taken. So but I mean, there is a bit clearly in
this environment is more pressure on compensation than
really hot market. If you have fair and talked me a little
bit about crypto, so what does he have to its demise actually mean for it for
crypto investments? So if you look across, you know, the
conventional financial system, if you want to put it like that, there are
certain key premises which are out there are independent custodians or
depositories, segregation of client assets.
And some of these things, it looks like just weren't
adhered to in what was a relatively unregulated activity.
So we certainly see more demand for, if you like, quality and separate
custodianship. And I think that, you know, the good
providers of that will continue to do well.
And I think we will see some more of these principles that you see in other
parts of the financial system come to the crypto world.
So I think it's been it's been a a chastening experience.
It shows that if you do similar sorts of activities, there's reasons for the
regulations that we have in other parts of the world.
And I think that's the approach. Regulators in general are taking,
although there are different regulatory views on this.
But, you know, similar activity should have similar types of regulation.
And I think that will be the direction of travel over time.
Does it change your relationship with crypto in some some of the offerings
that you may have put in place? No, not really, because we've tended to
adhere to those principles anyway, because, you know, that's what our
business is built on. It's different for some of the startups
in this space who've never sat inside a regulated entity and therefore don't
know what those principles are quite as intuitively.
So I don't think for us I mean, I think we still see interest in.
I wouldn't say crypto asset with a digital assets more generally because
they do bring certain different characteristics to it.
And you know, the continued research that central banks are doing on around
digital currency is somewhat broader than just crypto.
We tend not to talk about crypto, actually.
We talk about digital assets. And as I think we've talked about this
in past years as well. It's the underlying technology, the
digital that the distributed ledger technology, the tokenization of other
assets that can come from that. But it's possibly in the long run going
to be the thing that the industry benefits from most from the invention of
crypto. You know, 10, 15 years ago, it was.