A new faction contesting the foundations of how to invest

Philip Salter
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Q. Why are you called The 300 Club?

A. This refers to the 300 Spartans who stood against an invading Persian army at Thermopylae. The group went there even though they did not have the support of Sparta or of the other Greek cities.

These Spartans understood the risks, but they still decided to make a stand and make others aware of the danger, even if they themselves could not hope to turn the tide.

Q. What are the principles that tie the club together?

A. We stand for two main principles. First, we want a transparent debate on the theoretical underpinning of much of current investment theory and practice. We believe much of it is misunderstood, misapplied or incorrect.

Secondly, we want a move away from complexity. It is not that we are against complexity, but rather we are against more complexity than necessary. We believe in Occam’s razor, which says, “it is vain to do with more things what can be done with fewer.”

Q. You are calling for immediate action – why the rush?

A. 2008 has shown us very clearly that decisions made by financial agents on behalf of investors have major ramifications on the entire financial system and by extension on our social and political systems as a whole.

The 2008 financial crisis was never resolved. While governments shored up banks by pumping money into them, they did not deal with the underlying problems. Now many of these governments are being challenged (Italy, Spain, Greece, Portugal and Ireland) and we are not sure who will be able to bail them out.

Part of the solution must be a more rational application of our investments and the risk premia we demand for it. This is no longer only an economic or financial issue but also a political one. For example, if we move most of our investment capital to government debt, how do we finance future investment and growth in our societies?

Q. Why do you fear a perfect storm?

A. At present, there are several factors coming together, the most dangerous being that as a result of 2008, governments and regulators are more aware of risk, and have put risk models in place, which have created a false sense of security.

Secondly, in an attempt to hedge tail risk, financial engineers are applying the same flawed academic logic and creating products based on the same academic foundations that produced the catastrophe of 2008. These are being sold to investors with the hope that this time it will be different.

Thirdly, the regulators, in a logical and laudable attempt to reduce risk, are pushing institutions into expensive and possibly risky assets but which they see as less risky, namely sovereign debt. If you are a Spanish institution, would you view sovereign debt as a risk-free asset? What if you are Greek? British?

Finally, everyone seems to have missed the point that politics is back as a major factor in the economy, from Wall Street to Berlin. Globally, we may be at the end of the great age of political stability that followed the end of the Second World War.

Q. What economic trends concern you?

A. The current global recession is so deep that in the UK QE1, with a 1.5 per cent positive effect on GDP, only managed to keep the economy flat. That is a great concern.

The same seems to be true around the globe, yet we do not have a clear pathway out of the current situation.

Relying on China is something of a red herring, as it is bound into the developed economies also.

Q. What investment trends concern you?

A. One trend that is of concern is the over-reliance on complicated risk models and investment strategies with an underlying belief that somehow, one can find a mathematical way to skew risk/reward towards reward with little or no risk.

Q. How do you intend to get the message of uncertainty and complexity across?

A. Our first stage was the launch of The 300 Club in the public domain to raise awareness.

Next, we intend to do this through a series of open papers, which we hope will incite industry discussion, as well as through debates, conferences and in the media.


Saker Nusseibeh, Hermes
Zuhair Mohammed, Aon Hewitt
William De Vijlder, BNP Paribas
Amin Rajan, Create Research
Lars Dijkstra, Kempen
Adriaan Ryder, QIC
Robert Talbut, Royal London
Alan Brown, Schroders
Dylan Grice, Société Générale
Yves Choueifaty, TOBAM