REFLECTIONS ON A BANK HOLIDAY WEEKEND… BY RICHARD JENNINGS OF TITAN INV PARTNERS

I write this piece from the beautiful surroundings of a restored farmhouse on the UNESCO heritage island and biosphere that is Menorca. It is amazing what a bit of early summer sunshine, R&R (the record this weekend is 15 hours sleep in a 24 hr period!), a few glasses of rose and peace and tranquillity can do…

I took the opportunity to catch up on a wide variety of reading, both financial related and current affairs (ensuring to avoid a certain other “tipsters” website!!), and for those of you who have not read the book “The Next 100 Years” by George Friedman, I highly recommend that you go out and buy it now.

It was written five years ago but many of the postulations within it by Friedman are proving to be astoundingly prescient, not least the sections on China and Russia and importance of the Ukraine region to Putiin. Given the events of recent weeks in this region and the continuing escalation of matters there, it provided an informed perspective to me and also highlighted just why Putin is unlikely to stop at the Eastern fringes that he already controls…

The section on China and the look back over her long history of protectionism in the face of global difficulties is also interesting aswell as the current parallels with Japan and the rest of emerging Asia in the 1990’s. Put simply, there seems to be no alternative to a major crunch in China  over the next few years as the estimated near 30% of all outstanding loans become non-performing and the economy actually contracts. The medium term social consequences of this throughout Asia will be far and wide reaching.

Onto more upbeat matters, and it is with great pleasure that I report that this publication and website has been acquired by Burnbrae Media Holdings – a private entity that owns T1ps.com, independent equity research business GECR, the UK’s leading investment conference organiser – Master Investor, commodity focused events & website companies Minesite & Oilbarrel, and corporate event management company Ex Events. Regular readers will know that I have been spending more of my time building up the unique fund management business that is Titan Investment Partners and that, as we close in on the first years full performance figures at the end of June has, to date, veritably trounced pretty much any other active fund manager out there. In short, the time constraints involved with Spreadbet Magazine needed addressing but I am certain that the publication and website will lose none of their unique “soul” and will in fact be taken on to new heights under the stewardship of Richard Gill and Zak Mir.

I will continue to write for the magazine and the site under the Titan brand and will strive to provide experienced and insightful analysis and views on largely macro related matters – Titan’s primary focus; believing that the vast majority of investment returns are produced at the asset allocation level.

So what caught my eye this weekend? The most shocking statistic was the piece in the FT in which it was asserted that research revealed that the AIM market has collectively, remarkably, produced returns of negative 0.7% p.a since its creation in 1995 – nearly 20 years! That is a sorrowful indictment of the abject failure of this market to live up to its billing – that being a provider of capital to early stage companies offering high growth potential to investors.

I actually met up with a wildly successful investor just a couple of weeks ago who has made hundreds of millions out of the stock market (and holds a large stake in Gulfsands Petroleum – hint, hint!) and discussed the recent spate of new listings we have seen. Like me he is also suspicious of the implications for the wider stock market given the rush to cash out by these entrepeneurs and Private Equity houses and actually suggested that if a fund could be created to simply short all new IPO’s then he would participate. That gave me food thought and I reflected upon refining this idea further over the weekend. Concentrating on companies with large management cash outs at IPO, short profits histories, low barriers to entry and lofty valuations would probably be additional ingredients to throw into the mix. Boohoo.com and AO World anyone?!

Another piece that resonated somewhat with me was from the Times Money section a couple of weeks ago (show’s how busy I’ve been eh?!) in which the authors proved without a shadow of a doubt that active fund managers, as a very large majority, resolutely fail to outperform their benchmarks over most timescales. Having taken the bold step of returning to my fund management roots with the creation of Titan in 2013, I hope not to become part of that majority!

There seems to be very few offerings out there where the fund manager is truly aligned with the investor, with six figure salaries and bonuses commonplace even where they have categorically failed to add any value. What I can say is that at Titan we are well and truly aligned with our investors and our remuneration comes solely from performance. If I don’t perform, I don’t get paid – one cannot get more aligned and be more focused than that. There should be more of this approach applied within the industry in my opinion, but of course it is difficult for ordinary investors to change accepted (if not agreed with) wisdom. If you can’t change it then join those that dance to a different beat.

Over the next few weeks I will be writing a special piece entitled “fund management myths debunked – why conventional wisdom is wrong” and will be offering it to our readers for free – watch this space!

And so, I sign off this first of many more pieces where I am no longer owner and editorial director of SBM but merely a contributor! To the continued success of the good ship SBM and all who read her!

Richard