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The Actuary The magazine of the Institute & Faculty of Actuaries

Nicola Horlick Interview: Driving force

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Is the City still a man’s world?
Yes, I am still frequently outnumbered. There are not many female CEOs out there.

Do you feel that being a woman has had a positive impact on your career?
Yes, in the sense that I stand out because there are not many women out there. People remember me.

Do you think that women make better managers than men?
Women make very different managers and I think you need to have both as they have completely different styles. Women were made to nurture and they tend to care more about career progression and appraisals whereas men, and this is not true of all men, tend to be egotistical and selfish. Some are good at team-building and some are useless. We have moved much more to a team-based workplace and it has been beneficial.

Can you have it all?
When I wrote the book Can You Really Have It All? I think the media thought I was saying that you can but what I was really trying to point out was that you cannot. I find the concept of role models difficult as one person’s set of circumstances is different from another’s and you cannot replicate those things as different things are thrown at you in life. I have been very successful in my career, I was given a lot of responsibility at a young ag, and I had six children but one did not survive. No, you cannot have it all.

What do you do to relax?
I find it very difficult to relax with so many children around. I read occasionally and I like going to the cinema but I tend to fall asleep as I am so tired. I love the theatre and was on the board of the National Theatre for many years. I think the best getaway from everything is skiing as you have to concentrate on what you are doing. It is the best family holiday as everyone can do it and it is very vigorous, plus I get bored lying in the sun.

What mark or legacy would you like to leave on the world?
I hope that I have shown that, despite being a woman with a large number of children, you can achieve. It is not ‘having it all’ but I want young women to understand that if they want to they can achieve. It becomes harder when you have children but I hope I have demonstrated that this is possible. Unfortunately, I have been stuck with this supermum tag but it is good if it shows it can be done.

How do you personally measure success?
A successful company is one with a strong culture and very little by way of office politics; an outwards facing business that is focussed on achieving the best for its clients. If you have the best quality people, which is crucial, you will succeed and this will be reflected in the profitability of the company.

What motivated you to pursue a career in the City and what contributed to your decision to become an investment manager?
In 1982 I was deciding what to do with my career and my father suggested that I should work in the City. My boyfriend was going to move there so it made sense for me to do it too. I knew nothing about the banks where I was applying for jobs and there was no careers advice promoting internships in those days.

I was accepted for a position at SG Warburg and part of the training scheme was to spend time in four different departments. The first placement was in fund management where I spent six months and I liked it so much that I asked if I could stay there. The management said that I had to go on to work in the other departments. I said I would leave and so they decided to let me stay in fund management. This helped me to get ahead of my peer group and by the time I was 28 I was made a director.

Has the City changed much since you first came aboard?
The City has changed dramatically. We have gone from the days of cosy merchant banks that were mostly family companies to massive global investment banks. Back then, we would go to a stockbroker for a price and they would go to the jobbers. After 1986, the year of the ‘Big Bang’, the stockbrokers and jobbers merged so that sales and resources became a single operation. Various entities were bought by the banks so that there were few independents left. 1986 was a year of major change.

Are you proud of the fund management industry?
I am very proud; it has grown hugely since I first joined. This is partly because pension funds became bigger and, as people became richer, more wealth was invested, from the man on the street to high net worth individuals. I think we are one of the countries that is very good at managing people’s money.

What excites or intrigues you most about the City?
It is a really interesting place to work and there are so many highly intelligent people, which I find stimulating. The best graduates have generally gone into the City and now manufacturing is a smaller part of the economy compared to financial services.

Of your many career accomplishments, which do you consider to be the most satisfying?
What we did with Morgan Grenfell was my biggest achievement. We had a fantastic team that turned it around completely, although I had the vision originally. In the three years before I joined, the UK business had shrunk from £10bn to £3bn. Keith Percy recruited me as he realised he could not turn it around on his own and needed someone to run the UK operation. I got rid of the top layer of management and promoted the younger guys. I also brought in some people from Mercury and recruited externally. Everything just gelled and it took off in a major way.

By 1997 the business had grown to £22.5bn from £4bn and after I left the business it doubled again as most of the team was still in place. If the business continues to grow after you have left then it must have been run well. This is a people business and you have to have the very best people to run it. A bad fund manager is always going to be a bad fund manager. I had to be ruthless to protect the team.

You auditioned for RADA as a teenager. Have you ever had to employ your performing skills in the office or boardroom?
Communication is very important — everything is defined by it. I communicate with my clients, with investment committees, with my colleagues and all of my staff. At Morgan Grenfell I had to get up in front of 1,200 people to talk to them about the business. I have spoken at conferences and done TV interviews. I did a lot of drama from the age of seven onwards but I think I made the right decision not to pursue it and I can utilise all of the skills that I learnt.

What is the most important lesson you’ve learned in business?
To treat people well to get the best out of them. You have to set boundaries so they know how far you can be pushed: in that sense it is similar to being a mother. I do not believe in managing through fear. What attributes make a successful business person? You need determination, enthusiasm and stamina. Be decisive and persuasive.

How much value do you think independent advice on manager selection adds to the investment procof a pension scheme? Is this just an additional layer of cost, or is there true value to be gained beyond the advice of the scheme actuary?
I think it is essential to have an adviser that understands the industry. Some local authorities manage without external advisers but many corporate schemes benefit from a manager and a financial adviser. Many do not know about investments so we need to rely on people that have the resources and can make a better judgement.

I think there is true value to be gained beyond the advice of the scheme actuary. I have managed money for large US and UK pension funds. These people have lots of teams at the centre that know about investments and do not need to employ consultants. Most companies do not have the same level of expertise, however, so employ externally.

Do actuaries make good manager selection advisers?
I see these as two separate areas of specialism — actuarial and investments. Some investors are not qualified actuaries so they need to recognise that they have different skills.

How responsible do you think actuaries are for private sector pension deficits? Are company directors any more to blame?
I think that regulation and accounting standards are largely responsible. Everything has been judged on too short a timescale. If markets fall temporarily, I do not think companies should be forced to pump money into a regime that is supposed to last 18 years.

The government, the Financial Services Authority and the accounting profession have done this country a huge disservice, meaning that people will have to work for another 40 years to support themselves for30 years after retirement. Everyone should be encouraged to save 25% to live comfortably but recently the incentive to save has reduced and so too has the onus on companies to provide a way to save.

What do you predict UK pension provision will look like in 2020?
For the reasons stated, not good. Some people will have defined benefit schemes that will be OK, while some will have defined benefit and defined contribution schemes. Depending on when you retire, instead of getting two thirds of your salary you are going to get whatever is in your pot at that moment in time.

In 2040 to 2050, there will be those with a defined contribution scheme retiring and there are people that are relying too heavily on property prices. Residential property is not going to increase like it has in the past 30 to 40 years; we have reached a long-term peak. People have under-pensioned and relied on residential property with the aim to downsize when their children leave or move to a cheaper area. What if they already live in a cheaper area?

People have to save for retirement and we need to encourage them to put money into a pension plan. It is incumbent on the government and employers to encourage people to save in the right way. The consumer is over-indebted and the savings ratio is low when it needs to be at much higher levels.

Do you think that young workers have been mis-sold the concept of possible early retirement, and if so how can their expectations be changed?
Most people understand that they won’t be retiring young and people definitely realise they will not be retiring at 50 any more. They could end up working until they are 75 just to supplement their income. Lots of people are forced into relatively manual jobs at a later age to get a better income. When people become infirm, the cost of carers and homes is huge. How many will survive that for longer than four or five years? Unlike in France and in Germany, you have to run your savings to zero before you get help from the Government. At least in the UK we have better provisions than they do.

How can actuaries make their mark in fund management?
I think they are two different areas of expertise and it is wrong for them to overlap. Actuaries should not be trying to be or beat a fund manager because a different skill is required.

What is your view on liability-driven investment solutions for pension schemes? Are these products good value for money?
People have been forced into it by an environment where a financial director, for example, might want to take the risk out of liability-driven investment structures. I would criticise the regime in which we have found ourselves. It is wrong to manage money on long-term liabilities with a short-term view. Over time, markets do tend to rise.

The stock markets have not seen a very good start to the year. What are your market forecasts?
I am quite pessimistic but it is difficult to tell if there will be a recession. If you are going from 3% growth to 0.5% then it is a very sharp drop and almost as bad as a recession anyway. The reason markets have not responded to the sharp reductions in interest rates is because they realise that earnings are likely to disappoint. Markets tend to lag behind consumer spending. They are just starting to slow now as is being reflected in corporate profits. Analysts have started to downgrade expectations and share prices have fallen.

What do you think will be the next interest rate move in the UK?
I think interest rates will go down in the UK but not as far as in the US. The Bank of England sees that inflation is high because of higher energy and food prices. In addition, the migration of production from the West to the East cannot go on forever so I believe interest rates may rise over the next few years. The Bank of England is not going to be able to bring inflation down easily.

How do you monitor risk on your investments?
It is more difficult to monitor risk than it used to be. On the big UK equity portfolios we used historical records but now I invest in alternative investments such as hedge funds or private equity. The quoted assets are easier to assess but some are not quoted and are much more difficult to analyse. Now we do much more qualitative work focusing on the managers’ previous record.

What made you decide to move into the alternatives market when you set up Bramdean Asset Management last year?
It is an area that is not well-served at the moment. Swiss pension funds have, on average,20% of their portfolios invested in alternatives, whereas in the UK it is only 3%. We are massively behind and it needs to come up the agenda. The providers are very fragmented and we wanted to provide a completely integrated service so that pension funds can allocate a total of 10% of the asset portfolio to all alternative asset classes.

What words of wisdom would you like to share with aspiring actuaries?
Keep your head down and work hard; you will be noticed. Avoid office politics and be as professional as you can.

Nicola Horlick — curriculum vitae
» Born 1960
» Education Balliol College, Oxford. Bachelor of Laws reading jurisprudence
» 1982 Sold animal foodstuffs for family business — Roy Wilson, Dickson
» 1983 SG Warburg — graduate trainee » 1984 Mercury Asset Management — joined Leonard Licht’s team as trainee fund manager
» 1989 Director, Mercury Asset Management (UK pension fund business)
» 1991 Director, Morgan Grenfell Investment Management (UK business including private clients)
» 1992 Managing director, Morgan Grenfell Investment Management Director, Morgan Grenfell Asset Management (the holding company)
» 1997 Joint managing director, SG Asset Management (UK)
» 2002 Chief executive officer, SG Asset Management (UK)
» 2005 Launched Bramdean Asset Management as chief executive