Pensions pots to Kristofferson: Hermes Investment chief Saker Nusseibeh’s bid to make the City think differently

“Does this make me a better or worse fund manager? I don’t know – but what I will say is maybe a bit of quirkiness does have an effect.”

 

Nusseibeh is certainly not cut from the same cloth as your average City fund manager. He’s Palestinian, has a PhD in medieval history and used to busk on the City’s streets, long before treading them as chief of BT pension fund-owned investment vehicle Hermes Investment Management. 

 

But this difference doesn’t just make for interesting dinner party chat. Nusseibeh believes it’s important for the City and it’s something finance has lost. 

 

Siegmund Warburg, he tells me, used to insist on not hiring people with economics degrees, but classical degrees. Something Nusseibeh, a Warburg-founded Mercury Asset Management alumni, tries to emulate. 

 

“Why hire people who think exactly like the crowd? Among the young it is harder to find people who are different – a lot of people come to the City having done the same mathematics degree. 

 

“I don’t mind if people don’t understand something and ask questions. Maybe if we all didn’t mind we would have realised that credit default swaps really are dangerous and maybe one of us would have worked out that a return on equity of 18 or 19 per cent on investment banks was too high – there is a place for all of these questions.” 

 

It’s fair to say Nusseibeh still carries some anger towards his own industry about the financial crisis. He believes analysts and fund managers knew something was wrong, but most chose not to say anything. 

 

When he took up his role at Hermes, he decided to channel his anger into something productive – and so the 300 Club was born. Its raison  d’etre? To ask questions nobody wants to answer and to help make the financial ecosystem better. Its members are chief investment  officers from across the City.  

 

“It started with me writing a simple list – ‘here’s what I think went wrong and here are four or five more things I think are systematically dangerous – what do you think?’”  

 

He may have a self-imposed mission to better the ecosystem of the City but the Hermes boss and his firm do not operate without their own challenges. When I spoke to Nusseibeh, the company had just brought the axe down on its hedge fund of funds, BBK, as well as its commodities  business. 

 

“The fund of fund hedge fund business is clearly not what it should have been,” he says, furrowing his brow. 

 

“The idea was to help smaller clients not to buy into bad investments – but actually a lot of fund of funds bought into Madoff – which brings the whole edifice into question. It doesn’t mean you shoot everyone in it – you look at the skill set, Tommaso Mancuso and his colleagues from BBK have now started the Hermes multi-asset team.” 

 

Meanwhile, the firm took the decision to shut its commodities business in a bid to take a longer view. 

 

“Commodities in our view is a good business for tactical asset allocation in the short term but I’m not convinced it’s truly skillful and that you can be fundamentally different from the benchmark in commodities,”  Nusseibeh explains. 

 

“I don’t know anyone else who would withdraw from a thing that makes money because ideologically it doesn’t fit – but that’s who we are.”

 

Owned by the BT pension scheme, Hermes Investment Managers has split its pension and asset management businesses. Its plan is to become a leading third party asset manager, slowly moving out from under the shadow of the BT fund – a solid plan, given the uncertainty facing the pensions industry. 

 

“Go into the countryside, grab the oldest person on the street and ask them if you save six per cent of your salary, will you have enough to retire on? Any sensible person will say no, it’s not enough,” he says. 

 

“The pension situation is dire. I think we can fix things but first we have to admit it’s broken. Enrolment is going to help but saving six per cent is nowhere near enough. You should be starting at 15 per cent and 20 per cent is roughly where you need to be. But I can’t see Mr Cameron or Mr Miliband telling the working population they will take 20 per cent of their post-tax salary.” 

 

Hermes is known as a pension fund manager now, but with its gradual move into the world of third party fund management, where would he like to see the firm in 10 years? 

 

“I would like to see Hermes show itself as a successful high alpha manager and a responsible manager, to the degree that people acknowledge you don’t have to be a nasty hedgie-type to succeed,” he smiles. 

 

“If we do that, I think a lot of the big boys will do exactly the same, to try and arbitrage the differential out of the market – then we have done something worthwhile in the City…Shall we sing Kumbaya now?” he laughs. Kristofferson indeed.

 

■ Started career at Mercury Asset Management on its graduate programme

 

■ After nine years at Mercury, he became managing director and EVP, international equities, Trust Company of the West

 

■ Becomes CIO global equities and head of marketing at Societe Generale in 2002 

 

■ Takes up role as CIO of global equities, Fortis Investment Management

 

■ Joins Hermes Fund Managers as head of investment before becoming CEO in 2012