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Fund Manager Sees Energy Transition as Opportunity of a Lifetime · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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  Speaker 2: Welcome to Marrin Talks Money, the podcasting which people who
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  Speaker 2: know the markets explain the markets.
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  Speaker 1: I'm Meren' Somerset Web.
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  Speaker 2: This week we discussed investment's opportunities coming out of the
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  Speaker 2: world's extraordinary energy transition for both retail and for institutional investors.
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  Speaker 2: My guest is Bernard Fairman, founder and executive chair of
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  Speaker 2: forty two to fifty investment manager of Foresight Group, which
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  Speaker 2: has two hundred and sixty six infrastructure as it's in
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  Speaker 2: the UK and over four hundred below belief. Bernard, thank
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  Speaker 2: you so much for joining us today. We hugely appreciate it.
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  Speaker 3: Yeah, I'm delighted to be here.
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  Speaker 2: Now listen, I think we've got an awful lot to
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  Speaker 2: talk about today. But before we start on this, could
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  Speaker 2: you please just explain to me how your business works.
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  Speaker 2: Has got a variety of divisions, it's got infrastructure, it's
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  Speaker 2: got private equity, it has got a capital management business,
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  Speaker 2: and a lot of people may know the funds inside
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  Speaker 2: that part business. But would you mind just giving us
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  Speaker 2: a point overview of how the whole thame works.
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  Speaker 3: Yeah, First, a very quick thumbnail kind of history Letson.
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  Speaker 3: I started the business forty years ago now, and at
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  Speaker 3: the time it was a venture capital business. So in
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  Speaker 3: two thousand and six seven we were amongst the first
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  Speaker 3: in Europe actually and certainly I think the first in
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  Speaker 3: the UK to come across and start developing a business
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  Speaker 3: in renewable energy infrastructure. So over the last I guess
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  Speaker 3: seventeen years now, we've built our position probably as one
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  Speaker 3: of the biggest investors in renewable energy in Europe and Australia,
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  Speaker 3: with about ten billions sterling invested in that space. The
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  Speaker 3: second division that you referred to, which we've also built
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  Speaker 3: up into one of I think one or perhaps the
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  Speaker 3: biggest regional private ecrey player in the UK, invests locally
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  Speaker 3: with offices right across the country. That's the second part
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  Speaker 3: of our business. The third one courseo capital management. A
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  Speaker 3: few years ago we looked at a zero pretty much
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  Speaker 3: interest rates, how would you make a sensible return? At
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  Speaker 3: the time we probably had thirty five thousand. We now
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  Speaker 3: got forty thousand private investors and we thought to ourselves, well,
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  Speaker 3: look we have one hundred and some of the people
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  Speaker 3: investing in renewable energy, low risk, reliable returns. Five six
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  Speaker 3: percent returns, why don't we combine that knowledge with a
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  Speaker 3: public markets business and we set up now a number
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  Speaker 3: of voids that invest in listed renewablench of businesses, both
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  Speaker 3: in the UK but also worldwide. So that was the
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  Speaker 3: if you wire the third leg to the business, and
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  Speaker 3: all of that's grown significantly over the last I guess
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  Speaker 3: five years.
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  Speaker 2: I'm just going to go back briefly to the regional
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  Speaker 2: private actually because I wrote about the sad loss of
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  Speaker 2: the regional's less provincial stock markets across the DA and
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  Speaker 2: what a sad, sad thing it was that you could
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  Speaker 2: no longer raise money in Aberdeen, Dundee, Edinburgh, leads You,
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  Speaker 2: Newcastle etc. For local projects. But you know, this is
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  Speaker 2: like a perfectly reasonable replacement, except for of course not
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  Speaker 2: listed and not with the transparency and community sharing that
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  Speaker 2: comes with being listed, but nonetheless a nice sort of
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  Speaker 2: source of regional capital.
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  Speaker 3: I think it's to the credit of the many local
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  Speaker 3: authority pension fundstead of invested with us, so that they've
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  Speaker 3: seen that here was a possibly liquidity they contribute to
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  Speaker 3: that would facilitate employment in their region. And that's what
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  Speaker 3: we've done. We started in Nottingham on to manage to Edinburgh, Newcastle, Leeds, Cambridge,
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  Speaker 3: I mean various points east and west of that, and
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  Speaker 3: it is probably the leading form of regional liquidity, if
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  Speaker 3: you will, for small businesses.
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  Speaker 1: What do you do if.
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  Speaker 3: You're a I don't know kind of sixty year old
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  Speaker 3: and you want to retire, how do you how do
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  Speaker 3: you get out? How do you get liquidity? And well,
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  Speaker 3: very few ways of doing it.
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  Speaker 1: Well.
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  Speaker 2: In the old days you used to list on AIM right,
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  Speaker 2: or list on one of the regional markets, but they
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  Speaker 2: don't anymore and AIM is a little bit of a disaster.
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  Speaker 1: Anyway, I interrupted you. Sorry, That's how this podcast works.
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  Speaker 2: You try and say something interesting and I interrupt you
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  Speaker 2: and say something less interesting.
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  Speaker 3: Apologize, well, I think we're all now in a position
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  Speaker 3: where we've got a probably the biggest investment opportunity of
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  Speaker 3: anybody's lifetime, namely the energy transition, which is facing us
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  Speaker 3: and demanding probably more capital invested per year than exists.
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  Speaker 3: People often ask me, well, don't you find you're in
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  Speaker 3: great competition with other firms to invest in this or
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  Speaker 3: that proposition, to which my response is what I just said, namely, no,
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  Speaker 3: not normally, because there are vast opportunities, I mean running
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  Speaker 3: into multiple trillions a year according to your own Bloomberg source,
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  Speaker 3: and nobody at the moment is remotely putting as much
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  Speaker 3: money into the spaces as is needed.
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  Speaker 2: Before we move on to the energy transition and the
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  Speaker 2: opportunities that is their private acquity business that do you
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  Speaker 2: find you are generally investing in the same kind of
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  Speaker 2: companies when we talk about your private actity businesses. Are
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  Speaker 2: we also focusing on the energy transition or is that
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  Speaker 2: a much wider branch of investment opportunity.
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  Speaker 3: I mean energy transition will be rare investment in private equity.
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  Speaker 3: It's you know, the full range of local businesses and
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  Speaker 3: we provide their liquidity. And what we do that I
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  Speaker 3: think is quite interesting is will make an investment, will
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  Speaker 3: probably bring in a new chairman or chairwoman and improve
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  Speaker 3: the general management of the business. We'll run it for
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  Speaker 3: a few years, and then having bought it locally, we'll
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  Speaker 3: sell it probably globally. And there's an arbor charge just
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  Speaker 3: in that. And so if you look at our exits,
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  Speaker 3: they tend to go to American companies or big European companies,
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  Speaker 3: and you know, you get a bump as a result
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  Speaker 3: of doing that having enormously hopefully increased the size of
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  Speaker 3: the business.
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  Speaker 2: In the meanwhile, as a result of being involved in
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  Speaker 2: in that business, there are two things that I would
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  Speaker 2: love to think that you are seeing. The first one
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  Speaker 2: is a manufacturing resurgence in the Midland and the North
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  Speaker 2: of Britain, which we talk about so much. You know,
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  Speaker 2: reshoring etc. Is manufacturing coming home. And also the productivity uplift.
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  Speaker 2: But again we talk about over and over and over
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  Speaker 2: about her digitalization is going to bring us a great
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  Speaker 2: productivity uplift which we'll change the dynamics of everything from
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  Speaker 2: our living standards to our public fiscal profile, etc. Are
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  Speaker 2: using signs of either of those two things inside that business.
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  Speaker 3: I think if you go from private ownership who've got
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  Speaker 3: limited horizons to private equity ownership, things change for the better.
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  Speaker 3: We don't leverage these businesses, you know, you don't think
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  Speaker 3: kind of huge buyouts with enormous borrowings. I think basically
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  Speaker 3: all equity of one sort or the other, and we're
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  Speaker 3: we work hard to actually improve the management, improve the
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  Speaker 3: way these businesses work in terms of maybe they don't
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  Speaker 3: even have a marketing department, they do, and a whole
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  Speaker 3: lot of other things like that best practice. Also, I
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  Speaker 3: have to say sustainability. I mean, that's something that we're
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  Speaker 3: very keen on because we think it makes sense economically.
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  Speaker 3: But if you're saying, do I see a great improvement
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  Speaker 3: in productivity, kind of inherently, the answer is not really,
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  Speaker 3: and I don't really see that nationally. The framework exists
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  Speaker 3: to make that happen.
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  Speaker 1: Okay, that wasn't the answer I was hoping for.
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  Speaker 3: I'm sorry, but that's what I'm seeing.
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  Speaker 2: Sustainability in itself drives profitability. I mean that is something
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  Speaker 2: that a lot of people say it's entirely unproven.
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  Speaker 3: If you've got sensible governance, sensible governance is better for
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  Speaker 3: a business than one person running the business and making
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  Speaker 3: a whole load of mistakes.
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  Speaker 2: I think people would say that good governance is different
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  Speaker 2: to sustainability.
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  Speaker 3: Well, sustainability means a whole load of things, doesn't it.
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  Speaker 3: I mean, it means sourcing materials in a more intelligent way.
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  Speaker 3: It means communicating with your local environment, I mean the
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  Speaker 3: local community, a whole bunch of things. Going back to
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  Speaker 3: the kind of energy point, we only started investing it
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  Speaker 3: in energy because we saw it as being a success
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  Speaker 3: in other words, it will be the cheapest form of
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  Speaker 3: energy production, not for some kind of you know, quasi
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  Speaker 3: religious reason because we thought it was a great thing,
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  Speaker 3: because we wouldn't have been able to get investors if
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  Speaker 3: that had been the case.
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  Speaker 2: That's good because we don't encourage them religious succession on
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  Speaker 2: this podcast generally speaking. But listen, I'm interested in this
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  Speaker 2: and the idea that renewable energy and can at some point,
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  Speaker 2: well we'll talk about what you mean by the energy transition,
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  Speaker 2: it can at some point become the cheapest form of
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  Speaker 2: energy there is because so far, of course, that hasn't
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  Speaker 2: actually happened, and in the main so far, and certainly
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  Speaker 2: in the shortened the medium term during the transition period.
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  Speaker 2: Of course, the energy transition is insanely expensive, hugely hugely expensive.
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  Speaker 2: Moving from a very dense form of energy that is
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  Speaker 2: reasonably inexpensive to less dense forms of energy that the
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  Speaker 2: infrastructure build out to allow them to feed into the grid, etcetera.
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  Speaker 1: Is very expensive.
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  Speaker 2: So the short to medium term comes with massive cost,
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  Speaker 2: and so the reassurance that longer term this is going
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  Speaker 2: to be a cheaper form of energy there is something
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  Speaker 2: that I think most of all listeners could really do
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  Speaker 2: with the hearing well.
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  Speaker 3: It already is in some parts of the world. I mean,
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  Speaker 3: if you go to southern Europe, probably even northern Spain
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  Speaker 3: and creeping up, So that's the cheapest form of energy production.
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  Speaker 2: Does that include the cost of the grid buildout to
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  Speaker 2: take it into people's homes? I mean, it might be
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  Speaker 2: the cheapest way to produce a unit of energy, but
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  Speaker 2: in terms of transferring that unit of energy into my oven,
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  Speaker 2: that's another layer of cost, right.
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  Speaker 3: I think that depends country by country. I mean, if
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  Speaker 3: you're in the United Kingdom, for example, as we are now,
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  Speaker 3: much of the wind comes from a place where people
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  Speaker 3: don't live, namely northern Scotland, and so there you've got issues.
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  Speaker 3: But in some parts of the world isn't so much
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  Speaker 3: of an issue. And indeed, in some parts of the
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  Speaker 3: world that's building out in infrastructure pretty much from a
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  Speaker 3: scratch then isn't an issue at all because they build appropriately.
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  Speaker 1: Yes, exactly.
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  Speaker 2: And if you're building, if you're building new where there
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  Speaker 2: wasn't an infrastructure already, as opposed to drying to you know,
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  Speaker 2: attached bits to an old infrastructure, it's a slightly different equation.
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  Speaker 3: As a general point, Solar's a semiconductor. Semiconductor prices go,
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  Speaker 3: costs go down in line with Moore's law twenty five
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  Speaker 3: percent every eighteen months in perpetuity. When we started investing,
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  Speaker 3: we were paying six or seven or eight eurosenor what.
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  Speaker 3: Now it's down to zero point one zero point two,
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  Speaker 3: a reduction of ninety one plus percent in cost. Now
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  Speaker 3: that that has an impact, and that's why our view
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  Speaker 3: is that solar will become the backburn energy generator of
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  Speaker 3: choice across the world over the next twenty or thirty
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  Speaker 3: or forty years.
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  Speaker 1: It's generally superior to wind.
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  Speaker 3: Do you think it has a capacity for bigger cost
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  Speaker 3: reductions because of the way it's constructed. Yes, and also
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  Speaker 3: it's more modular. I mean, you can put, you know,
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  Speaker 3: I don't know, twenty solar panels on top of your house,
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  Speaker 3: but you probably can't put a wind generator that's going
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  Speaker 3: to do anything on top of your house. And that's
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  Speaker 3: a good thing. Distributed energy generation is inherently a good thing.
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  Speaker 2: And do we worry about China's dominance of the panel
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  Speaker 2: manufactured business and of the metalton minerals that go into them.
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  Speaker 2: I think that to one side and stop getting on
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  Speaker 2: Nigers in a twist about it.
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  Speaker 3: Yeah, I think it is what it is in terms
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  Speaker 3: of cost of production. I worry more about putting our
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  Speaker 3: whole car industry in the hands of the Chinese in
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  Speaker 3: terms of EVS, and I worry particularly about what that
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  Speaker 3: will do, for example, to the European motor industry. I mean,
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  Speaker 3: we employ in this country a million people directly and
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  Speaker 3: indirectly in the motor car manufacturing business. Now, has anybody
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  Speaker 3: thought what happens to that? I mean the union, it's
• 11:47
  Speaker 3: been you think about it. But has anybody thought about
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  Speaker 3: what happens to that if we just obliterate that and
• 11:53
  Speaker 3: go ahead with twenty thirty no new ice cars? I mean,
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  Speaker 3: if they have, I've not heard it.
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  Speaker 1: Well, that target's being pushed back already, isn't it.
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  Speaker 2: Well.
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  Speaker 3: I suspect that target will be pushed back a lot
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  Speaker 3: further than twenty thirty five, because I think the energy
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  Speaker 3: transition is just that a transition. It's not a cliff
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  Speaker 3: face And if you regard it as a cliff flace,
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  Speaker 3: you will get into deep trouble.
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  Speaker 1: Yeah.
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  Speaker 2: Now, you operate in terms of infrastructure globally, right, but
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  Speaker 2: you have probably the majority of you of your projects
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  Speaker 2: are in the UK. So shall we talk about some
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  Speaker 2: of the most interesting things that you've got going on
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  Speaker 2: in the UK because our infrastructure build out or are
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  Speaker 2: required infrastructure build out if we want to get anywhere
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  Speaker 2: near let zero by any of the chosen tates, is huge, right.
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  Speaker 3: Indeed, indeed, I mean interesting thing. We've got a pumped
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  Speaker 3: hydrop project in Scotland one also in the Republic of Ireland.
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  Speaker 3: Here you have, if you will, a lake at the
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  Speaker 3: top of the hill, a lake at the bottom of
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  Speaker 3: the hill, and you pump between them depending on cost
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  Speaker 3: of electricity or prices of electricity at any given time.
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  Speaker 3: So it's a way, if you will, of time shifting.
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  Speaker 3: And it's quite rare because the obviously the geography has
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  Speaker 3: to be right. And I think we're waiting for a
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  Speaker 3: CFD contract for difference on that Scottish property before we
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  Speaker 3: can finish its construction.
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  Speaker 1: What does that mean waiting for a CFD.
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  Speaker 3: Well, the government needs to provide some kind of certainty
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  Speaker 3: and that is a message that generally across many of these.
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  Speaker 1: Technologies, certainty of subsidy.
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  Speaker 3: No just certainty what the CFD will do. It flattens
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  Speaker 3: things out. You don't get big spikes. In other words,
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  Speaker 3: if he goes above a certain price, the government gets
• 13:44
  Speaker 3: the proceeds below a certain price. It results in money
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  Speaker 3: coming into this investment coming into the space becomes more investible,
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  Speaker 3: if you will.
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  Speaker 1: What about hydrogen. You have a few hydrogen projects on
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  Speaker 1: the go, right.
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  Speaker 3: Yeah, I'm a huge believer in hydrogen. In fact, our
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  Speaker 3: view is I was talking about solar's backbone generation. Our
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  Speaker 3: view is for hard to electrify places and activities. Hydrogen
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  Speaker 3: is a solution in a number of years time, and
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  Speaker 3: it's beginning to creep in to various uses now. So yes,
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  Speaker 3: in fact, we're raising hydrogen fund as I speak, one
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  Speaker 3: of the institutional funds we're currently raising.
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  Speaker 1: Well, really, and how will that invest?
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  Speaker 2: I mean? Hydrogen alway seems to me to be one
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  Speaker 2: of those things that you hear about endlessly, but you
• 14:32
  Speaker 2: never never quite gets there. You never actually see a
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  Speaker 2: project come to fruition. You never quite get to the
• 14:38
  Speaker 2: end with a hydro, but you think it's close.
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  Speaker 3: Now sorry, with hydrogen, Well, the point to realize about hydrogen,
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  Speaker 3: We've been able to make hydrogen for about one hundred years.
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  Speaker 3: The problem hasn't been how do you make it? The
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  Speaker 3: problem has been how do you make it economically? And
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  Speaker 3: the solution to that is renewables because, as we said
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  Speaker 3: earlier or implied earlier, renewable prices go up and down,
• 15:00
  Speaker 3: and in many cases you can have negative pricing. Now
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  Speaker 3: in those kind of situations, if you attach a hydrogen facility,
• 15:09
  Speaker 3: you end up being economic in terms of the production
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  Speaker 3: of green hydrogen, and I think that's the key to
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  Speaker 3: the ongoing rollout. They work very well together.
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  Speaker 2: Okay, So you would, for example, attach a hydrogen project
• 15:22
  Speaker 2: to a massive wind farm in Scotland where sometimes you
• 15:25
  Speaker 2: get you know, too much wind, too much power coming
• 15:28
  Speaker 2: out of a wind farm at any particular time, you
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  Speaker 2: could divert that into hydrogen production.
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  Speaker 3: Exactly exactly, because as I say, the issue has always
• 15:35
  Speaker 3: been cost of production, and there's a solution to the
• 15:38
  Speaker 3: cost of production.
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  Speaker 2: Is the government, this new government still behind what you're doing?
• 15:42
  Speaker 2: Do you think, I mean, an awful lot of the
• 15:44
  Speaker 2: stuff that we've talked about, the regional projects, infrastructure projects,
• 15:48
  Speaker 2: for renewable energy projects, they need government support and they
• 15:51
  Speaker 2: need government rollout behind them. And we had a lot
• 15:54
  Speaker 2: from this government before they were a government about these things.
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  Speaker 2: Do you feel that you're going to get with you
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  Speaker 2: need support wires.
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  Speaker 3: Well, if you know what the government's policy is, I'd
• 16:04
  Speaker 3: be delighted to hear it, because I'm rather sure. Yeah,
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  Speaker 3: I'm not quite sure that I'm aware of what it is.
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  Speaker 3: I mean, I think it's worth saying governments generally get
• 16:12
  Speaker 3: in the way, but in this business, in the renewable business,
• 16:17
  Speaker 3: they enormously facilitated the role out of solo back in
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  Speaker 3: maybe ten ten some odd years ago, and so they
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  Speaker 3: can be helpful. One thing. However, I think it's worth
• 16:29
  Speaker 3: saying in Europe we've got a problem in the sense
• 16:33
  Speaker 3: I think the Prime Minister of Italy said the other day,
• 16:35
  Speaker 3: and I completely agree that the US innovates, which is
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  Speaker 3: why so much of the investment goes there. China replicates,
• 16:44
  Speaker 3: and Europe regulates, and I think government regulation, to go
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  Speaker 3: back to your point, is in danger of acting as
• 16:53
  Speaker 3: a severe deterrent to investment in this space and in
• 16:58
  Speaker 3: particular to competition in this place. I mean, we've got
• 17:03
  Speaker 3: fifteen twenty people who spend the whole time dealing with
• 17:07
  Speaker 3: production of statistics that go into a government black hole
• 17:10
  Speaker 3: somewhere and will probably never be looked at or used
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  Speaker 3: for anything, but more and more regulations coming in the
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  Speaker 3: EU and the UK. We raise money from investors all
• 17:22
  Speaker 3: over the place, so we have to basically adhere to
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  Speaker 3: any regulation pretty much anywhere that we might get an investor,
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  Speaker 3: which in my view, as I say, is very anti
• 17:32
  Speaker 3: competitive because if you haven't got real scale, you can't
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  Speaker 3: afford to do it, and which means you won't raise money.
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  Speaker 3: So that is the biggest beef I think I've got
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  Speaker 3: with government regulation.
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  Speaker 2: A minute over your career, has the regular environment become
• 17:46
  Speaker 2: significantly worse? I mean, I think people have complained about
• 17:49
  Speaker 2: regulation forever. But I did speak to an outgoing CEO
• 17:52
  Speaker 2: the other day who told me that in the beginning
• 17:54
  Speaker 2: of his quite a long career, in the early days,
• 17:56
  Speaker 2: he'd maybe engaged with the state or with government about
• 17:59
  Speaker 2: anything to do with regulation or obligations to this state, etc.
• 18:02
  Speaker 2: For maybe half a day year. Towards the end of
• 18:05
  Speaker 2: his career, who would be dedicating two days a week
• 18:07
  Speaker 2: to engaging with the state.
• 18:10
  Speaker 3: That when we started, when I started the business in
• 18:12
  Speaker 3: nineteen eighty four, there was essentially no regulation. All the
• 18:18
  Speaker 3: regulations sort of came in within about three or four years,
• 18:20
  Speaker 3: and it gradually ramped up and it's got worse and
• 18:23
  Speaker 3: worse ever since. I mean, as the chairman of an
• 18:27
  Speaker 3: FDSC two fifty company, we spend I say eighty percent
• 18:32
  Speaker 3: of our board meetings talking about governance or regulation and
• 18:35
  Speaker 3: one sort or the other. Because the fact of the
• 18:37
  Speaker 3: matter is if you in invertiny, are in breach or something,
• 18:41
  Speaker 3: you're in for a world of pain. So you can't
• 18:43
  Speaker 3: afford to do that. So you have to spend appropriate time,
• 18:46
  Speaker 3: which means you're not spending time talking about the business
• 18:49
  Speaker 3: and adding value. So and it's only going one way.
• 18:53
  Speaker 3: As I say, Europe regulates, but other parts of the
• 18:57
  Speaker 3: world don't, which is why you're won of the reasons
• 18:59
  Speaker 3: Europe not getting an investment that other parts of what are.
• 19:02
  Speaker 2: Going to And when you say it's only going one way,
• 19:04
  Speaker 2: but this is recognized in Drugs Report the other day,
• 19:06
  Speaker 2: is one of the things holding back Europe and everyone
• 19:10
  Speaker 2: everyone recognizes this is a problem in the UK that
• 19:13
  Speaker 2: we are of regulated and not to be lower regulation,
• 19:16
  Speaker 2: but we love to layer another regulation on top of
• 19:18
  Speaker 2: that one, and that love of the gold plating on
• 19:20
  Speaker 2: top of that one.
• 19:21
  Speaker 1: Is there any way back?
• 19:23
  Speaker 3: An Argentinian approach, I suggest.
• 19:25
  Speaker 2: Okay, So we're moving into an environment and I think
• 19:28
  Speaker 2: we can both feel it happening around US where regulation rises,
• 19:32
  Speaker 2: taxes rises, the size of the state rises, and report
• 19:35
  Speaker 2: from the OBI the other day is suggesting that the
• 19:37
  Speaker 2: state by you know, within fifty years, will be making
• 19:40
  Speaker 2: up sixty percent of GDP, etc.
• 19:42
  Speaker 1: I mean that's really possible.
• 19:43
  Speaker 2: Is it really possible for a capitalist, democratic, capitalist state
• 19:48
  Speaker 2: to operate in that environment?
• 19:49
  Speaker 1: So something has to break or change.
• 19:51
  Speaker 3: Yeah, it's not far off from France now, Actually I
• 19:53
  Speaker 3: don't think, but because the way ahead of that, that's
• 19:55
  Speaker 3: the right word. Yeah, I absolutely agree. I mean, you
• 20:00
  Speaker 3: you've got I think COVID didn't help because people expected
• 20:04
  Speaker 3: the state to do more and more, and it's a
• 20:06
  Speaker 3: ratchet effect and the words, once you've got it, you
• 20:09
  Speaker 3: can't get rid of it. So if you want to
• 20:12
  Speaker 3: deliver what the state wants to deliver, you've got to
• 20:15
  Speaker 3: have growth. If you haven't got growth but you're still
• 20:18
  Speaker 3: delivering all the benefits that state's delivering, then you just
• 20:22
  Speaker 3: get high and higher taxes. In the end of the day,
• 20:24
  Speaker 3: you know, the whole thing will implode on itself and
• 20:27
  Speaker 3: we'll be back to the IMF.
• 20:29
  Speaker 2: Not so right the way I asked you about productivity,
• 20:31
  Speaker 2: so hopefully earlier, because the sharp rise in productivity and
• 20:34
  Speaker 2: its growth feels like the only way out.
• 20:37
  Speaker 3: Well, how will you achieve that? I know how to
• 20:39
  Speaker 3: achieve it. A lot less regulation, lower taxation, some elements
• 20:44
  Speaker 3: of the laughter curve, which no one in government believes in.
• 20:47
  Speaker 3: But we're going in exactly the opposite direction. I mean,
• 20:50
  Speaker 3: everything's cyclical, everything will change and in some years the
• 20:54
  Speaker 3: whole thing will reverse. But that's the path we're on
• 20:57
  Speaker 3: now as far as I can see, and the.
• 20:59
  Speaker 1: Pendulum has to swing a long way before it does.
• 21:02
  Speaker 2: Let's go to something that I do think that the
• 21:03
  Speaker 2: government is interested in, or certainly they appear to be
• 21:06
  Speaker 2: engaging with lots of people I talk to on this,
• 21:08
  Speaker 2: which is the state of the UK stock market as
• 21:10
  Speaker 2: a whole, and the falling number of companies listed and
• 21:13
  Speaker 2: the falling liquidity inside the market, lack of IPOs, etc.
• 21:18
  Speaker 2: That seems to be something that maybe we could do
• 21:20
  Speaker 2: something about, and possibly the government is interested in doing something.
• 21:23
  Speaker 3: About indeed, And just to kind of add to that
• 21:29
  Speaker 3: what we're finding, I mean, our shares probably turn over
• 21:32
  Speaker 3: half a million pounds a day or something like that,
• 21:35
  Speaker 3: and what we're finding is that when we see one
• 21:37
  Speaker 3: of our long standing shoulders selling, it's usually because they've
• 21:41
  Speaker 3: got redemptions and they have to And that's the effect
• 21:45
  Speaker 3: that we've seen quite a lot of in the last
• 21:48
  Speaker 3: two or three years.
• 21:48
  Speaker 1: It's just a function of flows out of the UK market.
• 21:52
  Speaker 3: And they're continuing, I mean week by week, day by day.
• 21:56
  Speaker 3: But it's not surprising if you look at the performance.
• 21:59
  Speaker 3: I mean, it's self filling to an extent. If you
• 22:01
  Speaker 3: look at the performance of the LSC and compare it,
• 22:03
  Speaker 3: compare it to New York and the NASDAG, there's no comparison.
• 22:10
  Speaker 3: So what's the solution. I mean, probably getting pension funds
• 22:14
  Speaker 3: one way or the other, investing far more in the
• 22:17
  Speaker 3: UK stock market, which you could do through some kind
• 22:19
  Speaker 3: of differential taxation or regulation, and maybe doing the same
• 22:24
  Speaker 3: for the private investor as well. With the private investors
• 22:26
  Speaker 3: still alive and well in the UK, I mean, as
• 22:29
  Speaker 3: I mentioned earlier, we've got forty thousand of them investing
• 22:31
  Speaker 3: in our products and they are influenced by tax as
• 22:37
  Speaker 3: evidenced by the take up of venture capital trusts also
• 22:41
  Speaker 3: eis to an extent, so the government can change behavior
• 22:46
  Speaker 3: if it decides to do so through differential taxation.
• 22:49
  Speaker 2: Yeah, I mean people are very incentivized by tax rates,
• 22:52
  Speaker 2: which seems to be something this government hasn't.
• 22:54
  Speaker 1: Hasn't quite understood yet.
• 22:56
  Speaker 2: In the private equity business, I'm one of the great
• 22:59
  Speaker 2: hopes for the UK market, certainly for IPOs. Some at
• 23:02
  Speaker 2: some point the private equity sector will want to get
• 23:05
  Speaker 2: money out and so list stocks, list companies that are
• 23:08
  Speaker 2: held inside private equity funds. But from what you said earlier,
• 23:11
  Speaker 2: very far from thinking well, we're going to list this
• 23:13
  Speaker 2: stuff when we get out, you're selling it abroad.
• 23:15
  Speaker 3: I think so. Yeah, I mean I'm not. I can't
• 23:18
  Speaker 3: think of the last thing we listed. Well, to start with,
• 23:22
  Speaker 3: listing isn't an exit. I mean, listing is a is
• 23:25
  Speaker 3: a kind of waypoint along the road to exit, but
• 23:28
  Speaker 3: it's not an exit. Secondly, I think the minimum size
• 23:33
  Speaker 3: goes up and up, and we're dealing at the smaller
• 23:36
  Speaker 3: end of the skill. I mean, we're writing I don't know, three, five, maximum,
• 23:41
  Speaker 3: ten or twelve million pound checks, so we're not investing
• 23:44
  Speaker 3: in you know, companies that are going to probably that
• 23:48
  Speaker 3: are going to list an appropriate value to bring in
• 23:52
  Speaker 3: proper institutional interest. So the other thing I think i'd
• 23:56
  Speaker 3: say in that context is that the LASL tifts that
• 24:00
  Speaker 3: where people are trying to, you know, provide fake liquidity
• 24:03
  Speaker 3: for inherently liquid investments. It's something that I'm not particularly
• 24:09
  Speaker 3: enthusiastic about. I think it's a difficult issue and one
• 24:13
  Speaker 3: that we won't really solve until institutions start investing in
• 24:17
  Speaker 3: the UK again.
• 24:18
  Speaker 2: Creating fake liquidity by you mean buybacks or by forcing
• 24:23
  Speaker 2: what do you mean effectually?
• 24:24
  Speaker 3: I mean I've seen it again and again. People will
• 24:27
  Speaker 3: raise some money for what is it for private investments
• 24:30
  Speaker 3: and that they won't invest thirty or forty percent of
• 24:32
  Speaker 3: it in order to provide liquidity.
• 24:34
  Speaker 1: I see what it means.
• 24:34
  Speaker 3: Well, that is the ultimate in fake liquidity. Buybacks I
• 24:38
  Speaker 3: think do have that place. I mean we've done some
• 24:41
  Speaker 3: buybacks over the last year or so. They do have
• 24:44
  Speaker 3: their place when you get some kind of extreme undervaluation.
• 24:47
  Speaker 3: But also as an expression I think of the management's
• 24:51
  Speaker 3: confidence in what they're doing and you know, belief that
• 24:54
  Speaker 3: the current share price isn't right. So we're deploying company
• 24:58
  Speaker 3: cashed by shares back. We bought some shares over the
• 25:01
  Speaker 3: last year, but we buy large use them for employee ownership.
• 25:07
  Speaker 3: I mean that there's an employee stock option scheme which
• 25:10
  Speaker 3: which we've got that.
• 25:11
  Speaker 2: Presumably you also feel your shares are horribly undervalued at
• 25:13
  Speaker 2: the moment, Well.
• 25:14
  Speaker 3: We're selling it eleven times forward. I mean problem is
• 25:17
  Speaker 3: at that level you can't make acquisitions because the private
• 25:22
  Speaker 3: market is probably selling at fifteen sixteen times. So that
• 25:26
  Speaker 3: needs to right itself before we can grow by exosition,
• 25:29
  Speaker 3: which was probably the second intent when we listed, first
• 25:32
  Speaker 3: one being to promote our brand and our naim and
• 25:36
  Speaker 3: people have heard of us, because as you get bigger,
• 25:38
  Speaker 3: you need to go to bigger institutional investors, and if
• 25:41
  Speaker 3: they've not heard of you, you've got a major problem.
• 25:43
  Speaker 3: When you walk through the.
• 25:43
  Speaker 2: Door, Tangent, when you're talking about the energy transition, etc.
• 25:49
  Speaker 2: Would you consider or have you got any nuclear investments
• 25:52
  Speaker 2: at all? No?
• 25:53
  Speaker 3: I mean people that's talked about small nuclear reactors reacted.
• 25:57
  Speaker 1: Yeah, I'm.
• 26:00
  Speaker 2: Feel like they must be the answer to everything. We
• 26:01
  Speaker 2: don't need an energy mix. We can just have lots of.
• 26:03
  Speaker 3: Those every damn Yeah. Well we've got pretty much every
• 26:09
  Speaker 3: other known form of renewable but not that, And I
• 26:15
  Speaker 3: think that's something the government really needs to probably in
• 26:18
  Speaker 3: conjunction with the Rolls Royce, to to lead the way
• 26:22
  Speaker 3: on and to construct some kind of you know, some
• 26:26
  Speaker 3: kind of model that that others can invest in. We've
• 26:31
  Speaker 3: kept away from that. I mean, you know, we invested
• 26:33
  Speaker 3: in Geothermala in Holland, we invested in wind in Sweden
• 26:40
  Speaker 3: and Finland, we invest it in you know, you name it,
• 26:44
  Speaker 3: we invested it. But that's that's a market that we've
• 26:46
  Speaker 3: kept away from for the moment.
• 26:48
  Speaker 1: There any possibility of geo thermal in the UK we
• 26:50
  Speaker 1: got anywhere we could do that, we haven't have we.
• 26:53
  Speaker 3: Not that I'm aware of. There are very few hot
• 26:57
  Speaker 3: spots in Europe, Holland Nearsterdam being one of the main ones.
• 27:02
  Speaker 3: I think what we've got in the UK is the
• 27:06
  Speaker 3: opportunity for gas production, not something that we invest in
• 27:12
  Speaker 3: or will invest in. But as I said, if we've
• 27:15
  Speaker 3: got an energy transition and we don't want to cliff edge,
• 27:18
  Speaker 3: and we don't want to be importing more and more
• 27:20
  Speaker 3: from possibly hostile slates under certain circumstances, then we need
• 27:25
  Speaker 3: to increase our own energy production. And fosil fossil fuels
• 27:29
  Speaker 3: an area we're transitioning from. But gas is a good
• 27:32
  Speaker 3: transition fuel. So I'm surprised disappointed that we're not making
• 27:38
  Speaker 3: more use of our own resource.
• 27:39
  Speaker 1: I think everyone is. I think everyone is.
• 27:41
  Speaker 2: Do you think there's any chance at all of the
• 27:43
  Speaker 2: UK achieving that zero by twenty thirty, twenty thirty five,
• 27:47
  Speaker 2: twenty forty, twenty fifty.
• 27:48
  Speaker 3: If you look at transitions in the past, if you
• 27:52
  Speaker 3: look at the transition from horses and carts to motor cars,
• 27:58
  Speaker 3: if you've got any other kind of transition, it always
• 28:00
  Speaker 3: takes a lot longer than people think. So this is
• 28:02
  Speaker 3: a thirty to fifty year job. It's not a three
• 28:04
  Speaker 3: to five year job, particularly not a three to five
• 28:07
  Speaker 3: year job when no one's putting in place anything that
• 28:09
  Speaker 3: will facilitate that, like a proper charging network or proper
• 28:14
  Speaker 3: kind of cognizance of you know what it does to
• 28:17
  Speaker 3: the UK industry by eliminating the motorcar sector. None of
• 28:23
  Speaker 3: these things I see government thinking about or putting in
• 28:26
  Speaker 3: place makes me more convinced that this is a long
• 28:30
  Speaker 3: term transition, And naturally it feels like a long term transition.
• 28:34
  Speaker 3: I mean, who's going to take their wood burning stove
• 28:37
  Speaker 3: and throw it out and put in a heat pump?
• 28:40
  Speaker 3: Before they have to so five, ten, fifteen, twenty years away,
• 28:45
  Speaker 3: depending on individual circumstances. So it's got to be done
• 28:51
  Speaker 3: like that, and it's got to be done for reasons
• 28:53
  Speaker 3: of economics, not through reason. Not the governments is you've
• 28:56
  Speaker 3: got to do it, but I'll do it because it's cheaper.
• 28:59
  Speaker 3: Because if it is and you don't want to do it,
• 29:01
  Speaker 3: and you're going to need to be compelled one way
• 29:03
  Speaker 3: or the other, and that is not a route down
• 29:05
  Speaker 3: which any sensible government should want to go.
• 29:08
  Speaker 1: I'm going to take that as a no, Bernard.
• 29:10
  Speaker 3: I think that's probably a long winded a long winded no.
• 29:14
  Speaker 2: All right now, Bernard, I have to ask you to
• 29:16
  Speaker 2: say something optimistic before we go.
• 29:19
  Speaker 1: Can you think of anything? Yeah?
• 29:20
  Speaker 3: The optimistic thing I think is that technology improves our
• 29:25
  Speaker 3: lives all the time. Going back to energy, I mean
• 29:29
  Speaker 3: my specialist subject. Fact the matter is, if you're if
• 29:33
  Speaker 3: you're kind of building something, all your cross are upfront,
• 29:37
  Speaker 3: if you've got and then you do have low running costs.
• 29:41
  Speaker 3: So in a future world you can imagine, you know,
• 29:45
  Speaker 3: our homes are powered by solar, our cars are powered
• 29:51
  Speaker 3: by a hydrogen fuel cell, our planes are hydrogen. We're
• 29:54
  Speaker 3: not emitting much in the way of carbon, and it's
• 29:57
  Speaker 3: all cheaper because costs of come down and down and down,
• 30:00
  Speaker 3: and that will happen, but don't expect it to happen
• 30:04
  Speaker 3: by twenty thirty or twenty thirty five.
• 30:06
  Speaker 2: Okay, well, we'll look forward to maybe twenty sixty for
• 30:09
  Speaker 2: all this, and lets to hope that these state gets
• 30:11
  Speaker 2: behind you.
• 30:12
  Speaker 3: Indeed, thank you very much.
• 30:14
  Speaker 1: Hang on, we haven't.
• 30:15
  Speaker 2: Finished yet, then, are you not going to go getting
• 30:17
  Speaker 2: away that lightly? There's always a question at the end,
• 30:21
  Speaker 2: always a question at the end, and it is this.
• 30:25
  Speaker 2: If I were to give you a choice over a
• 30:28
  Speaker 2: ten year period, and it doesn't matter if you're not
• 30:30
  Speaker 2: expecting these things over a ten year period, to either
• 30:34
  Speaker 2: hold gold or to hold bitcoin, which one would you choose.
• 30:39
  Speaker 2: You're a tight guy.
• 30:40
  Speaker 1: You may have a different answer to this than other people.
• 30:43
  Speaker 3: I think I choose gold. Gold has done over the
• 30:48
  Speaker 3: last other than for about the last ten or twenty years,
• 30:52
  Speaker 3: gold has pretty much to replication you what the stock
• 30:55
  Speaker 3: market's done, what the dal Jones has done, to be precise,
• 30:59
  Speaker 3: and we see it going up quite a lot recently.
• 31:02
  Speaker 3: I think people inherently turn to gold when push comes
• 31:05
  Speaker 3: to shove. I mean you can put gold in your
• 31:08
  Speaker 3: back pocket, you can't put bitcoin in your back pocket.
• 31:11
  Speaker 1: Okay, Bernard, thank you very much, Thank.
• 31:13
  Speaker 3: You very much, my pleasure. Thank you.
• 31:17
  Speaker 2: Thanks for listening to this week's maryon Dogs Money. If
• 31:20
  Speaker 2: you like us, show, rate, review, and subscribe wherever you
• 31:22
  Speaker 2: listen to podcasts and keep sending questions or comments to
• 31:25
  Speaker 2: Marror Money at Bloomberg dot net. You can also follow
• 31:27
  Speaker 2: me and John on Twitter or x I'm at Marinus
• 31:30
  Speaker 2: w and John is John Underscore Steppe. This episode was
• 31:34
  Speaker 2: hosted by Meat Mary zam zat Web. It was produced
• 31:36
  Speaker 2: by Samasadi Production and Support and sound designed by Blake
• 31:40
  Speaker 2: Maple's Bettel.
• 31:41
  Speaker 1: Thanks of course to Bernard Famine.