After taking six months medical leave to deal his lymphoma, Inigo Fraser-Jenkins, the head of global quantitative strategy and European equity strategy at Bernstein Research in London, returned to work this week with a new perspective on life.
As BI notes, Fraser-Jenkins is perhaps best known for an essay he published in August 2016 titled "The Silent Road to Serfdom: Why Passive Investing Is Worse Than Marxism." It argued that active investors were trying to allocate capital most efficiently; socialist governments are at least attempting to allocate capital with some rationality through planning; but passive index funds don't even do that. Mindlessly tracking the S&P 500 could generate bubbles through vast piles of incoming cash being invested with the least amount of thought and analysis.
But now, as ValueWalk's Mark Melin writes, wth six months to reflect on his life while in the hospital, Fraser-Jenkins appears to have had an epiphany. Much like the movie character Jerry McGuire, the quantitative analyst woke up from a long mental slumber of day to day tedium, earning a paycheck, and wanted more to his life.
On January 8, his first full day back at work, he sent his clients a 3,921-word-long essay questioning why he does his job, the role financial services have had in creating inequality, and whether the sector has a future.
Jenkins sees himself differently now, yearning for a “social function” in this world. Unlike the movie sports agent McGuire, whose desire to put his client’s needs ahead of firm profit cost him his job, Jenkins finds that the zeitgeist of the financial services industry can provide a meaningful social function by working with, not against, the system.
Ignoring a rigged system that is only getting worse won't benefit the financial services industry
While in the hospital, Jenkins has exited his day-to-day life to examine his larger goals and personal mission. Coming down from the mountain, the man who famously called “passive investing worse than Marxism,” looks at the financial services industry and says it needs some soul-searching.
When wages paid to average workers and the market cap of stocks diverge in different directions, the world is traveling towards Thomas Piketty’s political inequality dystopia. If changes are not made, those in the financial services industry who have largely benefited run the risk of being “shut down” and transformed into a public utility by “fiat politicians” who increasingly are at times serving what amounts to an unmet voter blood-lust.
Charges have been made the system is, of course, rigged. Author Michael Lewis initially generated elite establishment gasps when he made such a suggestion. But those with deep knowledge of how the system works know he’s not that far off. The worsening trendline now threatens the middle class and upper middle class to various degrees. Who is next?
Perhaps the most extreme example of the rigged system is MF Global.
The establishment ignored topic of blocked federal investigations will only get worse if it is not addressed. How is it possible that in an era where a judicial and investigative misconduct issue involving the White House is analyzed to death that documentation in the public domain of the trend of blocked Wall Street Federal investigations is not even examined? In a US Presidential election where the “rigged system” galvanized the grassroots on both the right and the left, how is it that the known operating mechanics of the “rigged system” remains a blacklisted topic?
This is the downtrend of the rigged system and if it isn’t addressed it will only get worse.
While Jenkins didn’t go this deep, the larger point he makes is that ignoring real issues, marginalizing valid concerns, is not in the best interests of the financial services industry at large.
Address problem of inequality or it will eat the finance industry alive
When Jenkins looks at his chosen vocation and the larger finance industry, he examines it with a more nuanced eye that comes from six months of self-reflection.
At its core, he sees a principled industry that provides meaningful services to the economy and larger societal good. Like many others, he looks for the good. Most people in finance want the industry to respect the rule of law. From Jenkins perspective, it is income inequality that should be addressed otherwise it will eat this industry alive.
Finance is often derided for its greed and personal wealth accumulation. But taken from a larger perspective it “has an enormous amount to contribute” to the world order and easing social tensions, not just creating them.
In particular, the finance industry’s influence in the pharmaceuticals and technology industries, much derided for price gouging and informational manipulation can be a force for good. It is almost as if Jana Partners and the California State Teachers’ Retirement System (CalSTRS) urging Apple Computer to put profits aside and study the damage phone addiction is causing today’s youth was a casting call for Jenkins’ concept of doing good and finding work interesting and rewarding. At least they are making an effort to focus on something other than naked capitalism.
“Maybe the yearning for a social function is personal and merely the result of being older, or having been ill,” he writes, pointing to a “yawning inequality growing in society.”
Fix the problem, or it will eat you alive, he tells his fellow finance professionals.