YWR: London Rising
Disclosure: These are personal views, not investment recommendations to buy or sell a security. For investment advice seek professional help.
The negativity on London is everywhere.
It’s in the news every time the LSE loses a listing.
It shows up in the investor surveys where everyone is underweight the UK.
It shows up in equity market valuations were the UK is tied with China for the cheapest market in the world.
Everyone hates UK equities despite the fact they have little to do with the UK.
And this negativity shows up in the conferences too.
I attended a closed end fund conference at the LSE. The panel discussions were all about what could be done to fix the lack of investor interest in UK closed end funds and what could be done to close the extreme valuations discounts.
The CEO’s of the renewable energy trusts were especially frustrated and wondering out loud why institutional investors preferred to plough billions into Private Equity infrastructure funds when if they wanted exposure to solar or wind farms they could buy it on the LSE with an already established 8% running yield and 20-30% discounts to NAV.
Nope no interest.
MegaFunds would rather pay 20% performance fees on funds with no liquidity and no visibility (MegaFund Positioning Review).
Is the problem that these structures are in the UK and listed on the LSE? That’s what everyone feared.
There is one way the some of the valuation discounts on UK closed end funds are getting closed, but it isn’t a solution anyone wants to see.
American PE firm takeovers.
So you get the picture.
London and its capital markets slowly sinking into irrelevance as the money flows like gravity to the US.
And Mega US PE funds take over everything at a discount.
Maybe it was all because of Brexit.
Last one out turn off the lights.
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But I actually see it the other way.
I’m getting a tingle.
I think London is on the up. And it’s an opportunity.
My sister coming to visit made me realise this.
She was coming to London for work and brought her family for a quick 3 day trip over the bank holiday weekend.
Over the 3 days we:
had a great pub dinner on the Thames near Hammersmith with a post dinner walk over the bridge and back
experienced a famous YWR London bike ride tour past Buckingham Palace, Westminster, and then over Waterloo Bridge to the South Bank and London Eye
ate Chinese food dinner in Chinatown followed by a walk down to Trafalgar Square then down Whitehall to Big Ben at night and back through St. James Park
climbed the St. Pauls dome
had another YWR bike tour through Mayfair and Hyde Park to Harrods
walked over the Millennium Bridge to the Tate.
ate lunch at the Boroughs Market.
toured the HMS Belfast then crossed back over the Thames by Tower Bridge.
had an Indian food dinner followed by a walk back to their hotel through Leicester Square and Piccadilly Circus.
And you know what?
It was so much fun. And it was clean. There were tons of things to see and no crazies. We biked, walked and rode the Tube everywhere.
London looked great and strangely I found myself proud to be showing them around. Something I’ve never felt before. Usually, I’m always homesick for California.
Maybe I watch too much Twitter but compared to what I am seeing in NYC, SF and LA, I thought London seems fantastic.
Then another thing.
This week I attended a Morocco conference in the City. The Casablanca Bourse, lots of Moroccan companies and the Finance Minister were in town to promote investing in Morocco. They put on meetings all day followed by a cocktail reception at the top of the Gherkin.
And you know what?
As I was sitting there listening to the great story about Morocco (France in Africa with more growth) I was thinking, ‘Morocco sounds good, but this is also a great story about London’.
Why do I say that?
If you are the Finance Minister of Morocco and you want to go somewhere try and promote your country to global investors where do you go?
Yes, NYC has more AUM, but if host an event there nobody would show up. Who cares about Morocco? The US is about the US.
HK/Singapore. Same thing. Morocco??
If you want to talk to investors interested in global stories you go to London. Wanna meet an SWF. Same thing. Meet our guys in London.
And that’s cool.
The Morocco event went to 9:30pm, and afterwards as I was walking to the Tube I passed through Leadenhall market and it was pumping.
It was Thursday night and one of those warm spring evenings when everyone in the City drinks beer afterwork on the sidewalk outside the pub. The mood was super positive and great.
Definitely no hollowing out of the City. Actually the opposite.
And walking around Leadenhall made me realise the importance of insurance in London, which we never think about. It’s a global insurance hub. With all the new buildings and some of the streets closed off for pedestrians it makes for a really cool insurance district.
Erik… where are you going with this?
Your sister had a nice trip to London and you went to a Morocco conference. Cool.
But how do we make money?
And how does this show London is having a turnaround?
Here’s what I think.