Andrew McNally has done his time in investment banking. In four years at Morgan Stanley and 11 years at Berenberg, he rose from equity analyst to managing director and head of Berenberg’s UK business. It was he who was the impetus behind Berenberg’s big push into equity research. But in July 2014 McNally gave up his banking job. Since then, he’s written a book and started a new asset management firm, Equitile.
“I’d reached a natural point in my career, when it was time to think about how I’d use my time and effort next,” McNally tells us from Equitile’s office in West London. “I spent 25 years in the equities business. I built the mid cap franchise in Europe at Morgan Stanley and the UK business at Berenberg. As I see it now, the structural opportunity is in asset management.”
"We are not in the business of setting up a three man boutique"
It’s early days. Equitile has yet to be regulated by the FCA and only has two employees – McNally and George Cooper, a fixed income fund manager from BlueCrest, J.P. Morgan and Goldman Sachs. In time, however, it’s likely to grow and McNally’s history suggests researchers will be at the forefront of any expansion. “We are not in the business of setting up a three man investment boutique,” he informs us.
The way McNally tells it, Equitile will offer a combination of social value and durability in a world where the future is more uncertain than ever before.
“In Equitile, we’re taking a post-crisis view,” he tells us. “Modern financial theory has been revealed as having fundamental flaws and that has led to a breakdown in trust. In a world of unquantifiable risks, the most important thing has become resilience. Our aim is to develop a series of funds which will be systematically resilient in a rapidly changing world.”
What creates resilience? “It could be balance street strength, it could be innovation, it could be the strength of the firm’s relationship with its employees,” McNally says.
Crucially, and as suggested by the title of his book – Debtonator – McNally is pro-equities and against debt. “We’ve lost sight of the fundamental differences between the debt and equity contracts we use to finance our society,” he says.
When you’re a debt financer, McNally says you’re making a bet about whether you’ll get your money back – and you usually do, with interest. When you’re an equity financer, you’re taking a stake in the business and most of the value is in the distant future. “It’s my view that people in the equities business are more broadly interested in the world as a whole than people in the debt industry are,” McNally says.
Equally, he argues that equity financing is more efficient at recycling wealth than debt financing, but that thanks to misplaced tax incentives, it’s being underused. “Since the breakdown of Bretton Woods in 1971, we’ve created a system where more and more of the equity gets focused in the hands of fewer and fewer people. At the same time, we have a system of extreme credit creation and debt finance that has grown exponentially.”
Debt is soul-destroying. Equities aren't
If you’re looking for a meaningful finance career, McNally advises that you should orientate yourself towards equities and away from debt.
“There are a lot of people in investment banks and elsewhere who are sitting around and wondering what they are doing with their lives,” McNally says. “But finance can be very rewarding if you can understand its social purpose.”
Ultimately, McNally says the role of the finance industry is to take savings and shift them into productive investments that will generate returns for customers as efficiently as possible. In his opinion, research-based resilient equity investments are the best way to do this. By the end of this year, McNally thinks Equitile will have seven to eight staff. Some are already involved on the periphery. If you’re looking for a meaningful and resilient finance career, you might want to get in touch soon.