9th March 2015
Jacob Rothschild is one of the most eminent and accomplished financiers of our time. Extremely well connected, he has built up three significant financial businesses during his distinguished career.
Q: What do you see the future holding for independent investment banks?
A: I think that the big banks, certainly the UK big banks, do not have a great future, and you can see them shedding people. But the boutique investment banks, they have a future. The Americans have kind of outmanaged the rest of the world in that context by quite a big margin, but if you think about the smaller investment banks, whether it’s Lazards, whether it’s Rothschilds, whether it’s Evercore, whether it’s Moelis, they’ve all done well. The big banks are more in trouble because of the problems of 2008.
Q: What do you think of the current state of the market in Europe and the euro?
A: Well first of all, you have a very odd situation: financial engineering by central banks with fiscal policy way behind. This has caused stock markets to go up, because the combination of printing money and very low interest rates, has pushed stocks up. If you relate that to the economies and geopolitical situation of the world, it doesn’t make sense. Markets are too high? If you look at Europe, in a tactical context, last year you had markets which rose as a result of quantitative easing; and America, Japan, India, which all went up too. Now Europe is doing it on a big scale, European growth is a bit better. So if you have to choose at the moment between markets in different parts of the world, you would probably bet, in the short run, on Europe as quantitative easing driven.
Q: Where do you think are interesting places to invest in at the moment?
A: In the short term, in tactical terms, I think that stock exchange investment in Europe is probably more interesting than either the Far East or North America. In stock exchange terms, taking a 10 year view, I believe America is the safest place and probably the best managed place capitalistically. I would go for America.
Q: Your family have a long banking history. Did you feel pressured as a child to join the family tradition?
A: Some. I had no idea what I wanted to do. I went to Oxford, I did well in my exams, and was asked to stay on at Oxford to do a doctorate in History, and to take the All Souls examination. But I wasn’t good enough academically. The family bank said, we’d like you to join. No pressure, but as I didn’t really know what I wanted to do, I went for it.
Q: What is the most important thing that you have learnt about investing? Also, is there a strategy which you have found works best?
A: Perhaps you need two approaches, perhaps contradictory, to be a good investor: on the one hand extremely cautious and cynical, but on the other you have to be brave and to take risks. Now balancing those two is really the name of the game. I try to balance risk and reward, but to be on the cautious side.
Q: What have been the highlights of your investing career?
A: Well the highlight of my investing career was when I left our family business. It was a difficult time for me, virtually starting from a low base, with a £5 million investment trust. It is worth today just short of £2.5 billion. So that was a success; and then I helped to start two financial services businesses: one was Global Asset Management, which remains a very successful money manager today, listed on the Swiss stock exchange and with a market cap of a couple of billion Swiss francs. I also started, with Mark Weinberg and Mike Wilson, St James’s Place Capital, which is a FTSE 100 company and probably the leading retail financial service business of its kind in this country. So I think those are two initiatives I am most proud of.
Q: Who is the most interesting person you have met?
A: The most interesting person, there are too many people that’s the trouble. Warren Buffet goes through my mind, I did a conference with him about twelve years ago. As a capitalist, he has of course been infinitely more successful than me. There’s also Jimmy Goldsmith who is interesting in a different way, as a kind of investor speculator; he started with very little. He was so interesting, not the greatest capitalist I’ve ever met, but he was as interesting a character as anybody.