Stanhope filters out the noise to take long-term approach

Daniel Pinto, founding partner of the Stanhope Capital multi-family office, managing $33bn, is a long-term player. His firm’s assets have grown steadily from $10bn a decade ago. And his sartorial appearance, low-key London West End office premises and thoughtful investment approach are all from the same page: smart, diligent but ignoring short-term fashions and knee-jerk reactions to economic vagaries.

“The recent banking crisis reminds us of the importance of a sound financial system to support companies over their life cycle,” he says of the SVB story, drawing attention to his belief that every company is an organism, with prospects for growth and development, depending on the right stewardship and injection of ideas.

"Additional regulation will be necessary to ensure that banks do not take undue balance sheet risks with their clients’ deposits. Evidently, measures taken in the aftermath of the great financial crisis were not sufficient."

The other conclusion he has reached, as a multi-decade observer of markets and political developments, is that the UK’s star has waned, no longer providing an attractive destination for serious capital, hampered by both the Brexit debacle and a lack of incentives for technological innovators.

“The US today has 25 per cent of its market cap in tech and this segment is not dominated by the speculative side, but by the likes of Amazon, Microsoft, Google, all profitable companies with some of the biggest margins in the S&P,” calculates Mr Pinto.

“On one side of the Atlantic, you have an economy which has given birth to the giants of technology, generating the bulk of earnings in corporate America and on our side, it’s just 5 per cent in Europe and 2 per cent in the UK,” he says, laughing incredulously. “There has never been such divergence in the very fabric of our respective economies and the drivers of value creation going forward.”

Private assets shortfall

The bulk of global wealth creation in the last 25 years has been from digital entrepreneurs, he says, expecting the current boom in artificial intelligence to carry on fuelling this trend in which Europe is vastly underperforming.

“I have discussed this with people in government, that London has missed the boat of attracting tech growth companies,” says Mr Pinto, keen to help boost London as a financial centre and home for mid-size wealth managers in particular.

“But it’s not too late and there are things that can be done to make London more attractive to technology companies, not just from Europe but potentially also from the US,” he insists.

The key to researching this economic vaccine, he believes, lies in first understanding the patient’s condition and symptoms, before they become fatal.

“One has to try and understand why the UK has been so slow in this aspect,” he says, pondering on a “mixture of reasons”, including rules blocking pension funds and insurance companies from investing significant assets in private equity.

“In America, university endowments, pension funds, insurance companies are all geared up for investment in private equity. But Solvency II rules in Europe have prevented large enough allocations,” restricting tech companies’ access to finance.

“We are starting to go part of the way to address London’s shortcomings,” he says, relieved the issue is at last getting an airing. But he is also conscious of the long-term nature of this problem, going back decades, including a failed initiative to address the issue in recent history under the Labour government at the turn of the millennium.

He recalls the 2001 review, delivered by the late Paul Myners, seen as investment royalty for his stewardship of city stalwart Gartmore, before being elevated to the role of city minister under prime minister Gordon Brown in 2008. Mr Myners advocated major allocations to private equity by institutional investors to help revitalise the UK economy.

Never too late

“Sadly, that initiative never happened, but it’s never too late to do the right thing,” says Mr Pinto. “We have been constrained by European rules. While Brexit has created many problems for the UK, at least there are some elements that can be used to our advantage. Now that these rules are no longer affecting insurance companies, perhaps they can be free and invest more.”

But the Brexit bullet is clearly one that hurts him personally, as an internationalist, born in France to a Shephardic Jewish family, with a cross-border network of relatives. Having secured his MBA at Harvard University, Mr Pinto is a strong believer in free trade and a devotee of efficient movement of labour. “When you look at G7 productivity levels, it is appalling that UK is last on the list,” he reflects, seeing the problem as a combination of adverse government policies and failure of local firms to organise vocational training along the lines of Swiss and German counterparts.

Emotional arguments

He is also impatient with those policy-makers who claimed Brexit would succeed, purely to feather their own political nests. “l always made a distinction between the economic and non-economic rationale for Brexit,” argues Mr Pinto. “If you are talking about regaining sovereignty, then I can understand the emotional argument.”