Jacob Rees-Mogg: the truth behind the moggology

Slide3For those of us of a certain age, Dallas was compulsive weekly viewing in the 1970s & 80s. J.R. Ewing, one of the show’s main protagonists was portrayed as a shallow, vain, covetous, egocentric, manipulative and amoral Texas oilman with psychopathic tendencies.

He was an utterly compelling TV villain. Few of us will have forgotten the final episode of the 1980 series called “A House Divided”, a real cliff-hanger where JR very nearly got his richly deserved comeuppance.

Fast-forward forty years to meet a real-life, bane of our modern times, Jacob Rees-Mogg. Jokingly referred to as the “MP for the eighteenth century”, he is an old school tie and waistcoat wearing, top hat sporting, very socially & politically conservative coxcomb – an appropriately archaic epithet some may say.Slide5

He was sent to live among us as a reminder of an earlier epoch when the UK was the only global superpower. In dress, manner and speech, he is the present-day embodiment of a former, grander, more class-conscious, less equal, more deferential, Imperial Age.

The halcyon era of the Pax Britannica when flying the Union Jack, the Royal Navy’s gunboats roamed the world’s oceans unchecked, keeping the sea lanes safe, so that our merchant adventurers could trade freely with Johnny Foreigner.

Rees-Mogg is part struggling investment management tyro, part EU-fixated right-wing Tory MP, and part putative high priest of Brexit.

Exuding self-confidence, with more than a whiff of arrogance about him, and apparently unencumbered by self-doubt or any form of introspection, he is the archetypal highly polished product of Eton College, one the UK’s most notorious public schools.

The moggology which has developed around him imputes great business savvy, superlative investment competence and enormous wisdom. This myth unfortunately does not stand up to closer scrutiny. As we shall see, his reach frequently exceeds his grasp, and he can be prone to making some very poor judgements and decisions.

JR-M can be the typical British, middle class, stuffed-shirt, all-round pain in the arse; boring for Britain as he chunters on and on endlessly about how the UK must leave the EU at the earliest opportunity because it is the spawn of Satan/work of the Devil etc. etc. A slight exaggeration perhaps but not so far from the truth.

On the other hand, he can also be extremely witty, droll and amusing. One of the most scrupulously courteous of men, the JR-M has earned friends and admirers in some of the most unlikely places.

A very entertaining piece appeared on BuzzFeed a couple of years ago, called “Everyone Took the Piss Out of Jacob Rees-Mogg at University.” It rehashed some of the more unusual episodes that took place during JR-M’s three years as an undergraduate at Trinity College, Oxford.

He was first introduced to his fellow students on going up to university via an appearance in a feature entitled “Pushy Fresher IV”, in Cherwell, the University newspaper. It profiled those people considered likely to become “notorious on campus”.

Rees-Mogg, went on to appear fairly frequently on its pages during his time at Oxford. He was far from being a normal run of the mill undergraduate; affecting a rather eccentric, upper class wannabe, young fogeyish persona around the university.  One wag even alleged that he wore double breasted, Saville Row tailored, silk pyjamas in bed.

Slide10One of the more amusing incidents recounted in the BuzzFeed piece recalled an exchange almost thirty years ago between a gamine and rather lovely Yvette Cooper, then President of the Balliol JCR and our hero.

She was campaigning to abolish sub fusc, the expensive formal gown and headgear that undergraduates were (and still are) required to wear, on the very sensible grounds that it put off applicants from state schools. JR-M was reported as suggesting that students should instead be encouraged to wear a “full morning suit”. He went on to say that the mortarboard was a key part of student dress: “I do so like to cycle around Oxford with it on.”

Slide11It seems absolutely certain that J. R-Mogg, during his time at university was a confirmed, attention-seeking contrarian who deliberately and repeatedly ignored that wise old Latin saw – “vir prudens non contra ventum mingit”. Some things just never change…

On graduating from Oxford in 1991 armed with a degree in history (class unknown – there are differing reports. JR-Mogg has not responded to a request for clarification) He headed for the City where he worked initially for Rothchild & Co.

According to a 2016 profile in The Spectator, he was taken under the wing of the legendary investment guru, Nils Taube, spending a couple of years learning the nuts and bolts of his trade at the knee of the Master.

Taube was described in his Daily Telegraph obituary as ‘one of the best [City fund managers], having returned more than 15 per cent a year for the two funds he ran continuously between 1969 and 2006 — a remarkable record’. Apparently, he died of a stroke shortly after being taken ill while working on his Bloomberg terminal at the ripe old age of 79. Surely, an indication of true dedication to his profession?

In contrast, according to a former colleague during his first stint in Hong Kong ‘Jacob was a pedestrian fund manager, always more interested in politics than investment — he never outperformed the index. He was great friends with Chris Patten and was always in and out of Government House, working on his political reputation.’

JR-M returned to Hong Kong in 2003 to manage the Lloyd George Emerging Markets Fund. He stayed for the next five years, surfing or more accurately, failing to surf the global commodities boom and the Asian markets bull-run.

According to an October 2017 Financial Times analysis of his performance, “….the fund trailed the MSCI Emerging Markets Index, the benchmark for many emerging market funds, in four of those five years.”

In his defence, JR-M boasted that under his management, the fund had grown from a “mere $50 million to $5 billion.” This clearly demonstrates that he is an excellent salesman but as the evidence shows, a journeyman stock analyst and picker.

Slide12 Fund managers are normally paid an annual fee calculated according to a fixed percentage of the value of the investment under management. If it grows, the fees increase. If it shrinks or stays the same, fees are adjusted on a pro-rata basis. This approach works very well for the fund manager, not so much for the investor though.

In 2007, J-RM left Hong Kong with two colleagues to found Somerset Capital Management LLP (SCM) of which he owns twenty per cent. The $64k question is: “Was he pushed, or did he jump?”

Was this move the classic reverse double ferret where our hero became FILA-FIHK-TILA – Failed In London And Failed In Hong Kong – Trying In London Again? Rees-Mogg knows but he’s not saying….

SCM was conceived as a specialist Global Emerging Markets investment management firm. Its website states “We believe in co-investment, we cap our funds and we prefer to focus on performance above asset gathering.” It is a challenging sector in which to prosper, but one where it is recognised that in the right hands, high risk can bring high returns.

The company now boasts forty plus staff and has over £6.5 billion under management with impressive offices in London, Singapore and very recently, Dublin. It strenuously denies that the opening of its new office in Ireland is in any way related to the chaos anticipated with the UK’s upcoming departure from the EU due to begin in early 2019.

Fortuitously, Jacob and his wife Helena are well on their way to amassing a sizable family fortune. Just as well really, as the loved-up, uber-fecund couple have six children to privately educate. She is in-line to inherit the £45 million Fitzwilliam estate. When that unhappy day finally arrives, it is thought the golden couple could then be worth well north of £100 million.  Moggwarts

Elected to the House of Commons in 2010, JR-Mogg reportedly works about 30 hours per month for SCM and draws a salary of approximately £180,000 per year for his efforts. Moreover, as a partner, he is entitled to a fifth share of the profits generated (£25.3 million in 2017/18).

This is in addition to his parliamentary earnings of £77,300 per year plus expenses. These amounted to £137,500 in 2016/17 (including £17.54 claimed for printer paper in June 2016).

Which naïve fool said that being an MP should be a full-time job, particularly when the tax-payer seems happy to pay for plenty of hired help to provide cover for those really busy times?

It would seem highly unlikely that there is ever any conflict between his role as an elected representative for North East Somerset where he is expected to speak for his electorate of 65,500 mainly rural constituents, and his activities as the fund manager of several billion ££s when he is legally obliged to act in the best interests of his partners and investors.

Slide13It seems certain that the stout West Country yeomen and women he represents are very content with their Member of Parliament sui generis. They must feel he is well placed to fully understand and empathise with the challenges and difficulties they encounter in their daily lives and then to act accordingly on their behalf.

SCM has over £1.7 billion under management in its only investment vehicles traded on the open market: the Somerset Global Emerging Markets (B) fund and the Somerset Emerging Markets Dividend Growth (A) fund.

Slide14Feel some sympathy though for the investors who may have been convinced by JR-Mogg’s self-confident, high-profile, well-networked, City “homme d’affaires” persona and his languid, rather exaggerated, faux-aristocratic manner and speech. As we shall see, all that glitters may not necessarily yield gold….

SCM’s fund performance over the last year has been dismal. In mid-August 2018, the City Wire Wealth Manager website ranked the SGEM (B) at 232/281 funds (0% 1 yr growth) and the SEMDG (A) at 241/281 funds (-0.7% 1 yr growth). Both funds languish in the bottom quintile of their sector.

This could only be described as a D-minus performance or in the argot of Eton College his old public school, a GTF or a General Total Failure.

Slide6JR-Mogg’s fairly recently departed mentor Nils Taube must be rotating in his grave at a rate of knots as heaven forfend, his erstwhile protégé fails to match key investment indices by a country mile.

Looking at performance over the last five years, the picture is slightly better. However, the performance of both funds is still middling at best.  SGEM (B) comes in at very average 100th/198 funds while SEMDG (A) ranks at 119th/198 position. They have returned a pretty anaemic 43 per cent and 40 per cent respectively in cumulative growth over the same period, placing them squarely in the 3rd and 4th quintiles of their sector.

In contrast, the top performing funds in the same sector have returned a relatively impressive 81 per cent growth over five years and 19 per cent over the last year.

The table compares SCM’s fund performance over one and five years with some of the more important emerging markets where they have reportedly invested their clients’ funds. The absence of any performance data on the SCM website is very surprising indeed in this age of information overload.

Slide8

The analysis provokes several interesting reflections:

  • Fund management really does involve “earning” lots of money in exchange for very little old rope
  • There are huge fees to be earned by even the most mediocre of investment managers
  • Salesmanship trumps stock analysis & fund management skills every time
  • The pattern of fund under-performance established at Lloyd George Management has continued with SCM LLP
  • The Emperor desperately needs some new clothes before he is rumbled by the markets and investors

For the tech-savvy reader, £1,000 invested in Apple shares five years ago would have yielded 298 per cent growth and would now be worth £3,980.  Investors in Facebook have done even better and £1,000 would have grown to £5,860, representing a stonking 486 per cent increase.

Slide7Rees-Mogg clearly has some very significant failings as an investment manager and guru. Indeed, some cynics might justifiably argue that a troop of half-trained monkeys could have done a better job by picking stocks at random or by simply investing in a low-cost tracker fund.

Why, therefore should anyone take his very confident claims about the supposedly vast benefits to the UK of leaving the EU with any degree of seriousness? The wild assertions he has made as one of the self-anointed “Oracles of Brexit” about this extremely complex issue are impossible to confirm or deny at this stage in the process of our departure.

However, the very underwhelming investment performance of his company provides indisputable evidence of his general fallibility, a lack of sound judgement in important areas and an inability to ensure that even his own business is managed effectively.

Rees-Mogg was recently reported as saying that it could take fifty years for the UK to even begin to reap a Brexit dividend. Not unsurprisingly, SCM which has a fiduciary duty to its investors, has begun briefing against him by warning its clients of the potential significant disruption to the UK economy posed by the hard Brexit so strongly advocated by err, Jacob Rees-Mogg!

Happily, for Jacob, Helena and their six children, they will be well protected from any of the adverse effects of Brexit through the splendid cushion provided by their very substantial family wealth. Would that this was so for the rest of us.

‘It is all very well having those views and being thought to be rather an eccentric but interesting lad when you are eight. But having the same views when you are forty-eight raises, I think, one or two eyebrows.

And, I think, he has allowed himself a bit to be taken over by his own image and caricature.’

Chris Patten – Former Cabinet Minister & Last Governor of Hong Kong

Jacob Rees-Mogg has a real ability to amuse, an attractive propensity not to take himself too seriously and a penchant for genuine self-deprecation. He is also as we have seen, a very successful salesman and marketeer, qualities that he is bringing to the Brexit debate in full.

Great care must be taken to understand the man behind the mask to avoid being dazzled by the superficial glitz of an unusually vivid and interesting personality.

To be charming, witty and charismatic is a very good starting point for any wannabe political leader.

However, other important qualities are also needed if that person is to lead successfully, such as: sound values, balance, vision, integrity, good judgement, reflectiveness, a deep knowledge of history, economics & geo-politics for starters and a degree of humility & introspection.

Many would argue that JR-M possesses the former qualities in spades but that he has a significant deficit in a number of the latter.

Why on earth then should the British people put their future economic well-being and long-term security in jeopardy by giving any credence to the very confident predictions of an over-rated, monomaniac like Jacob Rees-Mogg or equally, the opinions of the relatively small number of ne’er-do-wells on the far right of the Tory Party, in the European “Research” Group and elsewhere who are almost clinically obsessed with Brexit and driven to the point of recklessness and madness by it?

Our country and indeed the world, looks on in astonishment as he battles with Boris Johnson for the role of Macbeth or Macduff in “Brexit” – our 21st century national version of that Shakespearean tragedy. Slide16

One can only hope that the Great British Public will hear and then utterly dismiss the havering of Jacob Rees-Mogg and his absurd, equally attention-seeking, clown-rival, BoJo.

That would deliver for them both, some very richly deserved, just desserts indeed.  Together, they are jointly responsible for trying to create a right royal and very perilous Eton mess for the rest of us.

Returning to the question implied in the title of this essay: how real are Rees-Mogg’s much heralded, oft quoted achievements in business and therefore, how seriously should he be taken on the critical issue of Brexit? The answer is of course: not very much on all counts.

It is frequently said that emptiest vessels make the most noise, and this may well be true of the Brexit debate.  One can look at Donald Trump with amazement and wonder how a man without any redeeming characteristics, and lacking any obvious gifts except a massive capacity to tolerate risk has been able to become rich beyond the dreams of avarice? Clearly, these things are possible.

What is beyond doubt though, is that the good people of the United Kingdom deserve much better leadership in these very challenging times than either Jacob Rees-Mogg or Boris Johnson is able to provide.