The Big Interview: veteran investment chief Alastair Cumming

Alastair Cumming, senior investment director at Investec, at the firms office in Glasgows George Square. Picture: John Devlin

Alastair Cumming, senior investment director at Investec, at the firms office in Glasgows George Square. Picture: John Devlin

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He’s been based in Glasgow for practically all of a career spanning nearly five decades, but Alastair Cumming’s horizons seem to know no bounds. A voracious ongoing student of the world, he adroitly connects the dots between a diverse range of topics from Opec oil policy and Japan’s quantitative easing to the US elections and the rise of the middle class in the Far East – plus many more.

It’s an essential skill for a senior investment director such as Cumming, who’s constantly on the lookout for the next opportunity or exigency that might be “coming in from the left”. This professional predilection dates back to his days starting out as a broker on the former Glasgow Stock Exchange, but the personal passion is evident as well.

“I am an avid reader of anything to do with the markets, politics – anything like that,” Cumming says. “That is the exciting part – the markets are alive. They don’t cycle, because everybody learns something from what’s happened before, but they do rhyme. You have got to keep manipulating, changing and learning all the way along.”

A senior director at Investec Wealth & Management, Cumming’s CV is littered with venerable names from the broking and banking world. But it could have read quite differently had it not been for a stroke of family misfortune.

As a student at Kelvinside Academy, Cumming had hoped to take up a career in marketing. But the premature death of his father, John, forced Cumming to step in at the age of 17 at James Short & Co, the one-man brokerage run by his father.

Friends of his father’s from a fellow brokerage took Cumming under their wing during the year it took to wind down James Short, during which time Cumming learned the workings of what was then the open outcry system of buying and selling shares.

“It was not nearly as sophisticated in those days as it is now,” he says. “There were no computer screens, no Google, so the FT was your bible.”

He was hooked, and in 1970 took a trainee post with RC Greig & Co. A few years later, the firm opened an office on the 13th floor of the London Stock Exchange, where Cumming spent a year in the only substantive period of his working life outside Scotland.

By 1984 he was back in Glasgow working for private client broker Laing & Cruickshank. While there, Cumming arranged the takeover of Whishart Brodie in Edinburgh, giving the parent firm regional representation in Belfast, Edinburgh and Glasgow.

That was “quite an exciting time”, Cumming says, as he was trading business for all three of the regional offices as well as up to 200 trades daily from Laing & Cruickshank in London. Head office “would leave you alone if you were making money”, providing a good deal of autonomy north of the Border.

The 1987 acquisition of Laing & Cruickshank by Credit Lyonnais heralded the arrival of Ian Hay Davison, who would go on to make his name as the “Eliot Ness of Lloyd’s” for leading the clean-up of the specialist insurance market. In this instance, Hay Davison was called in by Laing & Cruickshank’s French owners to sort out a £90 million hole in the books. “I got on with him very well, actually, but he wasn’t interested in having any businesses north of the Watford Gap,” Cumming says.

The Glasgow and Belfast offices were sold to BWD Rensberg in 1989, where Cumming stayed for a further five years before joined Allied Provincial. Following a series of four acquisitions, that business eventually became Barclays Wealth Private Bank.

Many of Cumming’s clients remained with him throughout the succession of ownership transfers, having developed personal relationships that often accompany the trust required when managing individual and family money.

The overhaul of Barclays’ wealth division in 2013 saw the shift of lower-value customers into a “light touch” service, but Cumming was unwilling to transfer clients of up to 20 years into a call centre environment. He and three colleagues resigned to join Investec, which was taking advantage of unsettled conditions across the sector to bolster its ranks.

“We knew we could make a healthy living on smaller clients,” says Cumming, referring to fellow Glasgow-based Barclays defectors Clifford George, George Hunt and David Paterson. “In Scotland, £1m-plus clients are very thin on the ground, and they are also over-brokered.”

Regardless of the size of their portfolio, the primary challenge facing all investors for several years has been a lack of economic growth that has pushed returns to rock-bottom levels.

Quantitative easing has kept things ticking over by flooding markets with cheap money, but has also harboured a prolonged period of muted expansion that is proving difficult to break out of. Listed companies have taken advantage of low interest rates to buy back stock, which boosts their earnings per share, but many are struggling to lift top-line sales. “Quantitative easing is an experiment which we don’t know how it will end,” Cumming says. “It was a better fix than doing nothing, because it kept the wheels going, but we have borrowed growth from the future. We may trundle along sideways for longer than we expect.”

Cumming is also cautious on the bond market, which is on a three-decade bull run. Given its size – the worldwide value of government and corporate debt is about twice the capitalisation of global stock markets – a correction could cause serious disruption.

“The main drivers in any marketplace are fear and greed, and fear is a bigger motivator than greed,” says Cumming, who likens the current situation to the investment atmosphere during the miners’ strike of 1974. “It was very interesting in terms of market psychology, because everybody was very frightened and hunkered down. It was educational, and has served me in good stead in subsequent periods of stress.”

Though it’s difficult to beat the system during a period of low growth and inflation, opportunities exist. In addition to a few short-term sovereign bonds – an investor’s basic “insurance policy” – Cumming notes that inflation-linked gilts are currently quite cheap, and could prove a good investment over the medium to long-term.

Unit trusts linked to UK mortgage products are worth consideration, as are certain consumer stocks, particularly those of companies with exposure to emerging markets in the Far East. As for oil, Cumming believes prices have now bottomed out, but is not betting on a recovery to levels seen before the current slump. It remains to be seen what the impact of this will be on the Scottish economy, which has also had to endure the erosion of another major foundation, financial services, in the wake of the banking crisis.

The credibility of the nation’s two major banks was undermined when the government was forced to bail them out in 2008, calling into question Scotland’s reputation as a centre of prudent financial management. However, Cumming believes the country’s fund managers remain respected, providing a platform to work from for the future.

Sticking to his adage that markets don’t repeat identical cycles, Cumming says there will be no replay of the credit crisis that kicked off in the autumn of 2007. However, he’s keeping an eye out for the next dilemma emerging from left field.

“We are not going to have anything like that again for this generation, because we all remember it so well, but you can bet your bottom dollar that there is a lad in a back room in a bank somewhere who is working on the next scheme.”

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