KEITH SKEOCH, chief executive of Standard Life Investments (SLI), said yesterday that it was “worth taking a risk” on inflation in order to get more growth into the economy.
In comments that align him closely with incoming Bank of England governor Mark Carney’s more flexible agenda, Skeoch said there was a current obsession with inflation when it was not a particular problem anywhere.
In an interview with The Scotsman, he said that monetary policy had “run out of gas” and he expected Chancellor George Osborne to impose more measures to stimulate growth when he delivers his Budget speech on Wednesday.
“We are witnessing the end of inflation targeting,” he said, noting that he had experienced the effects of hyper-inflation in the 1970s when it was the number one target for policymakers.
“We are a bit inflation obsessed. I don’t think there is any inflation pressure anywhere in the world.
“We need to get growth going and maintain a framework for inflation. If it starts to accelerate we know how to nip it in the bud. It is worth taking a risk on inflation.”
Skeoch revealed a record-breaking year for SLI which announced that third-party assets under management rose 16 per cent to a highest-ever £83 billion and now account for half the total, against just 9.4 per cent when it was launched in November 1998. Total assets under management are up 8 per cent to £167.7bn (2011: £154.9bn), another record.
The annual statement showed that 62 per cent of net flows came from outside the UK, including £1.8bn ($2.8bn) from the US. Earnings before interest and tax rose 15 per cent to a best-ever £145m (2011: £126m) and worldwide third-party sales were up 42 per cent to £6.1bn (2011: £4.3bn).
He said the company was committed to long-term investing and while he accepted there was an issue with short-termism, he felt it was over-stated. He said recent research by the Investment Management Association showed the average holding period for UK equities had not changed.
Skeoch said shareholders were changing their behaviour as shown by last year’s so-called “shareholder spring” which led to a number of rebellions, mainly against boardroom pay.
He said he now expected the focus to turn to other issues, including pressure on nominations committees over succession planning.
“Corporate governance is a long-term game. The shareholder spring was the start of a greater willingness for investors to speak out where they found inadequate behaviour that did not sit well with the codes. There will be a continuation of activism and broadening out of the issues.”
He said there was now a “greater dialogue” between shareholders and a willingness to engage together to get their points across. “Dialogue is very important because it is the means by which you get constructive engagement. The shareholder spring’s impact will be long lasting.”
Skeoch believes the surge in equity markets has been fuelled by, among other factors, a switch from fixed income and a recognition that the world’s policymakers “will do whatever they can to stimulate growth”.
He expects the FTSE-100 to hit an all-time high this year, although there were a number of issues such as the Budget, the German election and the momentum of the recovery that would make the markets choppy.