Today we've got the first part of an interview with regular MoneyWeek contributor Charlie Morris, who's currently working with us on a major new project (more on that later this week).
Below, Charlie talks about growing up in Hong Kong, his army training, and the time he vacated his bath for royalty. We'll have the second part tomorrow.
Q: You were at HSBC for 17 years first at James Capel, which was owned by HSBC, and later at HSBC itself. What made you leave in April 2015?
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Charlie: My service was actively managed, but the world had changed. Although my fund was less risky than a traditional portfolio, perceptions differed. In 2000-02, "relative" returns became extremely unpopular. Absolute returns became popular. That means a manager making decisions rather than following the market. My portfolio was nothing like the market. It was free of a benchmark. After the crisis, this had largely played out. Many hedge funds caused mayhem, and "absolute" became a dirty word. Relative (hug the index) was back.
Things changed, and I just had to try and figure out what to do next. My last year saw the fund return 13% against collapsing oil and falling credit. I left on an extremely high note. I was determined that was the only position from which to start afresh.
Q: Didn't you want to go to another bank or firm?
Charlie: Doing the same thing somewhere else would make little difference. The whole reason for a multi-asset portfolio back in 2002 was no longer relevant: bonds had played out, commodities had played out, emerging markets Everything we started off calling a great opportunity had finished.
There are still pockets, of course, but you could drive a hole through the opportunities in 2002, whereas today you can't.
Q: Why?
Charlie: Because prices are simply too high. The bond market has very low yields. Credit is highly priced and overly issued. There is too much debt in the world. Property is also in the firing line because it's a quasi-bond. If you've got a tightly controlled multi-asset portfolio, you're going to struggle. I sought the ability to do my job with total freedom.
A hedge fund would have been appealing, but it's more exciting to have one's own hedge fund than to work for someone else's. They are very hard to raise money for these days. Besides, there's no additional magic that would appear.
Q: Why was it very difficult for someone like you?
Charlie: It's not easy to make money. Once you understand that, you realise what you're up against, and it helps you to be more realistic about what's possible. Hedge funds have a need to perform month by month. Markets don't work like that.
I think you can do a better job than the market. I think you can take less risk than the market, and make more. But what you can't do is produce some kind of Madoff-like perfection it's just not what it's about.
I realised that, actually, I love the game more than the industry. I love investments, markets, and the challenge of them.
Q: Let's backtrack a bit and go all the way back to your childhood. Where were you born, and where did you grow up and go to school?
Charlie: Where I was born is really funny. I was born in a town in the northeast of England called Hartlepool, where they hanged a monkey. During the Napoleonic wars, there was a French shipwreck, and there was a monkey that was washed aboard. All the English soldiers knew was that the French were hairy and didn't speak English. They put it on trial for being a spy. It was found guilty and hanged. That's why they call the Hartlepudlians the monkey hangers!
My dad built nuclear power stations in the 1960s. He was the chief engineer at Sizewell in Suffolk, then at Hartlepool, then at Heysham. We moved to Heysham, in Lancashire, after I was born. He was up there with the best of the civil engineers on the planet. I'm very proud of him.
Everyone was going on strike. It was the 1970s. My dad got a phone call saying "Would you like to move to Hong Kong and be the chief project engineer of the Mass Transit Railway?" and he said "Yup!" So from 1974 onwards, we lived in Hong Kong. My parents were based there for 25 years. My father was the chief executive of Hong Kong's largest construction firm. It was quite funny, because it was a British colony showing London how a metro system should work.
Q: How old were you when you moved to Hong Kong?
Charlie: I was three. I loved Hong Kong, and have fond memories of it: the smells, the light, the energy, the food. Some of the smells were quite honking in those days, because there was a contrast. There were slums. Over the next 25 years, they went, and the middle classes grew rapidly.
I remember the Vietnamese refugees very clearly. They were all coming over. I didn't really understand it at the time, but I think back to how these people were trying to get out of Vietnam. Who the hell wouldn't want to? It's like Syria today. I'm sympathetic to that cause.
Q: Were you good at school?
Charlie: No, naughty very, very naughty: always in trouble, all the way through school. I was born at the end of September and was in the year ahead, which I think was the biggest mistake ever. It just meant that rather than being top of the class, I was bottom of the class, bored, and played the fool. If you can, engineer it so your kids will be the oldest in the year rather than the youngest in the year. The difference between being five years old and six years old is huge.
Q: You then transferred from Hong Kong to boarding school Ampleforth, run by Benedictine monks. Was that a difficult transition?
Charlie: My older brother was already there, so that made it a lot easier. But it was pretty painful. Hong Kong was hot and I was spoiled and it was great. Yorkshire was cold and wet and miserable, and the food was terrible. Boarding school used to be rugby, cold classrooms, cheap food, and no central heating. Now it's a lot cushier like Club Med. They've all got en suite bathrooms and central heating blasting, and chefs in the kitchen and theatres and music centres. That's why it's so expensive.
Q: Do you have bitter memories of Ampleforth?
Charlie: No, school was great.
Q: Were you more studious there?
Charlie: Not really. I wasted my opportunities at school totally. I was naughty all the way through. Maths and physics, I was very interested in. But I was very, very bad at handwriting, because I did so many lines at prep school. I must have done hundreds of thousands of lines, as in: "I must not speak at the back of the class" or "I must not eat sweets". It destroyed my handwriting.
After leaving boarding school at the age of 17, I had a gap year. I went to study French at the University of Grenoble, and did a tour of Southeast Asia and Australia.
Then I went to Exeter University to read engineering. I should never have done engineering. I should have done economics or economic history. I failed my first year, redid it, and passed it. Then, in my second year, I said: "I'm going to go to Hong Kong, because I've already done this". I spent time in Hong Kong, and just didn't want to go back. University wasn't for me. I had good friends from that time, but I didn't enjoy it.
When I came out of that, my parents said, "You're on your own".
I got a job at a pub in Virginia Water in Surrey, and became manager six months later. I managed to treble sales. But I thought to myself, "This is pathetic".
I had wanted to join the army all my life from the age of 18. Originally, I wanted to fly helicopters. So at 24 I joined the army. I got a place at Sandhurst.
Q: How was Sandhurst?
Charlie: Fantastic: I loved it. The best year of my life. It's just the most perfect institution in the world. It runs like clockwork. Not a minute of your time is wasted.
It's hard work. You learn a lot about yourself and others. You improve your personal skills. It's not really about being a soldier, it's about leadership. The vehicle that you use is the green uniform and the rifle, but that's almost beside the point.
Q: It's very regimented for someone as rebellious as you. You had to be up at the crack of dawn, I presume.
Charlie: No different than working in the City! I think we got up at six. It was no big deal; I get up at six now. It wasn't some sort of physical nightmare that people assume it is. Yes, physical was part of it. You had big runs with logs, but that wasn't what it was about. It was not one big press-up competition. It was teaching people how to give a set of orders, make a plan and organise others.
Q: What about the academic curriculum?
Charlie: It wasn't that hard. There was some military history. The planning was taken very seriously: the ability to deal under pressure be tired and cold and wet, yet make decisions and ensure that things then happen. That was excellent, and I thoroughly enjoyed it.
I was supposed to join the Royal Engineers. Royal Engineers are the people that enable the battlefield to be accessible by the army. It's an important role. Everyone loves the "sappers" as they're called. Then, halfway through, I was asked if I wanted to join the Grenadier Guards. The Grenadier Guards would be the infantry one of the most prestigious regiments in the British army. To have that honour was fantastic. I said yes, of course, I would love to join the Grenadier Guards. Who wouldn't?
I left Sandhurst. We had a couple of weeks off for Christmas, and then I reported for duty at Wellington Barracks right next to Buckingham Palace. Two days later, I was on a plane to Kenya, and was there for three months. You're straight in there, a second lieutenant at age 24, and 30 men look to you.
You had to work very closely with your platoon sergeant. The platoon sergeant is in charge, even though you carry the blame and the responsibility. The way it works is, you lead from the front and he kicks everyone from the rear. That's the historic way to charge. After a while, people start to respect you more, and they stop sniggering and calling you the "young crow". It all starts to work well once you're a known quantity.
Q: Where else did you go with the Grenadiers?
Charlie: I got to Northern Ireland in the beginning of 1997, and was there for just under a year. It was regular patrolling duties. I'd arrived just after [Lance Bombardier Stephen] Restorick had been shot, so people were quite worried. We were on a residential tour. You'd be deployed to South Armagh, which was bandit country. They weren't nearly as bad as present-day terrorists. But it was a real threat.
Q: Were you very frightened, or somewhat frightened?
Charlie: No, not at all frightened. I didn't think the situation was very frightening. I had a job to do, and we did it. I felt they were more scared of us than we were scared of them. I had a platoon of Grenadier Guards. We were dying for them to have a go, but they never did.
Q: You mean the IRA, right?
Charlie: Yes. They never attacked us. They attacked soft targets.
The summer of 1997 was the Hong Kong handover. It was the middle of the Orange marching season. I begged my commander officer for permission. I said, "I know we are training for the marching season, but can I just have a couple of days off to visit Hong Kong for the handover ceremony?" So he said "Yes", which was amazing. That's how good the army is. If something means a lot to you, they say fine.
I had the most fabulous time watching the handover of Hong Kong, which I was very much in favour of. I thought it was time. The Empire was done.
I came back from Hong Kong and landed in Belfast. I was so tired, so I took a bath in the Officer's Mess. There was a knock on the door. A friend of mine said, "I'm standing here with the colonel, and he wants a bath". The colonel was the Duke of Edinburgh. I had to get out of the bath and let him have it. I gave it a quick scrub first!
Tomorrow we'll have the rest of the interview, in which Charlie talks bitcoin, the European Union, and about getting his big break in the City.
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