The world’s greatest investors: John Maynard Keynes

published 4 March 2016

16-3-4-JMK-634 — John Maynard Keynes likened the stockmarket to a beauty contest

John Maynard Keynes (1883-1946) is best remembered for his writing on economics, most notably The General Theory of Employment, Interest and Money (1936). This outlined what would become known as "Keynesian economics", the use of fiscal policy to manage demand and thereby maintain full employment. But Keynes was also a very successful investment manager, working for two insurance companies and managing the endowment of King's College Cambridge. Historians focus on his work for King's, because he had almost complete control over a large part of the portfolio.

What was his strategy?

Between 1921 and 1932 he adopted a top-down approach, shifting in and out of various assets based on economic indicators. From 1932 to his death in 1946 he focused far more on individual shares, adopting a value approach that focused on low earning multiples and high dividend yields.

Which worked best?

However, between 1933 and 46, his share selections returned an average of nearly 20% a year, double the level of the market. The part of the endowment that he controlled beat the market by 7.7% on a risk-adjusted basis. By the time of his death, King's shareholdings had grown from £285,000 in 1922 to £1.22m in 1946 (from £11.3m to £45.2m at 2014 prices).