The world’s greatest investors: George Ross-Goobey

George Ross-Goobey was born in Poplar, east London, in 1911, the third son of a shopkeeper and Methodist lay-preacher. He attended Christ’s Hospital School, Sussex, on a scholarship, but his family could not afford to send him to university. In 1928, he joined British Equitable Assurance as an actuarial trainee. He worked for various insurers, became a fellow of the Institute of Actuaries in 1941, and in 1947, was appointed the first in-house manager of Imperial Tobacco’s pension fund. He was a member of the Association of Superannuation & Pension Funds (ASPF – now the National Association of Pension Funds) and, in 1972, was made its president. He died in 1999.

What was his strategy?

In November 1956, Ross-Goobey made a speech at the ASPF conference, at a time when pension funds invested almost exclusively in gilts, and when the notion of capital preservation was sacrosanct. Pension-fund managers, he said, should invest for “the best possible results”. That meant ditching bonds in favour of stocks – even if doing so led to short-term loss. In the long run, the gains would far outweigh the losses and bring a much higher return than bonds ever could, especially in times of inflation. He didn’t stick with blue-chips, either – delving instead into small and medium-sized firms. At one point his fund held up to 1,000 stocks. His ideas were unorthodox at the time, and met with much resentment in the City.

What were his biggest successes?

When he took over Imperial Tobacco’s fund, its assets were worth around £12m. At a time of low inflation his methods yielded double-digit returns. But his key success was to usher in a new way of thinking: the so-called “cult of equity”. Pension funds only began shifting back into bonds after the turn of the millennium, and equities remained dominant until 2012.

What lessons are there for investors?

Challenge the orthodox thinking, and don’t be afraid to switch strategies. By the early 1970s, when stocks were peaking, Ross-Goobey moved out of equities and into commercial property. He also bought gilts yielding 16%, sticking to his principle that the rate of return was all that mattered.