Interview – Richard Tomlinson
INTERVIEW: RICHARD TOMLINSON
“Black Swans enlarge many of the standard deviations in markets.”
Richard Tomlinson, Local Pensions Partnership’s new chief investment officer, tells Mona Dohle, about why this crisis is different, the outlook for the global economy and that this is no time to act like a hero.
How has Covid-19 impacted LPP? It’s been an interesting few weeks to say the least. Our portfolios have seen some large price moves, but in terms of the operation we haven’t had any issues so far. I am sure many others are in a similar position in that we have gone from an office-based environment to a remote en- vironment in an accelerated timeframe. Thanks to our IT team, we are operating fully remotely which we could not have done a few weeks ago. It’s been a team effort.
That might be quite useful in the long run then? Rahm Emmanuel (chief of staff at the White House) used to say: “Never let a
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crisis go to waste.” This is the same situa- tion; we’ve had a significant upgrade in our IT infrastructure which we might have made in the long term, but this has accelerated it massively. It’s fair to say that we’ve learnt a lot about ourselves, as have many organisations. The key is to focus on communication within the team, which is much harder if you’re not in the same room. It is also forcing us to be more disciplined in terms of how we communicate, especially if oth- er support functions like childcare have disappeared.
Was your portfolio relatively well prepared for an event such as this? Were we prepared for a pandemic?
Clearly, we weren’t. Were we concerned about market structures, liquidity man- agement and the setup we have in public markets? Certainly. Some of the big swings we have seen re- cently were not that surprising given how the market structure has changed over the past decade in terms of who holds what capital and how it’s leveraged. The underlying liquidity provision, the way markets function now and the role invest- ment banks play in a crisis is not particu- larly surprising. Black Swans enlarge many standard deviations in markets. I thought we would see some flash crash- es, but this has been more significant. We’ve had significant
deleveraging of positions in many places. The whole ETF
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