Interview: Anthony Bolton

Halfway through interviewing Anthony Bolton about his new book, Investing Against the Tide, I am almost overwhelmed with an urge to start shouting out single, blunt words just to see what his reaction would be. “White,” I’d yell – to see if some compulsion drove him to bat back “Black”. For so contrarian is he that it seems to colour his own philosophy – not just his investment approach.

There have been many articles written on investing when there is blood on the streets – indeed, Mr Bolton was recently moved to call the bottom of the market a for second time. Yet so far, so usual. His record as a contrarian value investor needs little introduction: its effectiveness can speak for itself.

Since his Special Situations fund was launched in December 1979, an investor who placed £1,000 with Mr Bolton, would have seen that rise to £147,000 by December 2007 when he stepped down as manager.

But interestingly enough for an interviewer attempting to avoid skirting over familiar ground – and I am the first to see Mr Bolton this day in a series of interviews to publicise his latest book – it is intriguing to see just how consistently his contrarianism colours his thinking.

Take remuneration, for example. You’d think here is a pretty uncontroversial subject painted in simple moral tones: bankers earn too much money; they are paid bonuses; ergo bankers bad. But Mr Bolton doesn’t agree. He admits there is a problem with City workers’ salaries – it’s that they don’t get paid enough.

He makes the point, he writes, as a possible solution to “the long-term brain drain from listed companies to private equity [PE] – a lot of the best chief executives and finance directors are leaving the quoted sector for potentially higher rewards”.

He proposes two solutions in his book. “First, the average level of debt in UK-listed companies needs to rise. If this happened, there would be less opportunity for PE funds to buy these companies and gear them up substantially. Second, the rewards for executive directors of listed companies need to rise.”

“Yes, that is quite contrarian,” he says, when I push him on the issue. “But I’m in favour of results – pay has to be linked to results. If people produce good results, then pay can be high. But I’m obviously against payment for failure – quite the opposite.”

Yet isn’t this at the heart of the current debate, I ask? “This is hugely in the public eye,” he concedes, “because of the failure at the banks. But there is a view that maybe institutions should have some control over absolute levels of pay, and I think that’s debatable.”

His first solution to the lure of private equity is no less contrarian. Part of the problem many firms have encountered recently – not least, New Star – have stemmed from being overleveraged. “I’m talking about the long term,” he responds. “Obviously, there are times to have debt and times not to, but I would agree with the argument that the listed corporate sector does not use debt efficiently. It can be used to increase the return for shareholders and they have probably not used it as well as they could – for example, some of the drug companies have had very unleveraged balance sheets and that has not been in the best interests of the equity shareholders.”