John Kay, 5 Years post Kay Review

John Kay


5 years post Kay review on Long-Term decision making in UK Equity markets.

John Kay at a recent London CFA event speaking about 5 years post the Kay review on Long-Term decision making in the UK Equity markets. My short notes and impressions below.


John spoke clearly and with authority, in a measured but charming fashion. He was a good speaker (which economists are not always, in fact some would say often the opposite), with anecdotes and evidence at his command.

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
― John Kay, Other People's Money: Masters of the Universe or Servants of the People?

One amusing but alarming story:

"[On gathering evidence for the Kay review] Every asset manager I met claimed to be doing stewardship and governance well. In my view, this was not the case. At one fund manager it was obvious this could not be, as the first time the CIO had met the Head of Governance was in their meeting with me."

The strength of his view that regulation was part of the problem and not the solution was a surprise to me. You can read this in the review, but Kay speak about it more forcefully.

No one will be buried with the epitaph ‘He maximised shareholder value”
― John Kay, Obliquity: Why Our Goals Are Best Achieved Indirectly

Kay describes the problem that regulation and innovation are likely to be in almost constant conflict. Regulation seeks to encompass best practice *at the time* but from the moment it is set and crystalised, the regulations ossify and can not keep up with where best practice moves to (spurred on by the constant forces of innovation).

Brief notes: The wisdom of John Kay as distilled and interpreted by Ben Yeoh, at a CFA event last week in London.

Intangible investment has been run down in the pursuit of (short-term) EPS growth.

Concern that engagement has been dumbed down to a box ticking exercise.

Regulation is part of the problem, not part of the solution.   Regulation and innovation will be in conflict. Regulation attempts to encapsulate best practice at the time of enactment [however it ossifies]

Still need to foster long term trusting relationship between asset owners (Kay dislikes this term) and fund managers.  Fund Managers are central players in the system now.

Believes there is a challenge to the market based paradigm of capital allocation. It is not self evidently the best form of capital allocation. In several markets, net equity issuance has been negative not positive, if one accounts for share buy backs and acquisitions.

Several private equity participants could be views as short term flippers of assets.

Fund managers today and tomorrow will need a different skill set from those of yesteryear. The ability to assess management, culture, stewardship, success planning, corporate strategy…  [items that come under “ESG” or non-financial]

Kay review can be seen here: