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Richards’s kind of investment requires more greed than fear, which is perhaps why some traders have nicknamed him ‘the pig’. Hedge funds are unregulated, enabling their managers to ‘go anywhere, do anything’, aiming at high absolute returns for which sophisticated investors typically pay 2 per cent — double the fee of a conventional fund — plus 20 per cent of profits above a certain level. For this, investors get to visit the wilder shores of investment, catching the latest wave of financial fashion and, with any luck, jumping off before it crashes into the sand. It’s a hazardous sport.
Richards’s latest move is to buy 80 per cent of A1 Grand Prix from the Dubai ruling family, on the rationale that motor racing is one of the fastest expanding sports in China. It’s a sign of his increasing diversification away from commodities. He pretty much called the bottom of both the stock market and commodities cycle when he launched his fund, and when the metals markets began to shift in the summer of 2003 — as the world woke up to increasing demand from China — his portfolio took off. How did he spot the turn when so many missed it?
‘I was prepared to think about it objectively rather than experientially,’ he says. He points to a long red line on a chart showing 20 years of falling commodities prices. ‘A lot of people base their investment decision on experience. They had lost money in commodities for so long they were not prepared to believe the evidence of their own eyes.’ His evangelical belief in the commodities super-cycle tells him that the red line that turned up in 2003 has many years to run. High prices usually lead to an increase in supply, but he seems oblivious to that idea, even accusing the big mining groups of restricting supply: ‘These days they are run by finance guys who have never built a mine in their lives.’
We meet in RAB’s headquarters behind the Strand, well away from the glitzier ‘hedge fund alleys’ of Mayfair and Knightsbridge. Dressed casually in an open-neck blue shirt, Richards appears on edge and distracted. His fund’s value actually fell in the third quarter of this year, although it has picked up since. He prevaricates when I press him for a definition of a hedge fund, pointing out that there are many different types. Eventually he settles on the cynical ‘a fee structure with a strategy attached’, first coined by an American professor.
Richards puts his ability to think objectively — rather than ‘experientially’ — down to seven years in the army, which sponsored him through Oxford. ‘The army is a good place to learn to think clearly, better than Oxford,’ he says, comparing the battlefield with the stock market. ‘You never know exactly what is going on but you have to put together what you do know coherently and act upon it early enough to gain the advantage.’
Now 46, Richards grew up in Devon, the eldest child and only son of a shirt manufacturer; it was an affluent early childhood until his father’s company almost went bankrupt. Good at maths and history, Richards won a scholarship to King’s College, Taunton, and from there he went up to Oxford to read PPE. He joined the Conservative Club along with William Hague and believes his provocatively right-wing take on events held him back from a first-class degree, something that still rankles. ‘I was told that my examiner was a known Stalinist,’ he says. From Oxford he went to Sandhurst and was commissioned into the Royal Green Jackets, rising to the rank of captain. After his first job at the stockbroker James Capel he moved to Smith New Court, where he first met Alen-Buckley. In 1999, disillusioned with their respective jobs, they set up RAB — standing for Richards Alen-Buckley.
These days Richards stays away from political parties and is strangely defensive about being defined as a capitalist. ‘I am more pro-Christian than pro-capitalist,’ he says. ‘Christianity is my world view. I believe in an old-fashioned self-reliant Christianity which dovetails quite well with capitalism — but not rapacious capitalism.’
Giving money away is fundamental to his beliefs. Even at James Capel, where he claims to have ‘earned less than the secretaries’, he gave away 10 per cent of his income. ‘There is a dynamic where God blesses people who give,’ he says. ‘An awful lot of the men of God in the Bible were actually pretty prosperous.’
Strangely, Richards has barely heard of Sir John Templeton, the legendary American value investor who launched his flagship Templeton Growth fund in 1954: $100,000 invested in it then would have grown, with dividends reinvested, to $55 million by 1999. Also a devout Christian, and now 94, Templeton has given away hundreds of millions of dollars to good causes. Richards might do well to read Templeton’s best-known book. It’s called The Humble Approach.
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