Prolonged financial crisis and shifts in economic power herald an age of uncertainty which the financial industry and its clients are not equipped to understand, says one of Britain's most powerful institutional investors.
The world is entering an era of broken promises in which much of what people take for granted, like governments honouring debts, will become less certain, said Saker Nusseibeh, head of investment at Hermes, the fund manager owned by Britain's largest pension pot, the BT (British Telecom) Pension Scheme.
Politics will become a principal factor investors need to take into account, bringing an end to any belief that recruits to finance can make do with no more than an understanding of markets and economics, he told Reuters in an interview.
The market is not a judging machine, it's a weighing machine. It's also not efficient. That's another of the myths. It just suited people to say it was efficient, said Nusseibeh, whose broad view of investment issues is exemplified by his role in the 300 Club, an industry body which aims to highlight the dangers of short-term reactions to volatile markets.
Nusseibeh's views anyway carry weight since he has overall responsibility for investing the 21 billion pounds of assets under management at Hermes, which as well as running portfolios of conventional assets like stocks and bonds, is one of Britain's largest players in alternatives, commodities and commercial real estate.
On his investment judgements then rests the retirement welfare of thousands of telecom engineers and other ex-BT staff.
He sees the euro crisis is an example of the market's shifting reality, reflecting political as much as economic stresses in the system.
We've had an unprecedented era of peace and tranquillity in the world and you have two generations of investors who have never had to think politically and (now) they are going to have to think about it, he said.
Many of the most successful investors in history, such as hedge fund legend George Soros, came from backgrounds that may be overlooked by today's finance industry recruiters, Nusseibeh said.
If you look at really outstanding investors and you try to work out what it is about them that makes them outstanding, very often they are not mainstream, said Nusseibeh, an Arab from Jerusalem who moved to Britain in 1976 and holds a PhD in medieval history from Kings College London.
Nusseibeh argues a new breed of investment professional, educated in political science or history as well as in economics or accountancy, should be added to existing teams of strategists.
Such an approach would mean the role of the chief investment officer individually responsible for strategy will soon be consigned to history.
I don't think that you can ever now have a CIO again. One person can never have that skill set, he said.
In terms of the funds he takes responsibility for running, the big picture view on the euro crisis and his claimed appreciation of its political nature have left him free of exposure to Greek debt.
A resolution remains too distant for him to see immediate opportunities in peripheral Europe though he believes a solution lies within reach.
The minute the 'Merkozy' grouping says 'we will back with our own money absolutely every bond issued', that becomes a buy, he said.
But Hermes is in no rush to invest until tensions within governments and unstable electorates have been fully defused.
To promote a more considered investment stance, Nusseibeh helped set up and chairs the 300 Club, which facilitates broader, better informed and more fundamental discussion about risk, regulation, instruments or economics.
It's not that people are irrational or bad, it's just each one is being rational within the very narrow confines of a little silo. And if you add all the silos together, the sum total of it is irrational, he said.
Industry reaction to the 300 Club was initially hostile, Nusseibeh said, with some stalwarts accusing the club of breaking ranks and drawing attention to industry weaknesses like poor disclosure, fees and ineffectual management that some would have preferred to address behind closed doors.
But membership is now gathering momentum, including CIOs at large institutions, banks and public pension funds, and Nusseibeh and his 300 Club colleagues are not frightened of opposition.
I feel like the Dutch boy with the finger in the dyke saying 'there's a crack in the dyke and everyone's saying 'why are you pointing this out?' Because there's a crack in the dyke, he said.
(Editing by David Holmes)
(Corrects spelling of name in fourth and fifth paragraphs)