Ian as Investment Bursar

Ian Little's experience of portfolio investment began with his appointment as one of the two investment bursars at Nuffield College in 1958. At that date, Nuffield ceased to be a department of the University and became responsible for the management of its own funds.

Vickers was an extraordinary individual. His warmth and huge generosity gave him friendships with left-leaning academics despite his own right-wing politics and his support for apartheid South Africa. He was an active and dar­ing investor. He was not afraid to select the unorthodox and to bet on rela­tively short-run movements. Riding price bubbles is notoriously dangerous, and it is a measure of Vickers' judgement and intuition that it protected him and his clients from the worst perils of high-risk investment. A striking exam­ple of this comes from a time long after Little had ceased to be an investment bursar. Vickers put the College into Asil Nadir's Polly Peck conglomerate, to show a considerable profit, and got out of that stock in good time before the company was exposed as a sham and went bust. The daily telephone conversa­tions with Vickers were hugely enjoyable, but resulted inevitably in too much trading (“churning” as it is now called), a bad investment strategy, though profitable to a broker on commission for trades.

One of the investment trusts that served the College well was the Vickers da Costa Insecs (Investing in Success) fund. This fund was based largely on the principle of investing in firms that had shown a high rate of growth of earnings per share in the past. This strategy was surprisingly successful for some time. The success is surprising because the policy is based on two assumptions. First, it is assumed that earnings are positively serially correlated. Secondly, the strategy only succeeds if stock prices do not reflect that correla­tion, as what would now be called the efficient markets hypothesis would require. The serial correlation of earnings is such a natural and intuitive idea that it takes an unusual intellect to question it. That intellect was Ian Little's. As he writes: ‘However, I was unhappy that there was no statistical proof that past growth was a good predictor of future growth. I feared that our success might be based on an illusion, which could not last' (LbL 2004: 113).

The result of these ruminations was a short paper with the eye-catching title of “Higgledy-Piggledy Growth”, published in November 1962, and sub­sequently a small book co-authored with A.C. Rayner, published in 1966, Higgledy-Piggledy Growth Again. These studies destroyed the notion that there are growth stocks whose future earnings performance can be predicted from the past. This discovery was embarrassing because Ian was an Insecs Director (a position from which he resigned shortly thereafter) and because his find­ings could be seen as ungrateful in view of the great benefits that had accrued to Nuffield from its investment in Insecs. As Ian writes: ‘Donald MacDougall also thought I was “rather letting the side down”. I did not see it that way, as I did not believe success could continue for long if based on error. Perhaps I also thought that an academic scholar should put the dissemination of truth before profits' (LbL 2004: 113). As it happens, opinion in the City was catch­ing up with Ian's thinking. The fashion for growth stocks was soon in decline, and the analysis of company prospects became far more sophisticated. Ian's friendship with Ralph Vickers survived this history, and he became a Director of the General Funds Trust, the other big beast in the Vickers da Costa stable.

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