Joining up Britain’s knowledge economy
The original definition of a hedge fund stretched beyond breaking point some time ago. While many pure-bred varieties still flourish, a growing number of others adopt investment strategies that provide little obvious hedge against a general market downturn.
Some take patient minority investments that bear closer resemblance to the traditional long-only pension funds. Others are taking such large stakes or exerting enough management control over companies they own that they look more like private equity investors.
It should be no surprise therefore to find this fashionable breed of fund managers colonising yet another asset class: venture capital.
The long-term deal announced on Wednesday between Oxford University and Technikos – a venture capital project from the private equity arm of a London hedge fund – is a little bit of everything. The £12m investment helps the university fund its new Institute of Biomedical Engineering in exchange for half the shares (or royalties) from any spin-out that would usually go to the university.
At first glance, this is a big slice of the university’s rewards from any future commercial breakthrough for a sum of money that would be seen as a rounding error in many parts of hedge fund world. Oxford gets more than cash though. Technikos will work to help commercialise projects.
Simple as this sounds, this is something UK academia is notoriously bad at. While scientists punch far above their weight in global research, profitable technology transfer remains more of a buzzword than a reality.
What this, and other innovative schemes with universities such as Bristol, Southampton, Kings and York, really does is connect two of the more successful parts of Britain’s knowledge economy in the hope of solving its entrepreneurial failings elsewhere. Good luck to them.
Rolling back markets
Of all the British industries returned to the private sector by the Conservatives, few remain as inextricably tied to the state as the railways. But the continued heavy subsidies required to keep the wheels from grinding to a halt do not excuse the latest intervention by the Department for Transport.
By referring the rolling stock leasing companies to the regulator for a competition review, the government sends out an amber signal to investors across the network. Now owned by the banks (HSBC, Royal Bank of Scotland and Abbey), these businesses make a small, but far from stellar return on the billions of pounds of sunk capital.
Their crime, if there is one, is to make consistent profits from older trains inherited from British Rail while others in the industry still find their legacy infrastructure such a burden. The picture is complicated – not least by the need to fund maintenance of these trains – but critics have been quick to sensationalise the debate with horror stories of overcharging.
In reality, the question of whether competition works in this case is an arcane technical one rather than an ideological rallying point. Yesterday, the leasing companies welcomed the review – presumably because they anticipate the government’s complaints will get short shrift and therefore clear up what has become a grey area. Nevertheless, there is a worrying tendency in government to regard consistent profits in privatised industries as automatic grounds for concern. Regulators in other industries seem happier second-guessing the correct mix of investment and return rather than letting competition, however flawed, run its course. In the absence of catastrophic failures, more people should realise that markets necessarily produce quirks and anomalies, otherwise there would be little point in investing in them.
School’s out for summer. Sadly, for many older students, this is not the nirvana of sunbathing and partying it should be. In offices across the country, now is when gawky adolescents start arriving to begin their work experience sentence. If the company is feeling transatlantic or pretentious, the role may get the grander title of ‘intern’ and attract fierce competition (or nepotism). Either way, the ‘experience’ is often a deeply depressing one for both sides. Many jobs in today’s service sector industries are not easily handed over to unskilled newcomers. If they are, they are often mundane chores for which the student should really be paid. Though parents and career advisers see placements as vital, employers are not always impressed with what they see. Perhaps students would gain more from summer jobs in the post room or temping agencies. This columnist certainly remembers learning much more about the realities of business life peeling spuds in the kitchens of Smith New Court and unpacking training manuals at a City accountancy firm than five days pretending to be a journalist on The Independent.
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