A trillion-dollar investor who survived the GFC has three simple pieces of advice
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Every September for the rest of time, Wall Street will reflect on the surreal crisis of 2008.
September marks the anniversary of the demise of Lehman Brothers, the giant investment banks that folded as America’s housing market and several investment products tied to it collapsed. Many other firms, like Bear Stearns, were forced to make deals or shut down.
Aberdeen Asset Management, now Aberdeen Standard Investments following a merger in 2017, was one of the firms that survived that period.
It can partly thank its CEO, Martin Gilbert, for his decision to sound the alarm on collateralised debt obligations before the risky financial product helped plunge the global financial system into chaos.
“I have to say though, the atmosphere in the office was not one of panic,” Gilbert, now co-CEO of the $US736 billion ($1.01 trillion) asset manager, told Business Insider of the days after Lehman Brothers filed for bankruptcy on September 15, 2008.
He added: “It was stressful and intense, but it was all about keeping a cool head in those days and weeks in the immediate aftermath.”
Mr Gilbert recently shared three things he learned from that tumultuous time, particularly for investors who were not professionals then:
“Don’t sell at the point of maximum pain. The scale of the great financial crisis was really something else but there are common threads running through all crises. Markets have a habit of bouncing back and you have to do whatever you can to take a step back.
“Another lesson is to stick to the basics.Invest in what you understand, spread your risk and know that if something looks too good to be true, it almost certainly is. The products that the banks were churning out in the run-up to the crisis were ever more complex and built on even shakier fundamentals.
“This relates to another lesson, and that is that the nature of a globalised economy makes neatly apportioning blame very hard.
“Banks have rightly taken a lot of the blame for the crisis, but it was a failing at all levels by governments, regulators, investors, rating agencies, and the banks. When the crisis hit, each party spent quite some time pointing the finger at everyone else. No one party was to blame, but they were all culpable.”