Dawid Konotey-Ahulu co-founded investment consultancy Redington in 2006, having left Merrill Lynch where he was part of a team that implemented the first full LDI derivatives transaction for a UK defined benefit pension scheme.
He went on to co-found 10,000 Black Interns, and recently won the Outstanding Contribution Award at Financial News‘s Excellence in Fund Management Awards.
FN caught up with Konotey-Ahulu to talk overcoming challenges, LDI’s future, and his aspirations for diversity in the City.
You were turned down for a pupillage after your legal studies because the chambers you applied to said they had hired a Black person the previous year. Was this a turning point for you?
I was told explicitly I wouldn’t be part of the mix so I started to look elsewhere and found a role working for a law firm in the City. I ended up doing that for a year, then worked for a bank as a lawyer. In 1990 I moved across to NatWest Capital Markets, so I was still a lawyer but working in City institutions.
In 1991 Robert Maxwell fell off his boat and I was the lawyer who was trying to unravel what he had done. I then got sponsored and mentored by Duncan Goldie-Morrison, who was deputy CEO of the whole operation. He thought I’d do well to work the mainstream swaps and derivatives business and suggested I move across. I was quite resistant as I had studied law for a long time and was being asked to move into an area that was very numbers based.
I almost got fired when a new boss came in. He was very impatient and wanted to get rid of me. My immediate boss at the time took it upon himself to show me what to do. He helped me turn things around and find my feet.
Essentially I was given an opportunity by two people who took a chance on me when I wasn’t the obvious choice.
You set up Redington, MallowStreet and 10,000 Black Interns from scratch. Where does your entrepreneurial drive come from?
I grew up in Accra with not much money. My father was a government doctor on a dollar a day. You had to be inventive and innovative because we didn’t have much. We had to find ways of being engaged and doing stuff that was interesting.
It was also a violent time. I grew up during a time of coups and revolutions and it was a very tough time. I became comfortable with ambiguity.
I left Ghana in 1979 and my family and I came to the UK as refugees. I was the only Black kid in the school I went to. On my first day the biology teacher asked my name and said it was too hard to pronounce, so said I could be called Joe. I ended up being called Joe throughout my time at school. The experience made me resilient. You have to figure out how to deal with the cards you are dealt.
READ Check out all the snaps from FN’s fund management awards
I’m also not afraid of stepping out. My view earlier in my career was that the pensions industry needed to manage risk better. But to do that and change things, I realised I had to leave my job at Merrill Lynch. That stepping out was akin to me leaving Ghana and coming to the UK.
10,000 Black Interns has been a big success. What’s next for this initiative?
We have seen an extraordinary response. We got 2,000 internships for the first year and we’ll have another 2,000 for 2023 across 30 different sectors. It has changed the game and everybody is up for it.
In the past I have talked about ‘kinks in the hosepipe’. If you are from a minority there are kinks in the hosepipe of life where the water just stops. These can be at different points of life, such as when you are deciding what to do after school or choosing a career path.
What 10,000 Black Interns has done is unkink the hosepipe when people leave university. But there are other kinks, such as helping people to progress and enabling them to find a place at the top table. We will develop and evolve into an organisation that doesn’t just place people, but helps them through the journey to help them progress all the way through.
If we put 4,500 people into companies and 3,000 leave, that’s not good. You want 90% to stay, which is how you change the face of UK Plc.
LDI has come under scrutiny following the recent turmoil in the pensions market. Is it still fit for purpose?
The world moved to much stricter accounting after Enron. When FRS 17 accounting standards came in [which put pension scheme deficits on company balance sheets], it completely changed the game. Within a short space of time there were enormous debts appearing on corporate balance sheets. If you looked at any of the financial press in the early 2000s, all they were talking about were these enormous pension deficits which threatened to destroy UK Plc. There was an enormous need to control the volatility of pension deficits.
What we were trying to do was to immunise companies from further calls on their cash. The idea was to freeze the deficit so a company had a target to aim at and knew how much it could afford each year for the next 15 years, while allowing it to continue to invest in equities to top up the rest of the deficit to full funding.
LDI was trying to solve a very specific problem. All these pension obligations had been written without costing them. LDI has worked and there are millions of pensioners who will now be getting their pensions. If we hadn’t gone down that route, companies would have been forced to pay billions of pounds into the pension fund to keep it topped up — that’s money they wouldn’t have been able to invest in their business and innovate.
READ How the Bank of England helped ‘alleviate pressure’ on LDI clients
What we saw with the mini budget was extraordinary. We saw the biggest move in the real yield — which drives the size of the collateral calls — that we had ever seen.
But we are living in a new regime. We do need a rethink around collateral and liquidity generally, as well as extending credit lines and being prepared to wait for collateral. Banks will charge for that facility but it’s something that might need to be looked at as a possibility.
Many pension schemes will be able to hold more collateral than they were holding. If we get biblical about it, it’s a bit like having Noah’s Ark. Once the rain has gone and it’s dry ground, do you chop up the Ark for firewood or keep it just in case? You’d probably keep it for a long time just in case.
What are the biggest threats for the fund management sector right now?
The immediate challenge is how we establish normality with the pensions industry. But the S in ESG is also huge. This is the decade in which we have to get it right.
There is a generation coming through who really care about this and want to work in organisations that look after their people and do the right thing, and don’t necessarily have the usual people around the table.
One issue is becoming more diverse, but it’s also about inclusivity. People will say they joined a firm but that they didn’t fit. I know what it’s like to stumble, almost get fired, and have someone make it their personal responsibility to make sure you are a success. People from minorities have their own issues, and it’s about understanding them and helping. When the industry cracks that, more people will stay and there will be more people to get promoted.
If you looked at me in 1992, there was no way you would have bet on me. And yet four people at various points in my career were willing to take a bet on me, and I like to think they have been proved right in the end.
To contact the author of this story with feedback or news, email David Ricketts