The Prince of Wales may know as much about finance as the average fund manager knows about the royal family, but sometimes he’s uncomfortably close to the truth. Last week he told the National Association of Pension Funds that short-term thinking was making their brand of capitalism increasingly “unfit for purpose.”

This irritating, overworked phrase aside, there’s a serious problem here, although short-termism is a symptom rather than the cause. The malaise in this industry can be easily summarised: too many coins are sticking to the shovels of the managers and the brokers.

Since they designed the model, this is hardly surprising: they get paid whatever happens to the fund being managed. There is the nuclear threat of losing the mandate, but generally only prolonged poor performance allied with no convincing case for improvement causes the bomb to be dropped. Running a fund is so lucrative that there are four pages of them in your weekday FT, and little more than a single page of the underlying stocks that the funds trade.

Describing this problem is easy; breaking the model is much harder. The Kay report recommended scrapping quarterly reports and greater engagement by fund managers with companies. It singled out Neil Woodford as the model manager. Unfortunately, Mr Woodford has now left the big fund he ran and the response of the average manager to the Prince’s criticism is likely to be: why should I bother?

Profits for the pollsters

Yougov is a thoroughly modern company. The assets are mostly intangible, the product is essentially educated guesswork, and the profits are, well, elastic. Last week they were both £1.5m (“reported”) and £6.8m (“adjusted”) before tax. Fortunately for the founders, investors prefer the second measure, which is why the business is valued at £75m.

So should they mind the gap? Ignore the goodwill writedown and some exceptional items, and earnings per share are 5.6p. Not that this is much of a guide to the capacity of the company to pay dividends. Chairman and CEO Stephan Shakespeare is pleased to announce a 20 per cent rise in the payment, but at only 0.6p a share the micro-yield is 0.78 per cent.

Like any polling organisation, Yougov has its own black box, to ask the right selection of people the right question. Instead of using clipboards or phones, it asks 2.8m people electronically, and in theory increased awareness of the Yougov brand encourages them to be more thoughtful in their response. With politicians, businesses and lobby groups desparate to know what people think of them, this is a growth business. In some cases, like elections, results can be checked against the predictions, and Yougov scores pretty highly here.

It’s hardly Mr Shakespeare’s fault that the quest for truth in accounting has effectively drained all meaning from the p&l account. He might remember the words of Anthony Burney, long ago at Debenhams: “Let us resolve to make money and leave it to the auditors to decide the profit.”

Thames should take the plunge

The various owners of Thames Water have done splendidly since they took it off the stock market in 2001. The register has changed a bit since then, most recently with the McQuarie Group-led consortium selling down to three other private equity investors. As usual, the prices are all too private to disclose.

Now, at last, it looks as though the balmy days of raising debt and dishing it out as dividends may be ending. Jonson (“Stop”) Cox, the newish broom at Ofwat, the industry regulator, has turned down Thames’ plan for stiffing its captive domestic customers. Instead, he invited the company to cut costs and collect more water bills.

Thames is already pleading poverty, asking the government to guarantee the debt required to build a £4bn super-sewer under the river through London. This looks like another grand projet which is so attractive that its backers want someone else to pay for it. Had a little more equity been left in the business, Thames could have financed it; since the sum would be added onto its regulatory asset base, on which returns are almost guaranteed, perhaps it’s time for a rights issue – if the tunnel really is worth digging.

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