The safety of speculation …

Doubtless writing tongue-in-cheek to the Estates Committee of King’s College in 1938, Keynes remarked that it was safer to be a speculator than an investor. In the 1920s when first assuming responsibility for the College endowment, he had been a speculator, experiencing a remarkable conversion in the early 1930s to become a genuine long-term investor. Viewing the development of portfolio practice through Keynesian lenses, we demonstrate the essential continuity in conventional practice from Keynes’ time to the present day, the enduring characteristic being the treatment of uncertainty as if it were risk. Current practice is technically sophisticated, manifested in the reliance on benchmarks and risk controls to such an extent that we can refer to the fetish of benchmarking. In contrast, Keynes’ indirect, allusive, indeed elusive, approach embodies a unique insight—one that has been totally obscured by the conventional emphasis on ‘capital appreciation and depreciation generally’.