Hedge Magazine, August 2018. Original article (p42-45).
Starting a New Chapter
Interview with Jerry del Missier, founding partner and chief investment officer of Copper Street Capital
Jerry del Missier – what’s he like? We might as well start with that, as that’s what everyone asked me after I went to meet the financier at the HEDGE photo studio in South London earlier this summer. Because Jerry del Missier is a name that’s been heard far beyond the usual financial circles: he was the highest paid senior executive at Barclays Capital before resigning in the midst of the Libor manipulation storm. That’s six years ago now, and we’re here to talk about what he’s been doing for the past three: running his own investment company, Copper Street Capital.
If the air at the top was thin, it’s a far more down-to-earth situation for del Missier these days. Much has been made in the press about his modest offices in Maidenhead, near the train station just by the Travelodge. “I feel like we should be getting paid by the Maidenhead Chamber of Commerce for all the publicity we’re getting the businesses around there,” says del Missier, laughing. “But Copper Street Capital is a commercial venture. It’s not a vanity project.” And Maidenhead is really close to Heathrow. “I never fussed much over the trappings of office. I’m perfectly happy being in a small office again, with like-minded people.”
From the way that he talks, he’s clearly content to be in a different season of life, and equally, he’s happy to clean the office coffee machine if the light comes on when he’s using it. (The only difference is, he owns part of the company that makes the coffee. More on that later.) There’s no arrogance to be detected in del Missier and he’s surprisingly modest, at least until you see his shoes. Today he’s wearing a grey suit with waistcoat over a blue shirt, complemented by an orange tie dotted with little zebras. His cufflinks are leather and there’s a Rolex Explorer on his wrist. He seems to know a little bit about everything and a lot about more than most. It doesn’t take long to realise that he is very intelligent and also, clearly interested in the world around him, with an uncanny knack for seeing the big picture.
There’s about a dozen people at Copper Street Capital now, and del Missier tells me he is looking to add a few more, including in North America as he wants to start covering those markets, too. Del Missier’s dozen has quite the pedigree: he’s been hiring heavyweight names from the likes of Deutsche Bank and Barclays. The premise of Copper Street is to capitalise on event-driven opportunities in the financial services sector, and del Missier says the people are the key differentiator: “There is a core block of operations experience and expertise that allows us to really bring not just that operators perspective but also that insider perspective. You can put yourself in the shoes of the decision-makers inside the banks, because a number of us were those decision-makers not too long ago.” Maybe that’s obvious, del Missier adds, but seriously, the sector has undergone unprecedented change since the financial crisis – massive regulatory reform, upending of capital structure, and an unprecedented macroeconomic environment where central banks have had to resort to low or negative rates for long periods of time. “Direct intervention in asset markets has had a very disruptive impact on underlying businesses – assumptions about profitability are out the window. So if you’ve been on the inside and living through that whole transformation, I think it gives you a perspective that hard to replicate.”
Right now, one of the ways in which Copper Street is “heavily involved in the transformation in the financial services industry” is the situation in Europe, and the three key factors that’s driving driving change there. The first is recapitalisation – European financials have shrunk their balance sheets, raised new capital, and created entire new instruments. “This has created some significant distortion and opportunities, and the complexity of the environment makes it very difficult unless you are a specialist.” The second is restructuring of business portfolios, as new regulation has meant European banks have had to sell off assets. And thirdly, there’s reengineering of business models. “There’s a chart that illustrates this,” says del Missier, digging it out; most European banks still operate below 10% return on equity. “I think you’re going to see consolidation within countries, and in some cases you’ll see banks disappearing as they get broken up and parts get sold into others. “There’s still an awful lot of work to do, and a lot of opportunity to participate in this transformation.”
The best part of the job, says del Missier, is to be an active participant. “And hopefully, a driver of a constructive transformation of the sector. A healthy banking system is critical to the underlying economic success of a country or a marketplace.” It’s an extraordinarily interesting time, he adds – we’re at a crossroads that people will be talking about in 100 years. There’s tremendous satisfaction in being in it: “I firmly believe that taking Europe from where it is today and up to where it could be is critical for the European economy, and it also represents a huge investment opportunity.”
Del Missier was born in Northern Ontario in a mining town called Sudbury. “My parents had immigrated from Italy a couple of years before I was born. My sister and I grew up in an Italian household, and so did everybody else around us – everybody was first generation.” His first job was at 15, taking night shifts at the bakery where his mother worked before switching to construction jobs. “Everything that was made was saved for university,” says del Missier – it was always clear that he and his sister would go on to further education, something their parents never had the chance to do. Del Missier graduated from Queen’s University with a degree in chemical engineering and an MBA in finance. The engineering part was the influence of his father, “as I think that’s what he would have done had he had the chance,” but then the Canadian oil industry collapsed during his undergrad years. This was the 1980s and del Missier realised there was a lot of interesting things starting to happen in finance owing to the massive deregulation: “So I decided I wanted to be an investment banker.”
Del Missier started his finance career in 1987 at Bay Street, the Wall Street of Toronto. The papers often called him a “rising star” at Barclays, but del Missier is quick to point out he was “fairly senior” by the time he started at the British bank. He was in fact ten years into his career, having worked his way up from Scotiabank to a Senior Managing Director of Derivative Products for Bankers Trust, a place he describes as “an extraordinary organisation, a collection of extremely bright, creative people”. That business hit the wall in 1994: “You go through a period where the banks’ reputation has been damaged and the business that you’re a part of suddenly stops and it needs to be rebuilt. … As a firm, you call your fundamental values into question.” Those three years became the most valuable experience of del Missier’s career, he tells me. I ask him what the lesson was: “How you do business is more important than the results that you achieve.” He pauses. “If you compromise on values for performance it’s only a matter of time before you have problems.”
Del Missier has a three year gap on his CV between leaving Barclays Capital and starting up Copper Street, initially with $100m of internal capital before opening the fund to external investors a year ago. The newspaper articles from July 2012 tell the story of how del Missier, then newly appointed COO, left Barclays after 15 years. I’m not going to ask del Missier to recount this – instead I ask if it was a difficult time. He’s not one to look backwards, he tells me. “I’m not bitter about it. It’s life. I’d spent 25-plus years going at full throttle.” The lesson, he says, is that when you’re operating in a regulated industry you have to accept that things can happen when you achieve a certain level of seniority. “Our industry remains in a very political space.” Now though, he prefers to remember the good times. “I’m extremely proud of what we built, extremely proud of the people I worked with. I participated in some of the seminal events of recent times. I mean, my dad was a janitor and my mum worked in a bakery. I’ve been blessed.”
But, I press, when he set up his own company there must have been things he wanted to do differently. “Yes. You have a greater flexibility when you’re a dozen people than when you’re 28,000 people. In many ways the principles are the same, but it gets harder to keep those principles as you grow.” The point, he stresses, is to stay focussed on building the business in a sustainable manner, and not deviating from what you want to do. “I was raised to work hard, and keep my feet on the ground. The one thing you can control is how hard you work,” he says. And also, learn from your mistakes. “I was never afraid to take risk – I’m not talking about trading risk, but I learned long ago that it’s always good to feel a certain discomfort, and never let yourself get too comfortable.”
Del Missier is married to Jane and they have nine-year-old twins – a boy and a girl. “My family is everything. I spend as much time with them as possible.” Asked about hobbies, he tells me about the coffee chain he’s got a hand in, it’s called Boréal, but you can find it by googling “Best coffee in Geneva”, he laughs. I’ve checked and it’s true. He’s also involved in a Burmese restaurant in London called Lahpet, which has me do a double take – you can’t find Burmese food! “Exactly,” he says, looking pleased. I tell him how one of my favourite dishes is the fermented tea leaf salad from a Burmese place in San Francisco, and as I gush about it del Missier shows me the restaurant on Instagram – “lahpet” actually means tea leaf, he tells me. “This is fun stuff – it’s real and it’s not sitting at a computer. But the business takes up a lot of time. … I really want this to be a legacy project.” You want Copper Street to be the thing that people remember about you, I suggest, and he nods: “Yes.”
Copper Street is still at the whims of investor interest and the markets, del Missier says – that hasn’t changed. “But it’s my thing, and I want it to be an extremely interesting experience for everybody who works there. I want it to be the most meaningful thing that they do as well. I stepped into this under no illusion as to how difficult it is to build something from scratch.” He shrugs. “But I always tell the kids, anything that’s worth having is worth working hard for.”