The current generation of politicians aren’t up to the task ahead of them, which requires revolutionary steps such as the break-up of the euro, according to Bill McQuaker, head of equities at Henderson Global Investors. 

McQuaker, who is also director of Henderson’s range of multi-manager funds, says past crises brought us politicians such as Franklin Roosevelt in the US and Margaret Thatcher in the UK, but today there is no sign of the strong leadership they provided.

“The lesson of the 70s is that there are times when politicians fail and are overwhelmed by events,” he said.

“There is less willingness in Europe to allow the weak to go to the wall and the strong to get more room to breathe, but this is the creative destruction at the heart of the capitalist system."

Surprisingly, the manager thinks that out-of-favour Italian politician Silvio Berlusconi is one of the few to have shown the strength to break the mould.

“Recently we have seen Berlusconi talking about European involvement in a very different language than what we have heard before,” he explained.

“He has said Italian leaders have been too mealy-mouthed in their negotiations and the problem should be talked about in simple terms: there are three solutions, the first is that Germany bails out Italy, the second is Germany leaves the euro, and the third is Italy leaves.”

“This is strong and radical language, which is needed,” McQuaker added.

The manager is sanguine about the possibility of the break-up of the single European currency, saying that although in the short term it would be a disaster for the economy, in the medium term it would be ‘fabulous’.

“The euro should never have come into existence. Its collapse would be celebrated by the economies and also I think by the peoples of Europe,” he said.

“At the time the peoples weren’t consulted and, to be frank, I think they didn’t much care. On the surface it seemed quite a nice wheeze to be able to travel around Europe without a passport.”

“I feel in my bones that we cannot be too far away from some more creative thinking because what we have had so far simply isn’t working. There are signs of that already, not only in Italy but also in Greece.”

“Voting patterns in Greece have been radically difference than what we have seen since the 70s, after the period of military rule, so changes in the political process are starting to take place,” he continued.

“We should also remember the campaign stance Sinn Fein had on the fiscal compact – they said if Ireland signed up for that it would be the end of democracy in Ireland."

McQuaker says that investors have had to take a greater interest in politics in recent years than they had had to for many decades.

The consensus after the Reagan/Thatcher years was that market forces were all-important, and politicians wouldn’t interfere – and wouldn’t need to interfere.

The world since the financial crisis is a very different place, however, and understanding where the political winds are blowing is as vital as it was back in the 1970s or the 1930s.

Performance of manager versus peer group over 10yrs


Source: FE Analytics

Data from FE Analytics shows that McQuaker has returned 37.57 per cent in the last decade, versus a peer group composite of 30.39 per cent. He heads up five multimanager funds in the IMA unit trust and OEIC universe, including the £662m Henderson Multi Manager Income & Growth portfolio.

He warns that although past crises have seen leaders such as Roosevelt and Thatcher emerge, Adolf Hitler also rose to power in a time of crisis, and with electoral politics going through a volatile period a similarly malign outcome can’t be discounted.