Julia Hoggett, chief of the London Stock Exchange (LSE), knows that her prior experience differs from that of her peers in the financial sector. “My background, actually, is as a sociologist specialising in Sub-Saharan East Africa; so, not your classical financial services background.”
The Cambridge graduate says her career has been about “answering exam questions”. Her decision to enter investment banking at JP Morgan was the first of many such tests, one she had posed for her postgraduate research: “How [do] some of the least-developed countries in the world operate in the global financial economy, according to rules that they didn’t set?”
Later, Hoggett joined the Financial Conduct Authority (FCA), the UK’s financial regulator, after close to four years at Bank of America Merrill Lynch. While at the FCA, Hoggett came to a realisation that ultimately made her decide to leave her post after seven years.
“There was a moment in the summer of 2020 when Apple was worth more than FTSE 100. And I sat down that evening, in the context of being a regulator and tried to think about all the things that I thought I could do to contribute, to enhance the position of the UK capital markets,” says Hoggett to The Edge Singapore.
The next afternoon, she got a call asking why she had not applied for the top job at LSE. The role had been vacant after her predecessor, Nikhil Rathi, left to run the FCA the previous year. “So, I knew the exam question I wanted to answer at this point in my career.”
Hoggett joined LSE in April 2021. In an exclusive interview three years on, Hoggett says her varied perspective on the industry has served her well. “I have sat on very different sides of the table across different parts of the ecosystem… There are similar elements of being a regulator; you don’t make policy for one company; you make it for the ecosystem. So, I think it has been incredibly valuable coming from that perspective.”
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In her role, Hoggett is in charge of the exchange — which she describes as “secure the venue, run the venue, grow the venue”. Hoggett is not in charge of the wider business of the London Stock Exchange Group (LSEG), which also includes data and analytics services, among others.
Earlier this month, a consortium of investors including Blackstone and GIC offloaded shares worth some GBP1.6 billion ($2.72 billion) in LSEG, exiting a stake the group inherited when the bourse bought data services firm Refinitiv in 2021.
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Lessons for Singapore?
LSE shares more than a few similarities with the Singapore Exchange S68 S68 (SGX). While LSEG bears the namesake exchange on its brand, it derives less than 3% of its revenue from its equities business.
For FY2023 ended Dec 31, 2023, total revenue from LSEG’s equities business was GBP227 million, a mere 2.8% of the group’s revenue for the year.
SGX Group, which reports with a June financial year-end, posted revenue of $592.2 million for the six months ended Dec 31, 2023. In 1HFY2024, SGX’s cash equities revenue declined 5.6% y-o-y to $159.6 million, accounting for 26.9% of total revenue.
LSEG’s equities revenue has been dwarfed by Refinitiv, the data and analytics businesses the group acquired for US$27 billion three years ago. With trading and banking solutions as the largest contributor, the data and analytics segment contributed nearly 70% of LSEG’s GBP8.06 billion in FY2023 group revenue.
According to data from Dealogic, LSE saw just eight IPOs worth EUR844 million in 2023, marking the worst year for new listings since 2009.
That said, LSEG CEO David Schwimmer remained upbeat about the current year, citing signs of a shift in momentum and “an encouraging IPO pipeline” for LSE.
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One notable debut on the horizon is British personal computer maker Raspberry Pi, which confirmed on May 22 its plans to pursue an IPO in June to raise US$40 million ($54 million) on the LSE. This would value the company at around GBP500 million, making it London’s biggest listing since Kazakhstan’s Air Astana JSC listed its global depositary receipts there in February.
The small flotation is a welcome boost to the ailing UK market, which has contributed just 2% of the US$12.3 billion raised in IPOs in Europe so far this year — the lowest in decades.
Hoggett has tried to provide the context of a flagging global IPO market that is affecting even the US. In a keynote speech on May 20, Hoggett cited JP Morgan chairman and CEO Jamie Dimon’s letter to shareholders from April, where he lamented the decline in publicly listed companies in the US. “From their peak in 1996 at 7,300, US public companies now total 4,300 — the total should have grown dramatically, not shrunk,” wrote Dimon.
To end this drought, Hoggett urges a rethink of the role of the bourse in serving entrepreneurs better. She says the public and private markets were built in a vacuum — “not through the lens of serving the fundamental client that’s going through the system, but serving the system”.
“We genuinely think creating an ecosystem that supports the scaling and the health of companies is absolutely our job,” she adds.
Hoggett chairs the Capital Markets Industry Taskforce (CMIT), a group established in August 2022 to help drive the reform of the UK capital markets.
Its members include GSK’s chairman, Schroders’ CEO and KPMG’s strategy head, among others. CMIT members have met monthly since July 2022, publishing their meeting minutes online.
CMIT’s agenda — nicknamed “five fingers and a glove” — includes plans to reform the UK’s listing rules to merge two segments of the main market, boost sell-side research, encourage the deployment of risk capital, improve corporate governance and scale “consequential private companies”.
Enrobing these five tasks is the “glove” of culture (more on these later).
Hoggett’s thinking and the work of CMIT may hold some valuable lessons for our local bourse. SGX faces a wave of delistings and is said to be reviewing proposals by the Singapore Venture & Private Capital Association, which includes GIC, Temasek, General Atlantic, Warburg Pincus and KKR.
According to a May 6 Financial Times report, the Singapore Economic Development Board, the Monetary Authority of Singapore and the Ministry of Trade and Industry are also considering the proposals to revive the local stock exchange.
The Society of Remisiers (Singapore) suggested earlier this year that Singapore sovereign wealth fund GIC should expand its strictly non-Singapore portfolio to include the home market, potentially overlapping Temasek’s mandate. This would allow more CPF and sovereign money to be invested in SGX.
That said, Hoggett and her team from LSE are wary of speaking directly to Singapore’s bourse operators; they reiterated throughout this interview that LSE is not in a position to provide advice to SGX.
Cultural shift
What exactly is this enigmatic glove and culture that Hoggett and other industry leaders espouse? “I don’t think you can ask a sociologist not to think about culture,” says Hoggett, who is both the first female and first openly gay CEO of LSE.
She stresses the importance of “telling the stories” behind each new listing. “A lot of that is asking people to be open, and celebrating their stories. Behind every IPO I ever get the privilege of standing on the balcony for in the LSE, there are many human stories, and those are the ones I love.”
Some sterling examples are IPOs where the founder brings one of their earliest apprentices, says Hoggett. “We had a life sciences company come to the market and they brought the chap who ran the factory and the lady who did the payroll, as well as some of the C-suite; because every single one of those people has contributed to that company being where it is today.”
The UK is now attempting to “frame it slightly differently”, she adds, “not talking about markets as basis points and bid cover ratios, but in terms of real-life consequences”. “It’s also about increasing retail enfranchisement and giving people a sense of the value of investing in the real economy.”
Some corporate stories, especially those of new economy firms, are not easily relatable. For instance, explaining 17Live’s live-streaming business to retail investors during its successful de-spac process on SGX proved challenging for industry players.
Hoggett, however, is undeterred about this aspect of investor education. “I don’t think it’s a new challenge; I suspect somebody said 200 years ago: ‘Please explain to me the business model of railways.’”
This highlights the importance of ensuring “new propositions can be explained and communicated”, adds Hoggett. “That’s why the role of institutions like yours are so critical, actually, and why it’s so great that you’ve got the [readership] you do, because it’s in talking through, explaining that business model and giving people a sense of what the proposition is that people understand the different ways in which value is created within an economy and society.”
‘Globally consequential companies’
Hoggett made headlines last year when she said low executive pay in the UK hurts the country’s competitiveness. “The comment that I made was that we need to have the conversation about what it takes to generate globally consequential companies, and we are now having that conversation.”
To create these “globally consequential companies”, the UK must recognise that it is in a “global war for talent”, she adds. “If you’re a British company breaking into Asia or the US, you may well need to hire people who are experts in those markets. If your pay structures mean that the experts in those markets can get paid more than the CEO can get paid in London, then you may be giving up value creation as a consequence of your attitude to remuneration.”
Singapore may have the opposite problem. Here on the SGX, CEOs and individual directors are now expected to disclose the exact dollar value of their annual remuneration in a bid to improve corporate governance.
So, what does Hoggett consider as “globally consequential companies”? “The UK has been creating globally consequential companies for hundreds of years; we already have a significant number of them. I think globally consequential companies will have material activities in Asia and the US. But that doesn’t mean they have to be listed in the US.”
Listings may be flocking to the US, but LSE is putting up a fight. “There is no inevitability that to be globally consequential, you have to be a US company. We are a globally diverse economy and we should remain so.”
Photos: Albert Chua/The Edge Singapore
