Letter: Arm IPO would test PM’s free market credentials

You report that Prime Minister Liz Truss and chancellor Kwasi Kwarteng are preparing to launch a last-ditch charm offensive to persuade Japan’s SoftBank to list the British tech company Arm in the UK (Report, September 16). Why are they doing this, given both are fervent supporters of “free” markets?

According to your correspondents, a dual UK-US listing “would be viewed as a vote of confidence in the London stock market and would enable

UK-focused investors and pension funds to invest in what is viewed as one of Britain’s biggest tech success stories”.

This second point clearly illustrates the absolute dominance of benchmarking among those institutions, a practice roundly criticized by John Kay in his 2012 “Review of UK Equity Markets and Long-Term Decision Making”. Among its key points was the need to focus on absolute not relative return, so “risk” is not tracking error relative to a benchmark; and portfolios should be differentiated from benchmark indices.

It may well be the case that the new UK government “saw the chance to win at least part of SoftBank’s flotation as a ‘big and quick win’ to show it was serious about the future of the City” but such an initiative is not based on sound investment principles, nor is it consistent with the declared beliefs of Truss and Kwarteng.

JE Woods
Kingswood, Surrey, UK

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