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"Not sound, but brilliant". Keynes's Personal Investment in the London Stock Exchange

Marcuzzo Maria Cristina , La Sapienza Università di Roma
Sanfilippo Eleonora, University of Cassino and Southern Lazio

While an extensive literature has grown on Keynes as an institutional investor, much less is known about his personal investments in terms of their scale and composition, and in particular about his investment philosophy. Indeed, so limited is the knowledge that in some cases characterization of “Keynes as investor” in the literature has reduced to one what were in fact the two lives of Keynes as an investor in the interwar years: on his own account and for institutions. Continuing from our previous research on Keynes’s personal investment, in this paper we add perhaps the most important piece to the mosaic of his activity, namely his trading on the London Stock Exchange, concentrating in particular on the reasons behind his choices of assets in the portfolio. On the basis of unexplored archival material we reconstruct in detail the investment sectors in his sterling security portfolio from 1922-1945 and single out, within each sector, the companies (and the instruments) he was “more happy” with. With this evidence we are able to highlight what we have termed his ‘pet’ philosophy, namely finding out which were his preferred assets in terms of both longest holdings and dimension, following the lead he himself gave: “I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes” (CWK XII: 57). Keynes’s investment philosophy was described by a broker who worked with him in his capacity as institutional investor “not so much sound, in the sense of being prudent and safe, as brilliant in its originality and daring, and over a long enough period likely to show definitely better results than the average”. In this paper, we are not so much concerned with assessing his overall portfolio performance as with finding clues for an understanding of his choices of companies and instruments, looking for a pattern and consistency.

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Keywords: Keynes, Investment, London Stock Exchange

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