The world is changing fast and to keep up you need local knowledge with global context.
When chartered accountant turned ace money manager Delphine Govender left Allan Gray two years ago, most outsiders scratched their heads. After 11 years with SA’s most admired asset manager, she had been intimately involved in helping it grow from 60 people to 800; and witnessed assets under management ballooning from R20bn to R360bn. On the day when Delphine opens her new two new Met Perpetua unit trusts to investment from the public, Allan Gray’s former star manager explains why she decided to go it alone – and tells of the challenges of running a boutique money manager. – AH
ALEC HOGG: Well, we used to know you as Delphine Govender of Allan Gray but today is a big day for you. You are going public with Perpetua opening your funds for retail investments.
DELPHINE GOVENDER: Correct, Alec, we’re quite excited. Interesting, we’ve actually been operating as an asset manager probably by design a little bit below the radar, as we kind of formulated our business. Today is actually our second birthday of operating. It is also quite exciting to be now also rearing our heads into the public domain with our Unit Trust launch.
ALEC HOGG: How many are you launching?
DELPHINE GOVENDER: We are launching two funds, Alec. I think what you should expect from a business like ours, just for interest sake, Perpetua, as a name, actually means something that is enduring. Therefore, you’ll find that our fund offering will always have an enduring nature to it, so the two funds that we are launching are funds that we think will always will have a relevance in an investor’s suite of investments – the Perpetua Met Equity Fund and then the Perpetua Met Balance Fund.
ALEC HOGG: You say ‘Met’. Has it got something to do with Metropolitan?
DELPHINE GOVENDER: Correct. One of the interesting opportunities available to relatively new or smaller fund managers in this decade, is the ability to outsource the non-core investment aspects of your business but still very important aspects, such as operational, compliance, and administration and then, including that, distribution, to almost best of breed. Then also, obviously for relatively new fund managers, the ability to obtain a unit trust MANCO license is quite onerous and so, the FSB allows one to co-brand with establishing this in place. We’ve done our research in the industry and we’ve elected to partner up on a co-brand thing, of our unit trust with Met Collective Investments.
ALEC HOGG: They’ve been in the game for a long time and it does give you that third party, I suppose the ability to just focus on investments, and let them do the admin.
DELPHINE GOVENDER: Exactly, and this was what one hopes one achieves or obtains when you go to… We’re called boutique firms. As a function of that we tend to be smaller in asset size, and smaller in general business size. There is no compromise on, obviously the quality of the output. It is just that it is a different scale and I think, as a result, in our selection of whom we thought we wanted to attach ourselves too, what we needed to do was compliment the skills. What we really want is to have a distribution partner that has a respected brand, a very expensive and far-reaching, established distribution network. In partnering up with Met we believe we’ve got that but, again it always takes two in a partnership, and we also hope that we are good partners for them.
ALEC HOGG: Well, we’ve known each other for a long time and I’m sure people listening to this Podcast, well, not all people listening to this Pod Cast know your background. When did you join Allan Gray, just to go back a little?
DELPHINE GOVENDER: I actually joined Allan Gray in 2001, so it’s many years ago, some 13 and-a-half odd years ago. I spent just under 11 years there but prior to that, in fact my very first job in the industry, straight and fresh out of qualifying as a CA at Deloitte. The next week I walked straight into being an analyst at Old Mutual Asset Managers. Back in 1998, it was interesting because those firms, the investment units of life were still very much where aspiring young analysts went to join. Then interestingly, the household name meant that they worked, was Old Mutual Asset Managers, Sanlam Investments, and Liberty. Not necessarily the household names that are on everybody’s lips today, so there’s been quite an interesting revolution in the industry, over this last 16 or 17 years that I have devoted, perhaps my entire professional career to developing as an investment professional.
ALEC HOGG: You were ahead of that trend then as well, if you were leaving Old Mutual for Allan Gray, which in 2001 was nothing like the Allan Gray of today.
DELPHINE GOVENDER: Absolutely and it is interesting. You’ve hit the nail on the head and I think it wasn’t the obvious choice in 2001, as much as Allan Gray had actually come through in interesting positioning and of the late 90’s, when it was not invested, obviously in the whole TMT boom. Interestingly, I think the assets at Allan Gray, in the year, the opening assets in 2001, was somewhere between 15-billion or 20-billion. If you fast forward 11 years later, when I left, I think the assets were over 360-billion. It was a phenomenal decade to have been part of the investment team, in terms of participating in the success of the firm, but also I think being in the business and experiencing what it means in running an investment firm, and that was an invaluable time for me as well.
ALEC HOGG: How big a portfolio did you have to look after, before you left or at the time, you left Allan Gray?
DELPHINE GOVENDER: I guess the interesting thing about – and you’ll be aware about Allan Gray, and I think it’s a great characteristic of the agents that individuals, as much as the individuals will be well-known in the market, it’s not about building individual stars or disclosing the size of the assets that they manage. In fact, it is information that is kept, quite closely guarded, simply because it is not about the individual. It’s about clients and it’s about the firm. As a result, I’m not at liberty to disclose exactly the quantum of assets, safe to say that there were three key-fund managers, and two who had been more recently appointed, so there were five at the time that I left, and the total assets of Allan Gray was split between us.
ALEC HOGG: What I’m getting at is what turns an asset manager on? Obviously, performance is one but having ammunition, having firepower, and you had, you were one of the stars at Allan Gray, 360-billion that you looked after, collectively and off you go and start your own firm. I’m trying to see what it was that was going on inside your head, at that time.
DELPHINE GOVENDER: Well, I guess it’s the ultimate question because as you actually point out and highlight, the easy decision for me was to, completely to have stayed at a great firm, which has an established brand name and a huge, asset base but, I guess, ultimately individuals get motivated by different things. Your individual impact in the firm tends to perhaps, change over time, as the number of people in the firm; perhaps when I was with Allan Gray, I think I was the 60th employee when I joined in 2001. By the time I left we were almost 800 people. Obviously, mostly not in the investment team but, having said that, individual’s impact changes. I think what also happens is that your outlook, in terms of where you feel you can have a greater sense of ability to make a difference, changes, and interestingly if you look at most of the successful firms today, professional firms, the investment houses, even Allan Gray as an example.
Typically, they start from a single individual, who has a view or a sense of purpose that they feel that they want to perhaps to see outside of an existing established infrastructure. Perhaps, me talking about the fact that my first job was at Old Mutual and then moving onto Allan Gray and I guess the interesting, kind of, explanation there is how the market has moved on. Therefore, the question is, what does the landscape of the investment community and the asset management industry look like ten years from now? I think there is absolutely room for the next generation of substantial managers, that don’t necessarily have to be the mega names. I think that Perpetua, as a firm, is very well positioned, given the way we started building the firm, to participate in being a major player in the next generation of fund managers.
ALEC HOGG: You still haven’t really answered the question. What was it…you woke up one day and you said, “I want to do it myself.” What caused that? What was inside the Govender genes, if you like that made you want to do that?
DELPHINE GOVENDER: Well, partly I have answered it, in a sense that it’s about where do you believe your individual impact can be most realised. In life, we all hopefully ascend to what, is now well known as the hierarchy of needs where you spend quite a lot of your…once your basic needs are covered and you are in the profession, you spend quite a lot of time on mastering your skill and I think, that’s what for me, Allan Gray was valuable at allowing me to master the ability to hone in on my investing ability. Although, having said this to you, you know Warren Buffett extremely well, the world’s greatest investor, as you know and yet the whole beauty of why we pursue this endeavour of investing is that no one can really ever master it. It is the most ultimate dynamic, ultimately dynamic industry to work.
At some point you also have a question that goes on in your head, well some people do, not everybody does, and the question is, “Is this it? Am I truly achieving my full potential and is this an environment where I can? Or is there a different environment that I believe I can make a greater impact?” Ultimately, it’s not for everybody. You need to be an entrepreneur at heart and perhaps one’s own personal experience, about perhaps my parents and the opportunities that they had in South Africa, need to be the ones I have, also play a role, so it’s a very multi-faceted profession. Ultimately, it really is about saying, “I think I can make a more significant difference in the purpose that I feel I have for my life and I believe I have the competencies and the skills to have a good chance of succeeding at this.”
ALEC HOGG: What have you been doing for the last two-and-a-half years, Delphine, while you were building Perpetua?
DELPHINE GOVENDER: Well, naturally extremely busy they say an entrepreneur often swops the 40 to 50 hour paid work week for the 100 hour unpaid work week, and I think that’s been absolutely true but the reward, which is not measurable in a monetary gain, is absolutely what you do it for. The challenge has been immense but it’s been all good challenge so, fundamentally, what we’ve done is actually set up the business. There are quite a lot of onerous operational aspects but fortunately with good admin outsource partners, as I’ve mentioned, a lot of that has been taken off our hands. Really, for me, the bulk of my time has been spent truly cementing a perpetual identity, as an investor. As much as they could have been a big influence on me, from all my previous experiences as an investor, every firm has to develop their own unique DNA.
I guess, just like human beings, we inherit our DNA as a starting point, from our parents, as we evolve into adults we become who we are because, and despite of all our upbringing I guess, this is exactly what I’ve been doing. To really hone and develop Perpetua’s identity, both as an investor, and its processes. Fortunately, we’ve been able to attract some clients to actually, put it to work and truly allow the team to develop and internalise. I believe you can’t teach an investment process or a philosophy. It has to be one that is absorbed over time and, so by necessity, it’s a slow process and that is really, what we’ve been doing.
ALEC HOGG: What kind of a client will be happy and comfortable, having their funds managed by Perpetua?
DELPHINE GOVENDER: This is for me, perhaps one of your most poignant questions because often, you can approach investing in two ways. You can either say you can sell to a client, in terms of saying ‘this is what I promise you, this product will deliver and this is the kinds of returns’. Alternatively, you could explain to a client your approach to investing, your identity as an investor. The robustness of the approaches that you follow and the outcome you therefore expect to dependably and repeatedly generate out of this system, and if that resonates with the client, together with everything else about the way the business is set up and the client is appealed by this, then they actually buy you. Having said this, it is not simply a matter of standing up and saying ‘well, this is who we are. Take it or leave it’.
It is also about really ensuring that we have this open, and engaging and accessible client experience, so to answer your question more directly. Some of the key aspects that we’ve really been focused on and ensuring that what clients need to understand, is that firstly, unsurprisingly, we are absolutely managers that focus on looking at the value of businesses. As opposed to focusing on the share price and trying to predict where the share price is going next. One of my key learning’s has been to actually, pursue more of an all-encompassing value approach, as opposed to an extreme, deep value approach, necessarily as I think it is not an approach that is frequently enough in the South African market, due to the narrowness of the market.
Then the other kind of focus we have is that we are not benchmark cognoscente, so really, the type of client who wants to trust with their hard earned money need to say ‘this is the fund manager that we believe will treat the money like it is their own. Will take care of it and grow these hard earned savings, to as much as it can be and outperform the risks they take in this endeavour’. It is not simply about outperforming a benchmark that has been stipulated by a market or the norm.
Bio: Delphine Govender (41) BCom CA(SA) CFA is Founder and Chief Investment Officer at Perpetua Investment Managers, an investment firm which commenced operating in 2012. Delphine has 19 years financial services working experience of which over 16 years has been in the investment management field. The majority of this was gained at Allan Gray Limited where Delphine was employed for 11 years and where she held the position of portfolio manager and executive director. Follow her on twitter at @Delphine_DG
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.