The Credo Story: How SA-expat Roy Ettlinger built R35bn London-based group

Over the past month in London, I’ve sought out successful South Africans, those who left their homeland to test their skills in one of the biggest cities on earth. Most of them operate under the public radar, shying away from publicity, simply focusing on doing their best. Roy Ettlinger, co-founder of the Credo Group, is a classic example. Arriving in the UK 27 years ago with his chartered accountant’s certificate and a bellyful of ambition, he has built an asset management business that now managed over R35bn on behalf of clients, many from the homeland. In this fascinating interview with Roy and Credo’s Cambridge University educated chief investment officer Deon Gouws (ex Sanlam and RMB) we learn a great deal about why South Africans punch above their weight in London – and why so many have carved out hugely successful careers in their new base. – Alec Hogg 

I’m with Roy Ettlinger, Chief Executive of the Credo Group and his CIO, Deon Gouws. Roy, you’ve been in London some time….

Yes, Alec. It’s nearly 27 years. I came in October ’89 and I thought I’d come for a couple of years to get work experience. I guess I’m still getting work experience and never left. London’s been good to us. We’ve enjoyed it very much. As for the Credo Group…I joined a gentleman in 1992 who had a small broking business with about $20m under management – all ex-South Africans in the business. In 1998, we’d grown that business to about R100m which is what became Credo. That business was injected into a new company and I brought three partners on board. So here we are, 27 years later. I’ve gotten used to the weather and I’m very happy in London.

You haven’t lost your accent either. Do you still do a lot of business with South Africans?

I would guess today, possibly half the business is South African or South African-related. We have a very nice business with SA institutions and intermediaries where we use our platform, which has been developed over eight or nine years in-house. We have six or seven IT guys and it enables these institutions to have an offshore facility for their private clients. So by numbers of clients, it’s probably 70 percent South African. However, because of the size of the assets and where the Rand’s gone, it’s certainly less than half the assets. We have a very nice U.K. private client business, but South Africa is important to us. I go there three or four times per year on business. Deon (Gouw the CIO) returns to SA more often than that as do a number of my other colleagues. We probably have 50 or 60 trips per year back to South Africa to visit clients and keep building the business.

We’ve just employed employee number seven in South Africa. We spent a long time with no real representation, but we are growing offices there. We have an individual in Cape Town. We’ve recently employed someone in the Eastern Cape, based out of Port Elizabeth and have five people in Johannesburg.

London headquartered Credo Group's CEO and co-founder Roy Ettlinger (left) with his chief investment officer Deon Gouws
London headquartered Credo Group’s CEO and co-founder Roy Ettlinger (left) with his chief investment officer Deon Gouws

How important is it to become U.K.-dominant?

Many people see us as an ex-South African business, but I joined an ex-South African in London in 1992. The people who joined us were all already here. We’re certainly not a South African business. We believe we are a U.K. business that happens to have a natural network in South Africa because we have an affinity with people there. Today we have a staff of about 55 in London. We have 14 in Geneva and as I said, seven in South Africa. Of the senior ten people in the U.K., probably seven are South Africans but I would really suggest that this is a U.K. business and we continue to grow the U.K. The reality is the private client business…even when you find wealthy South Africans; however wealthy they are, £1m is a lot of money to them whereas £1m to a U.K. person is not of the same scale.

We believe there’s a very big niche in this market for investors who have from £500 000 upwards, which is not served properly. In the old days, people would go to their local bank manager. Today, for a variety of reasons, they can’t do that and the mega institutions are only interested in guys with £2m, £3m, £5m, or £10m, which opens a very nice market for us.

Deon Gouws, you’re well known in South Africa as former CEO of RMB Asset Management. Why did you pick Credo?

I’ve been here for three-and-a-half years now. Time flies. I met my wife when I lived here previously – she’s not South African. We had some decisions to make about four years ago and decided to come back to London. The one condition I put on the table when we had a long conversation one night is that I first wanted to find the right fit in terms of my own professional future, because I think London can be quite a tough place to be if you don’t have a good job. From that night, it took me about six months until I met the people at Credo. In fact, it’s a small world because there are some strong links between me, and the individuals at Credo. One of my ex-bosses (and still, close friend) Arnie Shapiro, who was at Old Mutual all those years ago and subsequently, at Capital Alliance; he and Roy have been personal friends for a long time, so that’s a link. That link wasn’t actually the catalyst. But it made it easy for me to do my due diligence and I guess, in the opposite direction as well.

We met each other and to cut a long story short, I think my own outlook in terms of investment philosophy was exactly the way Credo managed money. From that perspective, and it was just a good fit. The kind of business that Credo has was exactly the kind I wanted to work for. It was similar to my previous life in that it was an investment-related job, on the one hand. On the other hand, it was different in once crucial aspect, viz. that it was private client-focused. After 16 years in the institutional side, I reached a point in my life where I’d grown a bit tired of managing money, but never really meeting the underlying client. There are all sorts of gatekeepers, trustees, consultants, and middlemen at institutions that keep you away from the client. Getting away from that appealed to me before I even met Credo. When the match was made, I was very happy and I’m even happier now, three-and-a-half years later.

Roy, in 1998 you started off with about R100m under management. You now have £1.7bn, or R35bn in rand terms. Would you conceivably have been able to do the same if you had stayed in Johannesburg or Cape Town?

I would like to think so, but I guess not. One of the opportunities in the U.K. was that being an ex-South African and going back to our roots, there was an affinity with people here. Whereas had I tried to do it in South Africa… I think it’s a very competitive market. In our early days, one of the people I brought along was a co-founder (then our CEO). He wanted to build a business in South Africa and I was fairly adamant that there was no way we should try to compete with South African asset managers and intermediaries being based in the U.K. I think that’s proven to be the right thing. As I say, only now are we building an office there and that is really just to service our South African clients. We’re not going to build a domestic South African business. When we started this business, the market in SA was very well served.

There were many very good big players in SA whereas in the U.K., what we do was seen as a niche market. You can have a small niche business in the U.K., but because of the size of the market, it can be a real business.

What was your background before you came here in 1989?

I was at school in Johannesburg. I spent five years at university in Cape Town and then did my accountancy articles, one year in Cape Town and two years in Johannesburg. As soon as I completed articles in October of 1989, I got on a plane and came to the UK for a couple of years. I worked as an accountant in a timber trading business, also for ex-South Africans. That lasted about six months. I worked for another ex-South African for about 18 months and then decided I was unemployable, so had to start something on my own. I’d always loved the markets, they were a passion of mine, and I always wanted to deal with clients and investments, which is why when we started the business in 1998, we brought in someone else as the CEO. In about 2005, there was a disagreement. He left and I took over as the CEO, albeit reluctantly.

As Deon mentioned, one of the great things about this business is that you get to meet people and form relationships, and many of the clients become friends, and many friends become clients. It’s a very personal business in that sense. Our business has grown by word of mouth. We think we’re very low profile. We’ve done very little marketing and it’s like one big family. Of my senior staff, a number have been here a long time… I think the shortest is seven years (a U.K. individual), but the South Africans – I have people who’ve been with me for 10/12/14 years, which is fantastic.

It’s also quite interesting that you’re both Chartered Accountants, Deon. Warren Buffett says that if you don’t understand accountancy, you don’t understand business. Do you think there’s an affinity for CA’s who are also a little more entrepreneurial?

If I go back to my previous life in South Africa in the institutional side then certainly, over my investment career – which is roughly the last 20 years – I’ve seen more and more CA’s coming into the field. I guess there were always some, but it’s much more prevalent now. To cut a long story short, if you can’t work through the numbers and uncover the noise in the numbers then it is a disadvantage in the world of investing. In terms of our investment team here as well, it’s not exclusively chartered accountants, but we have a few of them over here as well in the investment team. I do think it’s a natural fit. I know there are successful investors who have very different backgrounds. There are some mathematicians, psychologists, and others but I do think the CA is a very good qualification for investment professionals.

A bit about your background: you say you did come back to London. Why leave in the first place?

Well, I moved to London the first time at the beginning of 2003 and I was involved in Sanlam’s very small, fledgling multi-manager international business. That business still exists today, but it has restructured a bit. I was involved in that for about five years. I only understood the timing in hindsight, but it happened to be roughly the beginning of the financial crisis in August of 2007, to be exact. I moved to Johannesburg from London to go to RMB Asset Management. First, as CIO and a while later, as CEO. That move back to Johannesburg – from my personal perspective – was simply, following an opportunity. It wasn’t a decision to move back to South Africa at all but where I was in my own life and my professional life, the opportunity presented itself and just entailed a move. As I say, in that first stint in London, which now goes back just over 11 years, was when I met my wife. We decided to give Johannesburg a chance, go back to that job, and a few years later when things changed – my own professional situation changed at the time of the merger between Momentum and Metropolitan – and that’s when we decided to come back.

Roy, for many South Africans, there’s concern about the politics. There’s concern about the economy. There’s concern for something you don’t see here called loadshedding. What is the feedback that you’re getting from (1) clients and (2) friends?

I still regard South Africa as home. I think London’s a global centre, but I do feel like a foreigner here. There are lots of foreigners, so that’s okay. I was actually in South Africa last week with Deon. I spent three days there. Whilst I’m a huge optimist – my father still lives in South Africa and he experiences loadshedding, and I think that for the elderly people it’s not very easy – it’s quite hard to be optimistic. From clients, we see that they’re probably as negative as they’ve been for a long time.

Since 1998 – is pessimism at its worst?

I think it probably is. I think there used to be quite a lot of hope, looking forward. Today it’s hard to find optimists. Whilst there are number of people and certainly, a number of our clients, who are doing very well economically, there seem to be concerns about the longer-term future. Short-term: I don’t think anyone’s that fussed but long-term; there seem to be real issues, which need to be dealt with.

How are you reading things, Deon, particularly the economy?

Firstly, I just need to respond to the way you framed that. I do agree with you but from our perspective, South Africa and the market there is and will always be important to us. I always say to people ‘I have many reasons to want things to go well in South Africa, even though I live in London’. All my family is there. Most of my good friends are there and many of my clients are there. I think those are good reasons to wish the best for the country. In response to your question about how I’m reading it and whether this is the worst since 1998, I’d make two points. In a way, I think it’s quite similar to the time (roughly) when I moved back to SA the previous time, which was the end of 2007/beginning of 2008. As you may recall Alec, January 2008 was when load shedding actually started and that was a very dark month in South Africa.

That was my first month back and everybody asked me ‘why on earth did you move back? You should have your head read’. Subsequent to that, there were a good few years, actually. We went through that whole honeymoon with the FIFA World Cup and economically, things were still going okay. The Rand was relatively strong, compared to where it is today. Today, from a social point of view, the country is in a similar space to where it was at that time. In a political sense, maybe you can debate how it’s changed and what people think is better or worse. Crucially, you ask about the economy. I think the economy is in worse shape, unfortunately. Not only because of South African domestic factors, which we can beat ourselves up about if we want to, but simply where South Africa fits into the world economy. I say this to investors all the time.

I was in South Africa last week, as Roy mentioned. I did three strategy presentations to clients in different centres and they key point playing out in the world of relevance to South Africa in terms of our investment view, is the real economy in China – the growth there. If China is really slowing down in the way that it seems it is and the effect it has on the commodity cycle, the effect it has on commodity currencies like the Rand; I don’t think that’s good for South Africa or for the Rand in the short to medium-term. I do point the following out to people: If you analyse the movement of the Rand over the last three or four years relative to other commodity currencies; in four years, since the previous World Cup (just to pick a reference point – given that we are in World Cup time, as we speak) the Rand is down approximately 38 percent against the Pound. The Aussie Dollar (over the same period) is down 30 percent. The Aussie Dollar was stronger for longer, but has come down a lot recently. In a nutshell, I tell people that means that 30 of the 38 percent is probably explained by real economic factors relating to emerging markets and commodities. You can debate the other eight percent and maybe that’s because of the potholes in Morningside. As I said, the real economy is a bit weaker than it’s been and perhaps, doesn’t augur that well.

What are the ingredients that are going to make the young guy who comes here actually succeed in London?

Well, one of the big things is confidence and self-confidence in your ability to do things. It’s an enormous market. Today, it’s probably a lot more competitive than it was when I came 27 years ago. It’s a real, global city today but the economy is enormous. Coming from South Africa where you probably had 20 major corporates dominating the JSE market cap, it was a small market. Here, I think one needs to believe in oneself. The fact that one comes with an immigrant mentality helps.

What do you mean by ‘an immigrant mentality’?

When I came here 27 years ago. All I had was a very good education and for that, I’m eternally grateful to South Africa. We were relatively confident in our ability, but we had no network. We had nothing to fall back on. If you didn’t succeed, there was no family and no infrastructure. You struggled, you battled, or you went home. Certainly, during my first 10 years, the South Africans were a very transient community. Many qualified young people came, spent a few years, worked on jobs, and moved on. Not necessarily back to South Africa, but many went to Australia and Canada.

Over time, there have been enormous numbers of successful South Africans here in London. The network is very useful, albeit very small relative to the others but I’ve never met a South African here – at any stage – who wasn’t willing to give me their time, the opportunity to assist if they could, and it’s been a very supportive network – the greater South African community. The fact that there were many similarities in the legal system and the time zones made it a relatively easy place to come. I had many friends who went to Australia. On the surface, everyone thinks Australia’s so easy because the weather’s the same and the sun also shines but I think that’s a much smaller economy, much tougher, and much harder to break into whereas this is a very open society.

Deon, I guess that would explain to a degree, why so many people from so many parts of the world want to come to London, and want to invest in London – because of this openness. Are there any other factors that attract this enormous amount of capital into the U.K.? 

I think there are numerous factors. Roy has touched on some of them. The history of this country and the fact that together with one or two others in the developed world…the fact that you have stability here and the rule of law. Corruption happens. We all saw what happened to Volkswagen last week. I’m not sure whether I should call that corruption or what I should call it. You will always get things that go wrong, whether it’s with some of the big industrial companies or some of the banks but ultimately, these things will be found out. They’ll be addressed. They’ll be rectified. Somebody will carry the can. Clearly, that’s not only in London. The same would be true in the States and elsewhere, but you’re asking about London. I think London’s proximity in the middle of the world from a time zone point of view, next to Europe, and not too far from New York also plays a role.

I just think the way that the British Empire has set its sails over the years… They went and colonised South Africa and now we come back and are colonising them back in a sense, and I think that’s true for many people who come back here. I never had any Ancestry Visas to make it possible for me to settle here. I had to do it the hard way and yet, I’ve always had an affinity with this country. Having grown up in South Africa with the culture there in large part – and I’m talking about the Afrikaner culture in South Africa – is greatly influenced by the British history within South Africa when it comes to things we’re interested in, the sports we play, and a number of other things.

It’s interesting that you say that because many Afrikaners have found a very happy home in the U.K. and if you were to talk to the great-grandparents, they would be horrified to hear that.

Well, I can beat that statement you just made Alec, by saying that my wife and I figured out that my grandfather and her great-grandfather were probably shooting each other in the Anglo-Boer War. I think that’s long gone now, though. We live in an international world. I’ve always been happy here. The thing about London is that it’s essentially, a city of immigrants. You can spend a week in London and you can go to a theatre, shops, and restaurants and you may not meet many local English people. You’ll meet immigrants from around the world, serving you everywhere. From that perspective, it’s easy in spite of my accent, which you mentioned earlier. My accent will never be smoother than it is now I’m afraid and yet, I never feel out of place in London – using that accent – and people are always very welcoming. It’s very easy for an Afrikaner like me to move around here and to operate here.

Roy, from your perspective (and you have been here for a lot longer), there is the perception that the U.K. society is very class-conscious. Have you been invited to go into the clubs, become member of the Harrow and Eton elite as it were, or does it matter?

I don’t believe it matters. I’ve had some experience because my son who is 18 today and in fact, has gone off to look at Cambridge University where Deon was lucky enough to spend a year, did spend his formative four years at school from 7 to 11 at a school called Westminster. I think four or five of the Prime Ministers have come out of Westminster. Again, it was multicultural. Lots of foreign bankers and foreign diplomats’ kids were there. We took him out at 11, for a variety of reasons. I’m not sure I fitted into that society. I think those class structures are breaking down and yes, in the old days when I first came, the city was full of English institutions. I don’t think many English institutions are left, if any. I think that for the next generation, it’s virtually gone. The universities are very keen on making sure they’re getting pupils from the State schools. The perception is there and I’m sure it still exists at certain levels, but I don’t think it’s a barrier to the businesses we’re in.

The Global Financial Crisis – we know what it was like in South Africa but being based here in the U.K. did you feel it more perhaps than we might have felt in a more isolated outpost?

When you say ‘did we feel’…if you’re talking about Credo, we didn’t really. We’re not a bank. We didn’t have issues with capital adequacy problems or liquidity issues. It was felt in that the markets went down, clients’ portfolios went down, and you had lots of unhappy clients. However, that was just a process of managing people’s expectations and educating them to the fact, that investing should be for the long-term, trying to make private clients aware of the risk. I’ve always found that they don’t really understand risk.

That’s a universal thing though, and not just here.

The real impact and effects we are feeling today was that the regulation was ratcheted up enormously. And the smaller you are, the bigger the percentage of the cost basis is. Today, we have 55 people with five people in a compliance department. Compliance departments don’t generate income. In fact, in many instances, they prevent you generating income. The compliance cost and regulation, which hopefully is a pendulum that has swung too far because I think ultimately, the private client loses out. People won’t deal with a certain size client anymore. No one wants a client with £250,000 because they’re just too expensive to manage. A number of businesses went out of business so there are also levies, which the rest of the industry has to pay to support that. So there’s been a direct impact from the crisis in the regulation and compliance.

Deon, how about the quality of the people who work in London: are they in line with what you saw in Johannesburg and Cape Town or are they, in fact, superior? 

No. I think South Africa will always be able to hold its own. In fact, you can probably say that the median quality – the average investment professional in South Africa (on average) is probably better than anywhere you’d find in the world. Simply, there are so many quality people in the industry in South Africa. In a sense, it’s a negative because I would argue that the market is probably a little bit over-serviced by lots of smart people/lots of highly qualified people battling for a piece of action over there. If I think about all the people whom I’ve met throughout my life – going back 20 years now – and then more recently elsewhere in the world… Bear in mind that when I was involved with Sanlam in the early 2000’s I was a multi-manager, which meant that I saw the inside of between 150 and 200 different investment managers around the world over a four to five-year period. This includes every major city in the States, parts of Europe, the Far East, and Australia and I met many smart people. But I think the smart people who walk around in South Africa will always be able to hold their own.

Roy, what’s next for Credo?

I guess more of the same. We’re relatively young, both the company and the senior management. I could see us doing this for the next ten years and hopefully, doubling and trebling the assets under management. One of the other big factors I found out about the U.K. is that you can plan long-term. You don’t have to worry about where the business is going to be in two or three years’ time because you know the regulation, the laws, and everything will be okay. I will be 53 this year and hopefully, I’ll be doing this in the next ten years .I’d like to be in the same offices with my same colleagues but with three or four times the assets. Hopefully, the Rand doesn’t become much weaker because whilst it is actually good for our business; since we are all proud and happy South Africans, I would love to see the country do well. It will always be an important part for us and for our business. I’m not sure that the Rand will remain… I think the Rand will continue to weaken. We will be here. We’re happy to service and look after South African clients.

Quick responses – Favourite football team.

ROY ETTINGLER: Manchester United.

DEON GOUWS: Arsenal.

Favourite share that you invest in.

ROY ETTLINGER: It’s a U.K. company, called Dignity PLC. It’s a funeral parlour provider.

DEON GOUWS: I’m going to go for something slightly more niche. We have it in client portfolios. It’s a share called DNA, which is an aircraft finance scheme.

Favourite holiday destination.

ROY ETTLINGER: I just came back from Mykonos and that takes some beating. I hadn’t been for 30 years and there was no financial crisis in August.

DEON GOUWS: Italy.  I didn’t used to like Italy. My first trip there, many years ago, wasn’t that good but this year I was in Rome and on the Adriatic Coast, close to Bologna (the Romany area).

Favourite rugby player

ROY ETTLINGER: I’ll be a bit controversial. A guy called Steffon Armitage who plays in France, whom the English didn’t pick. I think that had they picked him, it would have made a big difference to their chance of succeeding.

DEON GOUWS: I’ll go for Pat Lambie because he shares a birthday with you and I (17th October).

Favourite other company, other than Credo.

ROY ETTLINGER: Well, I’ve always been an admirer of Investec. I’ve looked at what they’ve done and I think they’re a fantastic business. I know a number of the people and they’re very good people as well.

DEON GOUWS: My favourites would all be in the financial sector in South Africa. I’ve had some very good grounding there in terms of my own experience. I still have an Investec bank card in my wallet.

What chance does Discovery have of cracking it in the U.K. market?

ROY ETTLINGER: The truth is that I don’t know enough about them, but they seem to have been so successful and so smart that I have no doubt they will be successful – no doubt.

DEON GOUWS: I agree with that. With their experience, the business model they’ve refined over the years, and the ‘can do’ mind-set (it’s a disruptive mind-set), I’m sure they’ll do well.

You favourite other executive – in other words, outside of Credo.

ROY ETTLINGER: I’d probably go for Natie Kirsh. He’s a shareholder of mine who’s in this building and he’s just a fantastic man.

DEON GOUWS: If I were allowed somebody who’s no longer alive, it would be David Ogilvy, the founder of Ogilvy – the advertising agency. I’ve read all his books and I think he was a very inspirational leader.

Your favourite books.

ROY ETTLINGER: I’m a huge sports fan, so I tend to read biographies. The truth is, I don’t get time to read much novels because I’m always reading financial stuff. But in Mykonos, I read a book called I Am Pilgrim (by Terry Hayes) which I thought was fabulous. The best description is trying to understand why Al-Qaeda has come about and looking to some of the reasons why you have people become Jihadists. Is the West to blame? It’s a very interesting book.

DEON GOUWS: I think the most readable guy in the financial world… I don’t really read business books or finance books that much but the one where I’ll read all his books is Michael Lewis. I remember when he wrote ‘The New, New Thing: A Silicon Valley Story’ in 1999 before the tech bubble burst, how well he diagnosed what was happening in the world and what was likely to happen. Of course, everybody remembers ‘Liar’s Poker’ but he’s written many books and the one that was the most timeous and was the best at the time, was ‘The New, New Thing’. It’s an interesting history lesson today, 16 years later.

IOS or Android?

ROY ETTLINGER: I’m an Apple fan. What can I say?

DEON GOUWS: I think the whole building is full of Apple fans.

WhatsApp or SMS?

ROY ETTLINGER: WhatsApp.

DEON GOUWS: I’d say SMS, just for one simple reason I often travel and don’t always roam. For WhatsApp, you need roaming or you need to be on Wi-Fi whereas SMS works, regardless. It’s a practical reason for preferring SMS.

Skype or Google Hangout?

ROY ETTLINGER: Neither.

DEON GOUWS: Reluctantly, Skype. I don’t really know Google Hangout, to be honest.

Facebook or Twitter?

ROY ETTLINGER: Twitter.

DEON GOUWS: I’m a huge Twitter fan. It’s changed my life for the better in every way, in terms of filtering what the world throws at you. If you follow the right people, you never need to look for articles anymore. Other people will feed you the relevant information, timeously.

Roy Ettlinger is the Chief Executive and Deon Gouws is the Chief Investment Officer at The Credo Group.

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