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“At Omba, we’re active managers, but our tool set is ETFs” – Mark Perchtold, Omba director
Many South Africans flock to London, either in search of increasingly greener pastures for their professional careers or if younger, for an intended two or three year stint before returning to SA. Many of those South Africans in the latter category, however, end up staying in England, particularly due to the rapidly decreasing stability in their homeland. BizNews founder Alec Hogg spoke to one such individual, Mark Perchtold, whose short stint turned into a whole new trajectory when he found himself in a really good job. Almost 18 years later, Perchtold is now a Director at Omba Advisory & Investments Ltd. In an informative interview, Perchtold explained how at Omba, “we’re not passive managers, we’re active managers, we express active views, but our tool set is ETFs.”
Mark Perchtold on London being a great location from an investment perspective
We started a little closer to my home in Wandsworth, which is in South West London, just because the cost of having a central London office was exorbitant. Many of our clients were in South Africa in the early days but we’ve now got a much more UK centric client base than when we started. Most South Africans that come to London didn’t really care as to whether it was Wandsworth or Central London. It was just the London postcode, so it was fine to have an office there. We did an offsite for the team in 2019 pre-COVID and everyone unanimously agreed, except myself – because it was close to my house – to move to central London. So, we agreed to move and then COVID hit and then we worked from home for a long period of time. We decided to go to the South Bank because most people were commuting into Waterloo or London Bridge. It’s a very central location and you could pretty much get anywhere in central London within 20 minutes. So, a great location for us. We can just see the River Thames from our terrace, so we are slowly getting into the heart of the action.
In October, I will have been here for 18 years and Dave Pierson, the co-founder, has been in and out of London for 20 years. We were at university together at Wits but as you know, there’s a sad brain drain from South Africa. Many people with skills leave and many come to London. Most come for a two or three year stint when they’re young, which was my intention, actually. I got caught up in a really good job, and the rest is history. London is a great location from an investment perspective. You really are in the centre of the world in terms of financial services. Asia is far away and the States are far away, but we’re right in the middle. A lot of financial services firms either have subsidiaries or branches or offices in London, where many have their headquarters. So, you really feel like you have proximity to the action, to what’s going on in product development, in financial services, in trends in the industry. It’s also a very well-regulated jurisdiction. Investors get comfort working with a jurisdiction that’s got good rule of law and governance. If something went wrong, you know you’re well regulated, and sometimes too well regulated with the regulatory burdens of today, but we think that serves investors well.
On doing business with South Africans
I was head of the South African team and travelling back at least eight times per annum for 12 years or so. So I have a lot of good relationships and connections within South Africa. The co-founder with me is a South African, and a number of our first employees were South Africans in London. We’ve got a very strong South African centricity to our business. But we’re a London-based UK investment manager. So, our business has evolved, particularly during the COVID period where we couldn’t travel back to South Africa. We’ve got a lot more UK business now, but we’re not going to forget about South Africa. We love going back, whether it’s for business or pleasure and we’ll continue to do business there in the future. We’ve got the South African flavour to us and we think it actually gives a lot of South African investors comfort in going to our website, reading our biographies and saying, oh, well, I know Wits University. You know, I understand that degree, we’re not Oxbridge, so we didn’t go to the best British universities, but If a South African comes and reads our education history and backgrounds, they get a good understanding of who we are.
On approaching investing uniquely by focusing on exchange traded funds
In my prior role, we were building multi-asset portfolios for clients with fixed income and equities and the building blocks of those portfolios were typically either single securities, funds, either from the house itself or third party funds, sometimes structured products. Very little use of ETFs was taking place at the time. The reason for that was that a lot of wealth management firms were earning a margin on the products and the construction of those portfolios. I found myself sitting in meetings with fiduciaries, trustees and lawyers and tax advisors of clients asking, why are you using these products for this allocation when you could just buy the S&P 500 ETF and it cost seven basis points, and at least you track it and you don’t underperform? So, it really took me on a journey going back to 2013, 2014 where I dived deeply into ETFs and thought they were fantastic building blocks to building multi-asset portfolios, with a further evolution of ETFs since then. Even at that point, you could express active views as an active manager with your toolset being ETFs. So, we’re not passive managers, we’re active managers, we express active views, but our tool set is ETFs.
You can express a view on a country, on a sector, on a theme or on a factor. Smart beta investing has evolved substantially as well. So you can have quite a nuanced view. In fixed income you can express a view on credit quality or duration or currency all through the use of ETFs and that wasn’t there ten years ago, but it’s certainly there today, and we’ve been specialising in that since we started. The big driver was also trying to keep costs down for the client. ETFs are a low cost implementation tool and we don’t charge high fees. Our fees are 0.3%. The all-in cost to a client for an actively managed process that is inherently diversified, because you’re using ETFs which are tracking major indices, is quite attractive. And those indices are made up of stocks which are seasoned enough to enter that index. You inherently have high quality companies in those indices, so it’s a great building block for portfolios. We thought we would be differentiated. We wouldn’t tie ourselves to one ETF product provider. You do get solutions from some of the big houses, which are only the ETF product providers’ own multi-asset solution. We’re product provider agnostic. We’re not owned by any big house and we don’t have any deals with any big houses.
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