A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
GQG off to a flying start in Australia
A “good chunk” of the US$1.3 billion currently managed by Florida-based start–up equities shop GQG Partners has come from Australian investors. The firm, launched in June last year and backed by Australia’s Pacific Current Group, is expecting to have more than A$1 billion from Australian clients by the end of March.
But GQG is not your typical start up. It was formed by the star fund manager for Swiss-based Vontobel Asset Management, Rajiv Jain, who provided enough cash for the new business to run for three years without clients, if necessary. It had 15 staff before any external money came in the door.
When Rajiv announced he would leave Vontabel in 2015, where je was the CIO, the shares fell more than 10 per cent. He had taken the firm, which then had five strategies totalling just US$350 million in 2002, to more than US$50 billion by the end of 2014.
He said on a trip to Australia this month that, while the new business was a staff-owned boutique which concentrated on performance first – and the business second – he hoped to build it into an institution which would be around for a long time.
Pacific Current Group, which is the former Treasury Group, merged with the US Northern Lights Capital in 2014. It has 17 affiliate managers in Australia, the US, Asia and Europe and became a small shareholder in GCQ, as well as its Australasian distributor.
Stephen Bramley, Pacific Current’s APAC head of distribution, said the firm would launch both a global and emerging markets wholesale trust, with the help of Equity Trustees, for Australia in about April, to complement the current mandate offering.
Rajiv said: “Managing other people’s money is a privilege. I also have 65-70 per cent of my net worth in the fund so our interests are aligned. No personal trading [by staff] is allowed and no soft-dollar deals [with brokers]… I set it up so I could focus on performance.”
He recruited several high-profile executives, such as CEO Tim Carver, and has earmarked 20 per cent of the shares for other staff, who currently number 22. Assets under management are expected to pass US$3 billion globally by the end of March.
GQG stands for ‘global, quality, growth’, which are the firm’s driving themes. Rajiv believes that being based in Fort Lauderdale helps his and the other managers’ focus. “It helps to be an outsider,” he says. “People talk about having an information edge. There’s plenty of information everywhere. Sometimes having a local [market] presence can dull your judgement. For instance, I am yet to meet a real estate analyst in Hong Kong who is negative on Hong Kong property.”
Rajiv also has strong views on manager fees, which he says, in his firm’s case, “should be below median”. If everything revolves around investing for the long term, then fees have to be a part of that. They should be related to alpha generation. The firm does not charge performance fees, though, which he says says is more to do with the clients’ own structural issues.
He does not want the portfolio managers to “think like the herd” and has blended his team from various backgrounds. It includes an investigative journalist and a forensic accountant to help get behind the numbers. The former journalist is a “full-time critic” of the portfolio managers’ work.
“You can always find cheaper names outside the US,” he says, “but they may not incorporate the same quality as you get in the US… sometimes a valuation gap is there for a reason.”
