Ninety One CEO Hendrik du Toit, who took the brave decision to proceed with Ninety One’s spin-off from Investec and subsequent listing right in the midst of the market meltdown caused by Covid-19 in 2020, spoke to Business Day about the company’s plans and the active asset management industry.
Can you explain your reasoning for proceeding with the listing in March 2020 and now, with the gift of hindsight, would you have proceeded any differently?
No, the rationale for the demerger was sound — it was to unbundle a financial services conglomerate into two simpler, more focused organisations with the ultimate goal of creating long-term value for all stakeholders: staff, clients and shareholders.
I doubt that anyone would have chosen to list during a market rout, but the intention was never to raise capital. The demerger and listing were in the works for 18 months and we were working to a structured timeline. Coronavirus wasn’t part of the plan, but in the asset management industry we are paid to manage risk, and we coped well to deliver this deal.
With the benefit of hindsight we would have done exactly the same. Where possible, long-term decisions should not be held hostage by short-term volatility.
The role of active asset managers and value investing in particular is being questioned due to a combination of low returns and fees that make those low returns harder to stomach. How do you shake off this scepticism?
The active versus passive debate is too simplistic. Passive is a useful and cheap way to get broad exposure to the market while active is completely different. They are complementary parts of the financial ecosystem. We believe that there is a bright future for good active managers. Investing other people’s money successfully in volatile markets requires the right balance of humility and confidence.
In addition to performance, active managers should explain their broad role better. In the financial ecosystem they price and allocate capital rationally. Economies without rational capital markets and professionally managed long-term savings are much weaker than those which have those attributes.
Will Ninety One remain an active manager in the foreseeable future or are there plans afoot to expand into the passive products arena?
Ninety One is committed to active management. We have no desire to engage in passive management.
Do you think there are any risks to passive investing that retail investors are not taking into account and does active asset management offer a way to mitigate those risks?
We love the challenge of finding tomorrow’s winners and generating an excess return for our investors. The risk in passive investing is choosing the wrong index, which is an active decision. Even if you buy the right index you may be investing in a portfolio of yesterday’s winners instead of investing in tomorrow’s value creators at the right price. Does it really makes sense to chase Tesla after it has gone up by more than eight times in a year just because it has been included in a major index? In short, index investing is not without its risks either.
What is Ninety One’s latest assets under management (AUM) and can you give us a breakdown?
Our AUM as at December 31 was R2.58-trillion. Our client base is 68% institutional and 32% retail (through the adviser and financial institution channels). More than two-thirds of our client base is from outside SA. We invest globally and serve a client base from around the world.
You’re one of the few SA businessmen who have managed to expand offshore without getting into great difficulty. What do you think you did right?
Sometimes the old-fashioned formula of hard work and luck at the right time still works. There are many truly impressive stories of South Africans and SA businesses succeeding abroad. This is, after all the country that produced Johann Rupert, Koos Bekker, Graham McKay, Allan Gray, Elon Musk, Roelof Botha, Brian Joffe, Stephen Koseff and many other great businesspeople. Just look at what Adrian Gore and his team are doing in China in partnership with Ping An. Just because some management teams internationalised with a combination of hubris and naivety, we should not throw out the baby with the bathwater. SA business should strive to be globally competitive and we should not shirk from pursuing big opportunities.
You spend a lot of time in London. What is the perception of SA as a possible investment destination?
International perceptions of SA are poor and have been in decline for some time now. However, SA does not have to do much to attract capital in this risk-on environment. Clarity on the policy front followed by consistent execution by the government will go a long way to ensure adequate access to international capital to finance future growth.
SA is in a very difficult place economically with a massive fiscal debt burden, rising unemployment and very low economic growth. What would be your priorities in order to kick-start the economy?
We have to start building a modern, competitive, outward-looking economy able to improve the living standards of all South Africans. It is time to put South Africans’ collective prosperity at the very heart of the national agenda. Simply put, we have to explicitly prioritise economic growth.
This is not the time for complicated plans. Nor is it rocket science. We need a clear vision and the will to deliver. In the near term, all we need is an enabling environment to encourage private-sector investment to get growth going, supported by the national prioritisation of economic growth. This includes dealing decisively with the scourge of corruption.
We must ensure our commodity producers are ready for the impending infrastructure boom that will come from the stimulus measures in the developed world. Why not declare an open skies policy for our country and rid ourselves of the need to run a national airline?
A pro-growth, business-friendly environment will create the space to invest heavily in modern education to create the human capital we need to compete in the 21st century and sustainably grow our per capita income over the coming decades.
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