How investing is like guessing who judges will pick in a beauty contest

Sticking with a winner is conventional wisdom in the field of moneymaking. Finding that winner presents more of a challenge, along with trying to remain humble when the humiliating loss of a client’s money happens. In The Mavericks: How Coronation, Ninety One and Allan Gray Beat the Rest, veteran financial journalist and author Stephen Cranston takes a deep dive into the three SA investing giants — Allan Gray, Ninety One and Coronation, SA’s more successful ANC — that have won and lost (but mainly won, it seems) hard-earned money for South Africans trying to ensure a future for themselves.

The exploration of Coronation, Allan Gray and Ninety One shines a light on the glory days of money management in SA, and the difficulties and changes that could lie ahead for investors and money managers.

There are passages that probably elude the full grasp of the reader who is not au fait with the basics and/or intricacies of finance. Though, as Cranston notes at the beginning of the book, when he started out, he barely knew the difference between a balance sheet and an income statement.

That said, it is entertaining and enlightening, and it’s useful to get a handle on who these big names of SA moneymaking are. Here you’ll find stories and anecdotes about almost everyone who had a role to play in the development and maturity of asset management in SA, through information gleaned from more than 30 interviews, most as recent as last year, including with Allan Gray himself, Hendrik du Toit, and Leon Campher and Tony Gibson.

There is a quick whizz through the start of modern asset management in the late 1960s and 1970s, with focus turning to how Allan Gray, Ninety One and Coronation rose and rose. But Cranston’s focus on the personalities and quirks of the (predominantly) men who drove SA’s nascent asset management industry keeps the book from becoming simply a history lesson about how, when and where to invest.

At times complex financial concepts are just that — too complicated for a non-industry reader. But those paragraphs do not dominate this compelling and insightful read — there is plenty to keep the newbie investor or financial history buff engaged.

Amusing asides make this history lesson on making and losing money in SA a largely attention-keeping read. Those in the industry will enjoy reading about how asset management unfolded and how these mavericks made such a mark in their chosen field. Those who know little about the industry might be left a little shocked at how much money flows through these firms. The amounts thrown around are mind-boggling.

Cranston writes that if there is a single explanation for the dominance of the Big Three superheroes, it is the relationships they have built with “consultants” — “the powerful group of asset consultants who were, and remain, key gatekeepers for money management shops”.

In possibly the most telling aspect of the success or failure of asset management in SA, a chapter towards the end of the book focuses on Dave Foord and his partner, Liston Meintjes, who together ran Foord & Meintjes.

Meintjes tells Cranston that there is now little to distinguish most asset managers: “I think there is now too much emphasis on Warren Buffett-style fundamental analysis: measuring PEs [price-to-earnings ratios] and price-to-book, for example. As investment professionals, we forget John Maynard Keynes’ adage that the secret in investing is guessing who the judges will pick in a beauty contest. He made a large fortune for his college [King’s] in Cambridge thinking that way.”

What Cranston says is a common denominator among Coronation, Ninety One and Allan Gray is that they all refer to the partnership concept. But not everyone has been “overwhelmed with joy and impressiveness” by the past 10-15 years of the industry. He quotes veteran fund manager Peter Major as saying, “SA fund management is too large and complex, cumbersome and impersonal and difficult to analyse, work with and get my head around.”

In the future, the huge personal wealth the founders of Allan Gray, Ninety One and Coronation have amassed personally will be far more difficult to reproduce, Cranston argues, given the falling margins and “clients that simply aren’t prepared to put up with the charges that they paid in the past”.

“The tide has turned, particularly against performance fees, which are often seen as a free option for the fund manager — they rarely share the ‘pain’ symmetrically with their clients.”

Mavericks is an engaging and fresh take on the “who” and “how” of SA asset management, in terms of both its history and where it might go, and Cranston gets it right with his easy mix of pacy storytelling and insightful, honest commentary.

An exploration of business success

Extract from ‘The Mavericks: How Coronation, Ninety One and Allan Gray Beat the Rest’

Because fund management is not a recognised profession, you often hear that people came into money management “by accident”, all too frequently as an alternative to auditing.

I, too, started writing about unit trusts and fund management by accident. I have no formal economics training. When I first started working for Andrew McNulty in the investments section of Financial Mail, I wasn’t all that clear about the difference between a balance sheet and an income statement. Then, quite by chance in 1991, it was my turn to do the monthly unit trust performance report in the days when there were about 30 funds.

Roy McAlpine of GuardBank (and Liberty Asset Management), who was taking his turn as chair of the Association of Unit Trusts, returned my call and tried his best to help me. He must have found me a very ignorant young man when I asked what fund managers did all day if they weren’t at their desks buying and selling companies. His helpfulness certainly contrasted with the aloofness of Allan Gray — though, to be fair, with Mark Herdman’s help, Allan himself and Simon Marais made up for this later in my career.

They say stick with the winners and, over the years, I have been a consistent supporter of the “CIA”, as the big independent gorillas — Coronation, Investec and Allan Gray — came to be known. I supported them with my own money and in my role as trustee of the Times Media Limited Pension Fund. That’s not to say I never called them out when they were stumbling, of course, but as I get older I can see the futility of worrying about short-term performance. It was really the combination of poor short-term performance and arrogance that I couldn’t tolerate.

All three CIA firms have shown humility. That might seem surprising given the bombastic nature of some of the individuals involved and their strong views, but losing clients’ money should be deeply humbling, and often humiliating.

I have been asked why I have written this book so soon after Muitheri Wahome’s Building Capital: A History of Asset Management in South Africa was published in 2021. The simple answer is that my publishers think this project will work commercially.

If you have read Muitheri’s book, be assured that what follows is completely different. It couldn’t fail to be because she is an actuary and I am a journalist. The other difference is that I know, or have at least met, everyone in this book (with rare exceptions, such as former Allan Gray bond manager Gigi van Zyl). I even joined a queue and Warren Buffett signed a pack of playing cards and smiled at me after the 2005 Berkshire Hathaway annual meeting.

You won’t be reading about the discovery of the gold in the Witwatersrand or the founding of Old Mutual in 1845 in this book. And I have been asked by the publisher not to include intimidating tables or spreadsheets because this book is for the lay reader, not exclusively for industry insiders.

This is a book about business success. I make no apology for sticking to the winners. The bulk of my own liquid assets are invested with these three managers, with Ninety One administering my living annuity.

Nevertheless, this is an unauthorised book. I have asked for input only to avoid factual errors.

Perhaps a more grandiose ambition is for it to serve as a memoir for my own generation of fund managers, the baby boomers. I was encouraged to write this book “for the industry” by boomer friends such as Anet Ahern (who is retiring as CEO of PSG Asset Management in May 2025), Tony Bell, Johan van der Merwe and Neil Brown before it is all forgotten.