Roy McAlpine is probably little known to people under 60 in South Africa. He retired nearly 30 years ago as chair of Liberty Asset Management (Libam). He had the misfortune to do so when his “back to basics” style of investing was out of fashion.
His successors, Carmen Maynard and Sidney Place, and other Young Turk portfolio managers such as Errol Shear, took a more pragmatic approach and immediately diluted McAlpine’s portfolio with the more fashionable New Economy shares of the time.
As a young journalist I was all for Place’s hipper, trendier approach to investing. It was, after all, the age of Investec’s Wired Index portfolio of Top 40 shares such as Enron, which looked destined to transform the global economy ― so different from the boring bricks-and-mortar companies McAlpine favoured, such as packaging group Nampak (it had far stronger fundamentals in the ’90s than now) and Coca-Cola bottler Amalgamated Beverage Industries.
Investec under a curly-haired Stellenbosch graduate barely in his 30s, Hendrik du Toit, preached the gospel of the New Economy. His marketing whizzkids, Robert Alexander and Brett Comley (aka dot.comley), toured the country in a reboot of a Billy Graham evangelical crusade.
It was hard for McAlpine, with his old-fashioned Scottish common sense— a penny saved is a penny earned — to compete. He had the last laugh (after retirement) with the dot-com crash in 2000.
Despite its brief fling with the dot-coms, Investec — now Ninety One — has been a huge success. It has a market capitalisation of R45bn in its own right as an independent business and about R3-trillion in assets under management.
But not because it hung its hat on the New Economy. Its most distinctive product is the Ninety One Value fund. John Biccard is a true market bottom feeder, piling into out-of-favour shares, which recently included Tiger Brands and Absa.
Many businesses without Du Toit’s astute leadership that bet the farm on growth, such as Prodigy, Infinity, Alliance Odyssey and Metropolitan Asset Managers, are now mere footnotes in fund management history. Du Toit was taught by his bosses at Investec Bank how to spread his risks.
Biccard, with his contrarian approach, makes Libam in the ’90s look positively reckless. McAlpine always made sure that blue chips made up the backbone of his funds. Many of them were also strategic holdings in Liberty chair Donald Gordon’s business empire, such as Standard Bank, South African Breweries and First International Trust, which held his British property portfolio — and a rare example of a non-mining rand hedge on the JSE in the early 1990s. Coronation founder Tony Gibson said, a little unkindly, that Gordon was Libam’s best fund manager.
It is one of those odd coincidences that McAlpine’s retirement coincided almost to the day with the launch of the Allan Gray Equity Fund. For journalists in the ’80s and ’90s McAlpine and his deputy, Jamie Inglis, were the go-tos to get a more conservative view of the market.
It was McAlpine, for example, who prevented interloper Investec’s hostile takeover of Cape establishment firm Board of Executors in 1989.
In contrast, their counterpart, Roddy Sparks at Old Mutual, had a higher risk appetite. He was an early investor in entrepreneurial businesses such as Bidvest, Dimension Data, Investec and Imperial.
During the 25 years from 1973 until it launched its first unit trust, Allan Gray was a sleepy Cape firm. It had an outstanding investment track record. But like the other Cape independent fund manager Foord & Meintjes (now Foord Asset Management) it didn’t believe in marketing. It was content to remain small and cosy.
Gray and Foord took pride in being invisible in the press. There was once a grainy photograph of Allan Gray in the Sunday Times and it was treated like a sighting of the Loch Ness Monster. All we knew about Foord was his fondness for yachts, but even when newsrooms had more staff it would have been a waste of resources to stalk him in Cape Town’s harbour.
In contrast, many of us in the press owe much of what we know about the markets (such as it is) to McAlpine. He patiently took me through the deal in which Liberty Holdings sold Plate Glass to South African Breweries — now, as an insider he wouldn’t be allowed to go into that level of detail under the present stock exchange rules.
We called McAlpine a value manager because things were very binary in the ’90s. Managers were either value or growth. It would be several years before styles such as quality and momentum entered the lexicon.
It would be simplistic to call either Allan Gray or Roy McAlpine value managers from the current vantage point. Libam fits more closely into the quality camp as it invested in shares with reliable dividends. “We like our clients to sleep well at night” was a favourite phrase of McAlpine when referring to the flagship unit trust, the GuardBank Growth fund (confusingly, it was not a growth fund and GuardBank wasn’t a bank).
Gray’s favourite word was “contrarian”. The firm avoided Investec as a share in its go-go years in the ’90s but piled in soon after its performance fell off the rails following Investec’s London listing in 2002.
Gray was a big investor in Sanlam, long before Johan van Zyl had convinced the market that it was South Africa’s best-quality non-bank financial services group.
Now that they have both passed on, McAlpine and Gray, who were almost contemporaries, should be remembered as the outstanding fund managers of their generation.
• Cranston, a financial journalist, is author of ‘The Mavericks’, a new book about South African fund management.
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