Feb 12, 2020
In conversation with Hendrik du Toit, Founder of Investec Asset Management and returning as CEO of Ninety One
Ron Derby, presenter of Power Business on Power FM, spoke to Hendrik about the road to independence, losing the zebra and the importance of taking a long-term view.
Ron Derby: Why change the name? Aren’t you sorry to lose the brand equity?
Hendrik du Toit: Of course, we are very proud of the Investec brand and contributed to building it. However, we had to be clear that with the demerger we would be creating two distinct, independent companies. In our judgment, the consumer-focused units of Investec are the banking and wealth businesses given that they deal directly with individual clients. Investec Asset Management is largely an intermediated business dealing predominantly with large institutional investors and through professional advisors, so it made sense for us to be the business undergoing a rebrand. We would have loved to bring the zebra with us, but we are also excited by the opportunity this gave us to create something new.
RD: How much will the culture change with this rebrand?
HdT: While we’ll soon be known by a new name, we have a very important line on our website that says, “We’re the same company, with the same passion for our clients, but with an exciting new name and identity”. I think this is critical – a clear culture is not only important for staff retention and attraction, it is also important for your clients. They work with you because they like your culture.
RD: Take us back to why you decided on the demerger.
HdT: When Fani Titi and I took over the leadership of Investec Group from Stephen Koseff and Bernard Kantor, the board asked us to do a strategic review. We concluded that the business, after many years of development, was too complex and the best way to target future growth would be to simplify it and create two very focused units – the asset management business, soon to be Ninety One, and the Bank and Wealth & Investment businesses. It’s really about simplifying Investec, focusing it and getting the growth back.
RD: So, you’re not a fan of big conglomerates?
At Investec we have always been great believers in focus. We focus people in their areas, we make sure we are specialists at what we do, and we understand what we do very well. My experience in business is that those firms who are very clear about their objectives, who remain in their strategic tramlines and have a laser-like focus on the task at hand, tend to outperform those trying to be everything to everyone. There is no decathlon athlete who can beat a specialist in the 100 metres or in shotput. On average, they’re good but actually, there’s always someone better. We want to be that someone better.
RD: What does independence offer you?
HdT: In asset management, and specifically in the active asset management business, independence is a highly valued commodity and our very large and sophisticated institutional clients are increasingly demanding it. While we have always behaved as if we were independent and Investec provided us with a supportive environment to operate independently, it wasn’t quite the real deal. Independence is an advantage because there is no conflict; no other financial services group involved. The only thing we do is invest our clients’ capital.
The second thing is your ability to allow your employees greater participation in the equity. Demerging and listing is not an exit strategy by management – it is an opportunity to buy in and therefore align ourselves better with all our stakeholders. We are demonstrating our long-term commitment by being owners and not just employees.
RD: I was reading in a recent interview you did that you’re in agreement with the Financial Times’ Martin Wolf on the future of capitalism. He suggests it be reformed and you believe that as asset managers, you are the perfect agents for the change. Can you explain why?
HdT: Since we started in ’91, when the Soviet Union was disbanded, capitalism has delivered enormous progress and wealth to the world in aggregate. It is by far the best and most efficient system to deliver prosperity, but there are also clear issues – from the unequal distribution of wealth to questions around the role of capitalism in securing the future sustainability of our world. Unfortunately, a lot of market capitalism has become very short-term focused. We need to understand that the capital of our savers must be invested to create a better future and, in particular, a more sustainable future. We need to think inclusive and long term and not be fixated on short-term profit.
I also think we cannot ignore the societies around us. If you look at South Africa today, where we have huge unemployment, particularly amongst young people, how do we include them? We need to do it in the context of a free world where people can excel and where they are allowed to enjoy the fruits of their achievement and their hard work. We are certainly not arguing for turning the clock back to pre-Soviet times, but we do need to make sure that we build a society in the right way. All businesses have an integral role to play.
RD: Let’s talk about some of the structural challenges facing your industry – the move to passives, pressure to bring down fees and the whole fourth industrial revolution. How are you dealing with these headwinds?
HdT: Like any industry I think the asset management industry has its fair share of challenges because, as industries mature, the market starts working and the competition becomes more ruthless. However, we are still in an industry where the prize for success is very significant.
Ninety One will be a business that has a relatively small market share in a large global market. We manage just over R2.2 trillion* (about £120 billion), while the global industry size is in excess of $75 trillion. If we just do our job properly, there is significant scope for growth.
In the long run, the growth of passives will create opportunity for active managers because the markets will become less efficient. Ultimately, I am confident that we will be able to continue to ply our trade successfully for clients and ensure better investment outcomes for them – that’s ultimately what we’re about.
*As at 30 September 2019.