Jun 29, 2020
from a weekly email to all staff
29 June 2020
Culture eats strategy for breakfast.
- Often attributed to Peter Drucker but the origin is not clear
This is my last letter for a while. I love communicating with you, but once things I love doing start to feel like “work”, it is time for a break. I respect the people of Ninety One too much to just go through the motions with you. We have an honest and open culture. When I communicate with you, I communicate from the heart. As a talkative kid and opinionated teenager, my parents often reminded me that God gave each of us two ears and one mouth. It is often better to listen than to talk. It is time for me to listen more to our clients and our people. This is what I plan to do over the coming months. We have lots of work to do before the start of the northern hemisphere summer holidays. I have a few important tasks at hand, especially the start of our strategy cycle for the new year. It is key that we test the positioning of Ninety One and the validity of our current growth strategy in the context of what has happened now that we have some sense of the future. We started the year with an ambitious agenda and as I said last week, we need to make sure that we execute on that plan, on time, while remaining open to adapt to the new reality.
Over the next couple of months, you will get more questions than answers from me. What I can assure you is that we will remain in contact, even though most of our offices will not be our primary places of gathering for some time. It is important that we remain connected during this period of limited travel and while working from home. The senior leadership team will continue to reach out to you to ensure that we remain aligned and that you are adequately supported and equipped to deliver on our promises to our clients and other stakeholders.
The regional leadership, human capital and workplace teams will keep you posted regarding the timing and the process we will follow to return to office. This will undoubtedly be combined with an even more flexible approach than in the past.
In the last few weeks I have been privileged to start engaging with my direct reports on an in-depth review of our strategy. With our annual report in its final stages, the demerger, listing, rebranding and results presentations done, and having absorbed the initial impact of COVID-19 on many levels, it is time to look ahead. Lockdowns are being rolled back around the world and we are slowly on the way back to some sort of normality, call it the “new normal”.
But that new normal is going to be challenging. We inhabit a more divided, poorer, more stressed world than before. We operate in financial markets which are still driven by debt-fuelled stimulus and remain accommodated by ultra-low interest rates. It is therefore vital that we engage this challenging world with maximum strategic clarity. Clarity requires conviction. Rational conviction requires regular critical review and an open-minded approach. Right now, I believe that we have a sound strategy and that execution excellence will determine our future success. That should not preclude us from careful and critical strategic thinking. Strategy is indeed a key success factor in any business, but when you have an organisation of smart, independent-minded people it takes more than the formal logic of strategy to marshal the full capacity of that organisation. Culture is the “unspoken language”. Culture is the glue that binds people into an effective team, based on shared assumptions, mindsets and social patterns.
What I do know, is that in any organisation, especially an intellectual capital business with a capital-light, organic growth model, “culture eats strategy for breakfast”. The purpose of this letter is to remind you of the importance of culture and of our role as custodians of the special Ninety One culture. While we are physically distanced, as is currently the case, we ought to work even harder to nurture and maintain our culture. This culture of ours is unique, has developed organically over three decades and has become key to our success. It has been built on a foundation of entrepreneurship and our “founder-owner” mindset. At Ninety One we are builders, dreamers and drivers. Here we have “freedom to create” within clear parameters of values, team and strategy. We encourage direct, honest and open discussion, benefiting from our diversity of background, lived experience, thought and perspective. You can and must continue to challenge the status quo. Our people have the freedom to be themselves, which facilitates the combination of individual expression with collective ambition and team discipline. At Ninety One we have reconciled individuality with teamwork. We have no place for outsized egos or “I-specialists”. It is about the “we”, but in the context of respecting the “me”. We insist on results but not at the expense of the human spirit. Relationships matter. We care about one another and treat people fairly. We are, after all, a people-centred business. We balance relentless drive with decency. A cornerstone of our culture is to “do the right thing”.
We are not cynical about our work, each other and the firm we are trying to build. Knowing that constructive conflict is a part of being direct and open, we don’t bear grudges or seek to bring each other down. We are not political and bureaucratic. This is what we profess and what we aspire to avoid, but I admit that these tendencies are not entirely absent and urge you to help me fight them.
Many firms talk about culture, even our regulators, but few firms live their espoused culture. We all therefore have a shared responsibility every day, in every conversation and with every email. Please help me nurture and protect this key competitive advantage. Cultural clarity breeds mutual trust. Trust breeds agility and resilience. This is what makes Ninety One special. Combining our culture with a sound strategy will enable us to move mountains.
Thank you for understanding that I need a break from letter writing, but not from thinking about you, talking to you and dealing with the tasks at hand. Let’s prepare for the road ahead with the confidence that we have the right culture which supports a special group of people, you. Our culture gives us a solid platform from which to achieve great things for all our stakeholders. We have work to do.
As Vince Lombardi said: “The only place where success comes before work is in the dictionary.”
Finally, I want to remind you that the virus is still out there. To date more than 10 million people have been infected and more than 500 000 people have lost their lives. Our thoughts and prayers are with the families who lost loved ones, wherever in the world they may be. As many of you plan holidays or simply physical re-integration into normal life, I want to remind you to stay alert and take the available precautions to avoid the virus. It will be some time before we have a vaccine.
Best regards and stay safe,
15 June 2020
Success demands singleness of purpose.
- Vince Lombardi
Last week’s letter discussed the scourge of racism and articulated the Ninety One position unequivocally. Thank you for your positive feedback. It is clear to me that you, the people of Ninety One, have your hearts in the right place. Your enthusiastic support for the SA Recovery Fund and what it represents confirms that. It is an extraordinary privilege to work with such a remarkable group of people. I am deeply grateful for that. For those of you who are not up to speed on this important impact investment effort, please read the Ninety One in the media emails, since many of our leaders engaged publicly on the topic.
Given the importance of June 16th to South Africans, the ongoing protest action in many countries around the issue of racism and the return of turbulence to financial markets, I could easily have engaged you on those important topics, but I have something else to share with you today. Before I do this however, I want to express my respect to all those who have struggled to rid South Africa of apartheid, including the children of 1976 and specifically Hastings Ndlovu and Hector Pieterson, who perished from police bullets on that fateful day. This also goes for the many other heroes who have struggled for a better, more inclusive world. We need to ask ourselves an important question today. What are we doing to ensure that they have not sacrificed in vain? I leave it to you to find your own answers.
On Friday, our Inspire group hosted Dr Amy Dickman from Oxford University, who shared her remarkable story about the Ruaha Carnivore project in Tanzania and the urgent need to protect the remaining wild lions of Africa. Inspire will share the video of the session with those of you who are interested. It was as much about conservation as it was about a woman with drive, willpower and the commitment to make a difference.
The topic for this week is not about the world out there, but about Ninety One. A Ninety One that has done a great deal this year; a Ninety One that has navigated the early challenge from the COVID-19 pandemic well; a Ninety One that has managed to remain one coherent firm, in spite of working from more than 1000 workplaces; a Ninety One that has kept its nerve and captured the market rebound as one would have expected from experienced investors; and finally, a Ninety One that has engaged society actively during this difficult period. This is good, but unfortunately not enough to ensure success in the post-COVID world.
We are about to embark on an in-depth review of our strategy. I agree with the legendary Andy Grove of Intel who claimed that “only the paranoid survive”. I am also confident that our strategic principles and our strategic direction are sound, but we need to confirm this over and over by asking the hard questions; we need to challenge ourselves. This is not a time to rest on our laurels.
From each of you I expect additional intensity and drive, but not by simply working harder. Where are the opportunities to work smarter? What and how should we prioritise? What else can we do for our clients and where do we find the growth opportunities? Over the coming months the leadership will engage you to learn how you are thinking about the future. This is a natural part of building a better firm. We have a clear strategy and we have clear objectives, but we need to continue to question whether we are on the right track and whether we are executing at the highest possible standard. As the well-known Nike strapline says: “There is no finish line…”. In a firm like ours, there is no place to hide and no place for defensiveness. You know that.
In order to lift our game and win big, we need to take advice from the late Steve Jobs, who said it is only by saying no that you can concentrate on things that are genuinely important. We should not be scared to challenge the future relevance of existing activities. Feel free to share your views with the leadership, including me.
At the same time, we need to assess whether we are executing to the right standard. This includes all our activities from investments to client engagement to operations. Morris Chang, the founder of Taiwan Semiconductor, famously said: “Without strategy, execution is aimless. Without execution, strategy is useless.”
Now is the time to prepare for the post-COVID world. Now is the time to challenge ourselves to be better. This bring me back to our desire to contribute to a better world. If we are successful and if we continue to win, our impact on the world will be so much more. To be a truly purposeful business we need to be a successful business.
This is not the time to be distracted. This is the time to take our business to the next level. Let us turn adversity into opportunity. Let’s capture the power of clarity. Remember the Rassie Erasmus point? “Let the main business be the main business.”
I look forward to our engagement over the coming months.
Best regards and stay safe,
08 June 2020
Man’s capacity for justice makes democracy possible, but man’s inclination to injustice makes democracy necessary.
- Reinhold Niebuhr
In my previous letter, I indicated that I would share some of the exciting new initiatives in Ninety One with you. This week, I want to tell you about the Ninety One SA Recovery Fund, a market-led intervention to support deserving companies and therefore jobs in these challenging times.
Before I do this, allow me to discuss an issue which has been top of mind in recent days: the killing of George Floyd by law enforcement officers in the United States and the consequent protest action across the world. This has triggered much debate and discussion, including in Ninety One. I want to thank those of you who reached out and shared your views with me and encouraged me to tackle this difficult and painful topic. The core issue is the continued existence of racism, bigotry, violence and a lack of inclusivity in many societies.
I am not American and will not attempt to tell Americans how to run their great country. I am a white South African male who grew up under a cruel system of overt racial discrimination in favour of people like me. I have seen the ugly face of racism and opposed it, but I cannot begin to understand the pain of those subjected to that kind of abuse. What I can say is that racism, in various forms, subtle or overt, remains a pervasive problem. Once we acknowledge this, we must eradicate it, wherever we encounter it.
At Ninety One we have spent nearly thirty years developing our culture and our social contract. We have deeply embedded our single core value, namely to do the right thing and we have made relationships as important as results. This includes embracing diversity and inclusivity. We need to treat each other how we would want to be treated ourselves. Decency is core to this approach. We work hard to make people of different backgrounds, cultures, beliefs and perspectives feel welcome in team Ninety One. We do not tolerate racism or abuse of power in our business. At the same time, there is always room for improvement, so please reach out to me or to any of the leaders in Ninety One if you encounter problems on these fronts.
As citizens of the world, your country, your city and your community, I encourage you to stand up for what is right and not to look the other way when it is inconvenient to confront what is wrong. As individuals that is your right and civic duty. As a global commercial enterprise, Ninety One has to be mindful of the diversity of opinions among our stakeholder base. We should understand that there are different points of view on important matters and be tolerant of such difference. Among ourselves we also have a range of opinions on important matters, but not with regards to racism. It is as simple as that.
As a concrete action to actively support initiatives that are engaged in advocating for justice and equality, I am letting you know that we will extend our COVID matching scheme to include charities concentrating on the issues of racism, social justice and societal inequality. We will match your contributions. Please put your money to work. It is a direct and concrete thing to do.
In a powerful letter to his staff Ron O’Hanley, the Chairman and Chief Executive Officer of State Street Corporation, concludes that: “For most of us racism is not our fault. But racism is our common problem – a problem that each of us must solve.” He then asks the “what must we do” question and suggests that this begins by focusing on building a better firm for our people, our clients and our communities. As you know, this is exactly what we at Ninety One believe and I would like to spend the remainder of this letter describing what this looks like in concrete terms for us, as an investment management firm, born in in South Africa.
As stewards of long-term capital, we allocate capital to businesses that help build communities through the provision of employment and the creation of wealth. We cannot talk inclusivity without recognising the importance of economic inclusion. As believers that financial markets add value to society, we need to demonstrate how the market can work for the benefit of society and people. The Ninety One SA Recovery Fund, our first commercial response to the impact of the COVID-pandemic, does exactly that. This is different from our charitable response, which was a combination of substantial contributions to the Solidarity Funds in South Africa, Namibia and Botswana, where the need is significant, and our generous matching scheme for individual donations to charities around the world.
The Ninety One SA Recovery Fund will seek returns for our clients and also report and measure its impact. This is about living up to the true meaning of the S in ESG. In recent weeks, South Africans have seen growing evidence of the devastating effect of the protracted lockdown on the economy. There is now a body of evidence suggesting that the contraction in Gross Domestic Product could be as severe as 10%, resulting in the worst recession in living memory, without the fiscal flexibility of many advanced economies.
There are good companies across all sectors of South Africa’s economy that will be facing funding needs that cannot be provided by the banks or the state. For some, the economic contraction will limit their access to capital to grow and expand existing capacity; for others, it will challenge their solvency as well as their resolve to remain operational. The permanent loss of productive capacity will limit the ability of South Africa’s economy to bounce back. This will clearly have a negative impact on employment and the tax base.
The Ninety One SA Recovery Fund is our effort, and that of our clients, to play a role in mitigating this risk by providing capital to good companies on commercial terms in a thoughtful way. We will have the flexibility to invest across the capital structure in a way which will enable companies which have been operating well up the point of lockdown to retain productive capacity and avoid raising further capital on punitive terms.
The fund will initially seek to attract support from South Africa’s institutional asset owners to pursue this objective. In addition, subject to the necessary regulatory enablement, we are hopeful that retail investors will be able to access the Ninety One SA Recovery Fund.
The lockdown, while necessary to protect the nation’s health, has been akin to putting the economy into an induced coma. South Africa faces a once-in-a-generation economic challenge. With this fund, we would like to support quality businesses and protect the nation’s productive capacity, which will in turn preserve thousands of jobs and South Africa’s tax base. This is our second big project in the impact space and speaks to our purpose of investing for a better tomorrow.
Let’s continue our work for a better, more inclusive world, through our investing activities but also through our willingness to stand up for our values. It is our duty to actively combat and eradicate racism. Let me conclude with a quote from my hero, Nelson Mandela: “It always seems impossible until it’s done”.
Best regards and stay safe,
01 June 2020
When we least expect it, life sets us a challenge to test our courage and willingness to change; at such a moment, there is no point in pretending that nothing has happened or in saying that we are not ready. The challenge will not wait. Life does not look back.
- Paulo Coelho
Thank you for agreeing to give me a break from letter writing last weekend. I needed it after the intense preparation for our results presentation on 20 May and the subsequent shareholder and media engagement. When I finished the last call of the week on Friday afternoon, I was really yearning for a day or so to charge my batteries. I need to thank the investor relations, finance, communications, marketing, technology and events teams for the excellent support they gave me and Kim during the build-up towards Ninety One’s first set of annual results as an independently listed business. Besides these teams, many of you gave advice, reviewed the prepared material and gave support. Thank you for making this a real team effort.
The results were well received by the market. Our shareholder engagements were positive and productive. We only completed the virtual road show on Thursday 28 May. Despite the huge amount of preparation and time these engagements take, I can assure you that they are worthwhile. Structured shareholder communication is not only a good discipline on management and the board, it also helps to create appropriate alignment. In addition, it gives me an insight into the style, people and culture of other investment managers. A fascinating topic, but not one for these letters. I would encourage those of you who have not yet looked at the webcast to do so. It can be found on our website. Since there will be no physical staff update for some time, please look at this. You should all be well informed about the state of our business.
Our presentation was direct and honest. I do not believe in saying one thing internally and another to the outside world. Ninety One has no intention to go to market with an overly curated message in order to talk the share price up. The share price will be what it will be. We have to grow the business by delivering on the expectations of our clients in terms of performance and service and ensure that we remain relevant to their needs. It is as simple as that. At Ninety One we say it as it is. We do not sugar coat reality. Our culture is based on honesty and directness. Trust is important to us, internally and externally. This is exactly what we did on the road show. We talked straight.
The essence of our message is:
The financial year that ended on 31 March 2020 was a truly momentous year for Ninety One. We demerged, listed on the London and Johannesburg Stock Exchanges, rebranded on schedule and had to contend with the severe impact of COVID-19 during the last month of the year.
We responded decisively to the COVID-19 pandemic by prioritising your wellbeing and our service to our clients. We did not furlough or lay-off any staff in the face of the pandemic, neither did we accept any government funding. We honoured all our financial commitments to our people. We were clear that this is a time where we need a highly motivated and stable staff complement to cope with the challenges in the markets and the service needs of our clients. We also emphasised our clear proposition to shareholders, our resilience and reminded them that we have delivered on all our promises. We confirmed our commitment to responsible corporate citizenship. We continue to pay our suppliers on time and do our best to ensure that money reaches the people who serve us and not just the shareholders of those businesses. We are supporting the societies in which we operate by committing £2.9m to COVID-19 relief efforts and have encouraged all our staff to donate generously using our matching scheme to raise additional funds for deserving causes.
We delivered record earnings by growing profit before tax by 11% to £198.5m with basic earnings per share growing at the same rate.
We attracted £6bn of net inflows, in line with the prior year.
Assets under management declined by 7% to end the year at £103.4bn, substantially lower than our average for the year of £118bn.
Short-term investment performance was good for most of the year but was negatively affected by the severe market correction during the last month of the reporting period.
Our people collectively now own more than 21% of Ninety One, leaving us even better aligned with our clients as shareholders than before. This leaves Ninety One with a very clear proposition to the market as an independent active investment manager with substantial employee ownership and participation.
The past year was successful, but the outlook is challenging. We are planning for lower revenues off lower average assets under management. Simply put: tough times ahead. The weakness in the global economy, low oil price, heightened political tension, and the anticipation of further market volatility will impact the behaviour of our clients. Many of them are currently focused on accessing enough cash to meet obligations. With a wave of job cuts on the horizon, retirement funds are preparing for substantial cash withdrawals.
I cannot remember a time in our history in which we have engaged our clients more intensively than the past two months. This works well for our advisor channel and we expect a big year in this channel. The challenge in a lockdown world is in the area of prospecting. If new clients do not “walk in the door” it is tough to engage them and create demand. This has led to less than usual visibility on the institutional pipeline. The creativity of our institutional client teams in navigating this challenge may prove to be key to ensuring a positive flow outcome over the coming year.
Add to this the performance pressure we face in some areas, and you will get the picture. The coming year or two will require maximum commitment, resourcefulness, resilience and agility from team Ninety One. I know that you are up for the challenge. This is no time to rest on our laurels.
This brings me to the quotation from Paulo Coelho above. I am a big fan of his books and ideas. What “could have been” a period of triumph and celebration of our accomplishments in building a business from start-up stage to a firm with a £2bn market capitalisation which has rewarded its shareholders with cumulative dividends in excess of £1bn and is still full of growth momentum on the back of strong client support, has been replaced by an intense focus on navigating the COVID-19 world, positioning Ninety One for future success.
Life has its way of ensuring that we all stay humble. As Paulo Coelho puts it: “The challenge will not wait. Life does not look back”.
Our strategy remains relevant, our priorities and long-term focus appropriate and our organically built, purposeful business is strong. Our focus should now be on high-quality execution. It is about investment performance, client engagement, appropriate offerings and faultless operations. I am convinced that market demand for risk assets and income solutions will return. As the famous Nike line goes: “there is no finish line”.
I look forward to sharing some of our exciting initiatives with you in the weeks ahead, but I hope this week’s message is clear. The past year was good, but we need to lift our game in order to navigate what promises to be a very challenging year. I know we can do it.
Best regards and stay safe.
17 May 2020
At mile 20 I thought I was dead. At mile 22 I wished I was dead. At mile 24 I knew I was dead. At mile 26.2 I realised I had become too tough to kill.
- Anonymous marathon runner
Last week I spoke about the fact that the “new normal” is not so normal. Well, the new normal is becoming a tad tedious and while we are all motivated to make the most out of the current situation and help save lives, it is not becoming easier. This week I am going to address this difficult phase we have entered as the relaxation of the lockdown is making a stuttering start in many parts of the world.
East Asia is concerned about second or third waves, but well ahead of the rest. (If you find the time, please read the beautifully written article in the Weekend FT by Yuan Yang about her time after lockdown in China.) In Europe the Swedish model is gaining credibility. The confusion about the right path, the lingering economic uncertainty and personal- as well as social stress are conspiring to effect potentially dangerous mood swings. Death rates are falling, but we have tragically lost more than 300 000 fellow humans to this virus which has affected nearly 5 million people.
Those known to be infected currently represent less than 0.07% of the world population and the actual mortality numbers are 6% of the 0.07%, which is 0.0043%. The numbers would have been vastly larger without preventative measures such as lockdowns. Nevertheless, if we contrast this with hundreds of millions, possibly billions of people who are increasingly concerned about their economic security, we can start to understand why the levels of discomfort are rising. Even though we are all safely at home, we are only a click away from the public debate and can therefore sense the feeling.
Over the past week, I have received many emails from friends, including ex-colleagues, who are extremely concerned about their future or who have indeed already exhausted their savings or lost their livelihoods through no fault of their own. This morning the Sunday Times in South Africa has the following headline: “Save SA: end lockdown!”. My late mother’s best friend, the acclaimed South African author Elsa Joubert, who is now 97, published a moving letter in which she pleads for an end to the effective incarceration and separation of old people from their children and grandchildren.
The coming week is mental health week and my psychiatrist friends tell me that the number of patients or people referred to them is on the increase. Yes, in many societies we have reached a difficult phase in this battle against the COVID-19 pandemic. Now, more than ever, we need to stand together as a team and support our colleagues who are experiencing a tough time. We need to be sensitive to those who say less on the Skype or Teams calls and those who have been alone for eight weeks. The battle against COVID-19 should be about “lives, livelihoods and life in general”. It should be multi-facetted.
As usual, our Human Capital team was ahead of the game. They sent me an article about dealing with the “third quarter” of isolation, based on a study of Australians in Antarctica. The author, Dr Kimberley Norris, compared it to the phases of a marathon. She writes about the initial experience of isolation and lockdown as follows: “For a little while people were saying how they were loving working in pyjamas, and not having to battle the morning traffic”. She refers to this as the “sourdough moment or when we all downloaded Houseparty”, or more conventionally put, the honeymoon period.
After that comes a feeling of loneliness when time grows “sludgy” and weekdays blur with weekends. Studies from space travel refer to this as the “third-quarter phenomenon”. After the initial hype and anxiety of isolation, people settle into a new routine, but as the glimmers of hope appear, such as relaxations in lockdown rules, frustration often sets in. Referring to the Antarctica study, Dr Norris explains: “That is when the sea ice is too thick for a vessel to get through or the runway ice isn’t thick enough to land.”
Bottom line: it is normal if you feel a little challenged at this point. There is nothing wrong with you; you are just in that “third quarter”. The marathoners will know what it feels like between 19 and 22 miles, how your body adapts and eventually overcomes. This is going to happen, but we will also come out on the other side feeling like the anonymous marathon runner I quoted at the beginning. Hang in there. Help those near you and do not be ashamed to ask for support. We have told you many times of the support infrastructure within Ninety One. In a marathon it is often not you, but your fellow runners whose encouragement carries you through the dark moments. In the context of the current isolation, we need to look around and see who needs encouragement. Those in good spirit who can help should do their best to support their colleagues.
Let’s use the remaining weeks of isolation or partial isolation to figure out what is really important to us individually, in our family life, and collectively. The evidence suggests that people who have been isolated (Antarctica) want to repeat that experience when they seek clarity on their priorities. If we use this time for that, we will come out stronger and better. For me, COVID-19 has reminded me of our common humanity, of the fact that all 7 billion of us share this planet. When I come out of this situation, I will rush less and make more time for the people around me. I will be even more committed than before to putting sustainability at the centre of our business. We cannot be neutral while our planet is dying. That is why I will tell our shareholders in the upcoming results presentation of the importance and centrality of our purpose to the future of Ninety One.
I look forward to engaging you all on the state of our business and on the challenges and opportunities ahead, once the closed period ends next week.
Hang in there, support your colleagues and stay safe.
10 May 2020
Never give up, never despair
- Her Majesty The Queen
The “new normal” is not so abnormal anymore. After 40 days of lockdown and with no live sport to watch I have accepted my daily and weekly routine, which includes writing to you all on either a Friday evening or a Saturday after my exercise and a decent brunch. By the way, I am very proud of my new poached egg technique. If any of you want a “best-in-class” poached egg on smashed avocado and toast, I can help. I am sure many of you have used the new routine to learn things you never had time for when life was a daily rush to the office and back. Please use the precious home time to the maximum without that dreadful commute. The lockdown will not last forever, even though it is beginning to feel like that.
For the first time in 75 years VE Day celebrations had to be “virtual”. It is important to view our challenges and difficulties today in the context of what the war generation had to endure to make their world a better place. More than 75 million people died during this conflict, a quarter of whom were combatants. While Great Britain and the United States were pivotal in the defeat of the Nazis and their allies Japan, the Fascist-controlled Italy and others, the combined count of their military and civilian casualties was less than two million. Twenty-six million Russians perished in their ultimately successful effort to stop Hitler’s momentum and drive him back West. Twenty million Chinese perished in the East Asian war theatre. Of the eight million German casualties, three million were civilians. The Japanese civilians – not soldiers – from Hiroshima and Nagasaki had to make the ultimate sacrifice after America’s decisive nuclear attack on their cities. The genocide of six million innocent Jews by the Nazi regime must never be forgotten. This was a dark period in the history of our world.
Her Majesty The Queen captured it so eloquently last night when she said: “At the start, the outlook seemed bleak, the end distant, the outcome uncertain. But we kept faith that the cause was right – and this belief, as my father noted in his broadcast, carried us through. Never give up, never despair – that was the message of VE Day.” We salute those who fought for a better world and delivered that to the generations that came after them.
This puts our challenges and the collective sacrifice in aid of the fight against COVID-19 and all its consequences into perspective. Last week I laid out a framework for the Ninety One response to this situation. This week I want to share a four-point framework for a successful global response to the pandemic and its consequences, courtesy of Professor Jeff Sachs of Columbia University.
Earlier this week I participated in a meeting of the leadership council of the Sustainable Development Solutions Network, chaired by Professor Sachs, where this framework was debated. The finance industry, and especially the investment management subset, has a big role to play in this process of rebuilding. This is a crisis humanity cannot afford to “waste”, although many political leaders are doing their utmost to achieve just that. The selfish shambles emanating from the most powerful country in the world, the indecisiveness within the EU, the denialism of the Brazilian leadership and sheer opportunism displayed by control-obsessed bureaucrats and “pretend” democratic leaders, all provide cause for concern. East Asia, including countries like Vietnam, is increasingly distinguishing itself by effectively combining the use of technology and competent government to deliver good health and economic outcomes. Questions around citizens’ rights remain open.
The problem in today’s world is the lack of leadership at global level. Amina Mohammed, the Deputy Secretary General of the UN captured the issue when she said: “Those who have power are not providing the leadership we need and many who are offering leadership do not have enough power.”
This imbalance does not take away from the validity of the proposed framework for a successful response.
Firstly, the world needs a coherent health response, which is taking shape at many levels. The cooperation between the US, China and the EU will be key. There are reasons for optimism. Secondly, the attention needs to shift towards the engineering of a powerful, global economic recovery. Given the extreme damage done to consumer confidence and balance sheets, this must be investment led. This is the time to take advantage of low interest rates and transform the infrastructure of our world. This is the time to drive the energy transition. This is the time to put sustainability at the centre of what we do. The G20 will have the opportunity to set the agenda when the postponed COP 26 happens in 2021. The world will be taking on significant additional debt to finance this recovery. Thirdly, it is difficult to see how this will end without a substantial debt restructuring programme, especially for the vulnerable emerging markets. To avoid adverse political consequences, this needs to be tackled in good time on a pro-active basis. The causes of World War Two are well documented. That is why the fourth point is the search for social solidarity at many levels, starting with the support of the very poor and vulnerable.
In our small way, we can also help. Ninety One should position itself to play a role in the investments required for a sustainable recovery and in the eventual debt restructuring. Along with the market we should apply our skills to build a better world and secure better outcomes for our clients. As a firm we should support social solidarity where we can. This is about how we inhabit and engage. There is meaningful, purposeful work to be done to build a better business for the future. Let’s do it. Let us never forget what the generations before us did for us. Let us not forget our responsibility.
Best wishes for the coming week. Please stay safe.
P.S. Thank you again for the wonderful emails many of you have sent me. Pointing out articles to read or great actions from other firms, or just sharing stories about yourselves in these difficult times. I really appreciate it. Reaching out to your colleagues and sharing perspectives can be helpful. These messages give me the energy I need to do what I have to do. Let’s continue inspiring each other to become better!
3 May 2020
It always seems impossible until it is done
- Nelson Mandela
As we enter the month of May the realisation is dawning that the restrictions relating to the battle against COVID-19 and its severe economic consequences will be with us for a long time. We will eventually get back to something we all call “normal”, but for now, we need to dig in for a protracted campaign. It is not whether but how we will get to the end of this. This is what I want to discuss with you in this letter.
From late March through April equity markets have given us some reprieve and breathing space. Here are the numbers. The S&P 500 initially retreated by 34% from its 2020 peak to the trough on 23 March. Until the end of April, the US Market as measured by the S&P 500 recovered by 30% from that low point, ending 14% down from its 2020 peak. The first day of May saw further weakness, leaving the market down by 16% from the high point in February. Similarly, the FTSE100 dropped by 35% and then recovered by 15% from the low point, leaving it down 22% from the 2020 peak at the end of April. The numbers for the JSE tell the same story. Down 36% peak to trough and 23% until the end of April. On top of this, the ZAR declined by 28% against the GBP since Christmas of 2019. Congratulations to our investment teams, especially the multi-asset team, for boldly telling our clients that the last week of March was not the time to panic. Difficult decisions await investors from this point onwards.
The price movements described above have impacted on our revenue-generating capacity for the coming financial year and we will have to work hard to rebuild. Rebuild and grow we will, but this is not a time to be obsessed by our short-term financial numbers; it is a time to focus on our clients and be there for them. As a purpose-led business we should also do our best to contribute to a more sustainable and better world. For the first time in our lives we are going to witness the significant impoverishment of billions of people as a result of projected GDP declines across the world. Sadly, the very poor will bear the brunt. Our role as an impact investor and steward of capital flowing to the emerging markets becomes even more relevant than before.
It goes without saying that clients and investment performance remain at the top of the agenda. Everything we do will be within the context of long-term thinking. Here is the plan:
We are going to do this as one team. In a situation like the one we are facing, there is no place for petty politics or destructive internal competition. There never has been, but now this really matters. I have committed that we will do no downsizing or retrenchments to meet short-term financial targets. This is not an indefinite guarantee or a promise that no one will be asked to go if they do not live up to our standards for results and relationships. There is no place for energy sappers or people who put their own interests ahead of the firm. This underlines that we are “in it together” and that we are going to face these challenges as a team. Teamwork adds resilience in times of challenge. Do you remember the Michael Jordan quote used in my second letter? “Talent wins games, but teamwork and intelligence win championships”.
We are going to live our culture as never before. This is the time where our culture, developed over three decades, will work for us. It will reinforce our agility, which will help us to deal quickly with issues and allow us to capture the available opportunities with commitment. Inherent to this culture are good values. At Ninety One we do not ask how we can circumvent the rules, we simply ask what is right and what is wrong. Our people do the right thing. Period. This allows us to trust our people and let them get on with the job. Honesty and directness are key attributes of our culture. Speak the truth to power and do not tell those to whom you report what they want to hear but what they should hear.
We are going onto the front foot to grow the business. Our client group and portfolio managers, supported by robust digital technology, have engaged our clients over the past six weeks as intensively as I have ever witnessed. We have to defend our book and build the pipeline of new business more vigorously than ever, in order to limit the damage from the lower markets and position Ninety One for long-term growth. We need to evolve our investment offerings in line with future client demand.
We are going to manage the cost line together, not top down. It is the duty of every member of the Ninety One team to manage the cost line. Every person and every team will know how and where they can save. Please share your insights with your leaders and question costs. If you are not heard in your team, reach out to any of the management team to share your views. There is already a headcount freeze in place. Every vacancy gets challenged right up to Exco before a replacement is authorised.
We are going to continue to invest in the business to create growth capacity for the long term. We are not going to cut back on key investment programmes on the technology front or stop building capacity in future growth areas. All “nice to haves” will be postponed.
We are committed to being an independent, capital-light, people-centred investment management business with growing employee ownership. Our demerger, listing and rebranding have reinforced our proposition to the market and growing employee ownership will further strengthen that proposition. This supports the conditions for investment and service excellence.
The longevity of our staff tells the story of a business as a people-centred place.
The clarity and focus of our model, the alignment of interests and spirit of our people give us confidence even when we face adversity. Abraham Lincoln once said: “Always bear in mind that your own resolution to succeed is more important than any other one thing”. Please remember this.
Thank you for making Ninety One a special place.
25 April 2020
Another extraordinary week in extraordinary times! Could any of you ever have imagined a negative price for a barrel of oil? More broadly, we have seen a slightly more stable and positive feel across financial markets, with signs of cautious optimism in the battle against COVID-19 emanating from parts of the world hit in the earlier stages of the pandemic. This contrasts with the tragic projections that the death toll from this disease will most likely have exceeded 200,000 people by the time you read this letter.
China has reported no deaths in recent days, the death rate in Germany is now less than 100 per day, and Italy and France are talking about gradual easing of the national lockdowns during May. Although the US is still firmly in the eye of the storm, hope of light at the end of the tunnel is emerging. And in South Africa, where the outbreak has been well contained so far, there will also a slight easing of the lockdown restrictions. The focus is starting to shift to the new reality of a post-COVID world.
This reminds me of Winston Churchill’s words from November 1942 after the Allied victory at El Alamein. “Now this is not the end. It is not even the beginning of the end. But it is, perhaps the end of the beginning.”
It is time to take stock of the world out there and the environment in which we will operate in the future. We need to ensure that our business aligns with the powerful underlying trends that will shape our world in the years to come. An example is an acceleration in the shift from real to virtual and implementation of productivity-enhancing technology in the post-COVID-19 world. Another example is the expectation of an acceleration in the relative rise of Asia.
This week, I have decided to experiment with the format of this letter. I am not going to do all the ‘talking’ or reporting. I have asked three members of our investment team to give us their views on the impact of COVID-19 on the world economy and specifically the developed markets (Jimmy Elliot and the multi-asset team), emerging markets (Peter Eerdmans and his fixed income team) and South Africa (Nazmeera Moola). Here is a summary with references to further material below for you to read.
This is already a much deeper economic crisis than the global financial crisis (GFC) of 2008-09. However, many lessons have been learnt from previous crises. The size and speed of government responses in providing support to businesses and employees are impressive. Monetary and fiscal support has already vastly exceeded that provided during the GFC and delivered in 6 weeks, rather than over the course of a year.
During the GFC, we were reminded that the state was the lender of last resort. But today the state is also the employer of last resort and the purchaser of last resort. Not since the second world war has this been the case in Western economies, which raises questions about the levels of government debt with which Western economies will be left. We are likely facing an extended period of loose monetary policy ahead. Long term, this should provide a benign backdrop for real returns for equities and other growth assets. While the volatility is unsettling, it creates opportunities for disciplined single asset class and multi-asset investors. It is in these environments that our clients need us most as active managers and custodians of capital.
Corporate resilience will become a new focus for all companies. Enhanced remote working facilities, diversified supply chains, longer-term funding, reduced leverage and among investors the wisdom of focusing solely on shareholder returns alone at the cost of sustainability, already being questioned, will receive even more focus.
Links to further reading:
(Please note some of the articles are designated for professional investors only)
On several measures emerging markets are more vulnerable than their developed counterparts: less developed healthcare systems, less fiscal space for governments to support economies, the risk of starvation as people in the informal sector lose their jobs and the difficulty to enforce social distancing in informal settlements.
However, there are encouraging signs that the impact of COVID-19 on the population in emerging markets could be more modest than feared. The biggest advantage of emerging markets is their demographic, given that COVID-19 affects the elderly the most.
Other encouraging signs include:
While the road to recovery globally will be slow, we believe emerging markets might well stage a faster rebound than developed markets. Before the COVID-19 crisis, many imbalances in emerging markets had been rectified. The private sector has an important role to play. By communicating the long-term growth case for emerging markets, the high yields on offer and the attractive opportunities in equity markets, we can help keep people invested in the asset class and attract new capital. This capital is crucial in supporting these economies and, we strongly believe, will ultimately lead to great returns.
Links to further reading:
(Please note some of the articles are designated for professional investors only)
South Africa entered 2020 clinging to its last sovereign Investment Grade credit rating with the economy in recession and very limited fiscal space. The lacklustre economy was due mainly to political sclerosis as the ANC government failed to take the hard decisions on structural reforms needed to reverse the damage done by Jacob Zuma’s term.
Encouragingly, the government has proven decisive in the handling of COVID-19. President Ramaphosa moved to act early by instituting a broad-based lockdown. This has served to dramatically increase awareness of the virus and slow infection rates. Total infection rates, death rates and positive test results as a percentage of total tests conducted suggest very slow progress of the pandemic in South Africa.
Unfortunately, the impact on the economy of the lockdown has been significant. We estimate a contraction in GDP between 6.2% to 10.5% for 2020 as a whole – depending on the speed of the loosening of the lockdown. To mitigate against this, the government recently announced a R500bn stimulus plan. Given the limitations on government finances, the bulk of this package will comprise loan guarantees to small and medium businesses, the redirection of spending and the release of the surplus from Unemployment Insurance Fund.
In addition, the Presidency has released a well thought through plan to reopen the economy. If the President can use the positive momentum gained by the coronavirus crisis to accelerate reforms, this will help South Africa’s growth into 2021 – and leave South Africa’s growth and fiscal trajectories in a far more sustainable situation.
Links to further reading:
As you can see, there is a great deal to think about. This event has affected the health of many economies across the world and the lives of billions of people. The impact of this storm on our way of life and our business will be with us for many years to come. To conclude I will share something else with you. It is a poem from one of our long-serving colleagues.
Here is the message he sent me earlier this week, rather late at night:
I hope this finds you and your nearest and dearest well during these difficult and hopefully never to be experienced again times. I have never considered myself a poet, but felt I needed to try and put something down on paper that had meaning – to me, to you, to whomever. You may share this in your weekly email if you wish.
Times are troubled and people are pulling together. Togetherness is needed now more than ever. We will get through this.”
For when the day this all ends
For when the day this all ends
And the world tries to make amends
Let’s not forget what has transpired
Or the life and love that’s expired
And let’s not take for granted
All the true beliefs that have been planted
For the work that’s been done on the frontline
To save your family’s life and mine
Look to the next phase
So we can write our own phrase
Because it will end
And the world and its people will mend
And we will have learnt
Despite the bridges that have been burnt
The world will win this fight
Again this world will unite
And before too long
We will all again be strong
And build back what has been lost
But not forget the lives that it cost
We will have that Friday night out
We will go to a concert and scream and shout
We shall queue for takeaway coffee, and beer in a crowded bar
The time when that comes may seem so far
But it will arrive
And then again we can all strive
For when the world does again thrive
And we are allowed that fortitude and drive
We will know we are truly alive
And we know that we can survive
Take a bow, Chris Prangle, stalwart from our operational change team!
It is time for us to start thinking about life after lockdown.
It is also appropriate to wish our Muslim colleagues Ramadan Mubarak. I hope all of us, Muslim and Non-Muslim, will make this a month of Zakat (charity) given the need we are starting to see around us as the economic damage of the most severe economic contraction since the Great Depression starts to bite.
I wish you all a wonderful and nourishing weekend.
The value of investments, and any income generated from them, can fall as well as rise. Forecasts are inherently limited and are not a reliable indicator of future results. Ninety One is not responsible for the contents of third-party sites that may be linked to from this page. You use any third-party sites and materials at your own risk.
18 April 2020
This was a short, intensive week and I trust that you were all well rested after the Easter weekend. As the week kicked off on Tuesday, I sensed energy, vigour and a desire to get stuck in among many of you. The road to recovery from the effects of COVID-19 will be longer and tougher than many people, including myself, initially estimated. We will also need resilience in the face of the recent extensions of lockdowns in the countries where most of you reside. Together we have the desire, agility and resilience to cope with the challenges ahead. It was encouraging to see Wuhan relax its restrictions and Germany talking about an exit strategy.
This week, I am going to report back to you on my initiative to communicate directly with most of you via small-group Skype calls. Thanks to the efforts of the Human Capital team and Caron, I have had the privilege to engage directly with approximately two thirds of you. It has been a most enriching and inspiring experience and I look forward to engaging with the final third over the next week or two. Thanks to the sterling efforts of the Technology team, our Skype experience was also significantly better than the previous week.
Here are my take-outs:
I look forward to the conversations scheduled for the next two weeks. These have become the highlight of my workdays.
Our thoughts are with another veteran, Alastair Munday who, due to medical reasons, had to relinquish his duties for the foreseeable future.
Next week I plan to share a few ideas on the challenges that confront the world in which we operate. The depth of the damage and the magnitude of the challenges are becoming apparent as the “fog of war” lifts and more data become available. We will have to face the facts and cannot pretend that that world will remain the same as before. It never does, especially after “black swan” events like COVID-19.
What is important, is that we muster the courage and commitment to tackle these challenges head-on. In the investment world, this is the time for active managers to stand up and be counted. Our clients expect nothing less. The companies in which we invest on their behalf now need responsible, supportive shareholders and lenders. The world needs clear thinking.
If we use this moment of dislocation to inspire ourselves to build a better firm, develop better ways of investing and renew our commitment to building a better world, we would be living our purpose of investing for a better tomorrow. Let’s do it!
Best regards and stay safe,
9 April 2020
In many parts of the world this is normally a short week filled with anticipation for the best long weekend of the year. It is spring in the Northern Hemisphere and the best time of autumn in the Southern Hemisphere. The roads and airports are usually buzzing with travellers on their way to enjoy family time.
In the Jewish calendar this is the festival of Pesach (Passover), which celebrates the freeing of Jews from slavery in Egypt. The Easter weekend is named after the Christian festival of Easter, celebrating the crucifixion of Jesus Christ on Good Friday in Jerusalem during the Jewish Passover and His resurrection on Easter Sunday. This time is about a new beginning and hope for both Jews and Christians. In the Northern Hemisphere spring has the same meaning for all its people. Indeed, some claim that Easter is derived from the name of the ancient Anglo-Saxon Goddess of Spring, Eostre or Ostara.
For us at Ninety One this is also a time of renewal and hope. This is only our fourth week as a separately listed, rebranded business. The energy, commitment and fighting spirit that I have witnessed over numerous Skype calls and in many emails this week tell a story of resilience, agility and boldness. Our business is functioning well. We are fully engaged in the investment markets and with our clients, despite the fact that most of us now work from home.
Yet, in 2020 the world is battling a terrible pandemic, COVID-19. Yes, there will be an Easter weekend, but in many parts of the world there will be no holidays and limited celebration. The beaches, parks, ski-slopes and holiday resorts will be empty. So will the churches, synagogues, temples and mosques. The offices, factories, restaurants and shopping malls will be empty. Over this weekend we will all hear Simon and Garfunkel’s “Sound of silence”.
Many people will have no job prospects after the Easter weekend of 2020. As the lockdowns –necessary to fight this virus – are taking their toll on economic production and employment, the stress in many societies is increasing, despite the attempts from governments to compensate for these lockdowns. This is especially acute in countries where governments have limited resource of a financial or technical nature.
This is not the time to look the other way, but a time to think how we, as a business and all of us on a personal level, can support those less fortunate than us. I want to thank you for your generosity in taking up the offer to match whatever you give to worthy causes, supporting the victims of the pandemic and the consequent economic fallout.
Our business has made its pledge to the Southern African Solidarity funds and our people are rising to the challenge to offer ideas, skills and advice where this may be required in support of the battle ahead. Most importantly, you did not allow the lockdown to disrupt your service levels and efforts to protect the assets of our clients, as is becoming of the people of a firm where everyone is a shareholder.
Do not spend the Easter weekend fretting about the fact that the S&P 500 managed to decline approximately 29% from its peak in February to the day we listed (16 March) or by almost 34% to the most recent bottom on 23 March. Use the last Easter weekend you will have free of sport on TV, holiday commitments, guests staying over and the stressful return on a packed road, to enjoy your families, your homes as well as your own company. Use the pause to rest, read, relax but also to think how you can live life better and differently after lockdown.
As a business we need to examine whether we are doing enough to contribute to our purpose of investing for a better tomorrow by striving for better investment, a better firm and contributing to a better world.
Last weekend, acclaimed author Arundhati Roy wrote the following in the Weekend FT: “Whatever it is, the coronavirus has made the mighty kneel and brought the world to a halt like nothing else could. Our minds are still racing back and forth, longing for a return to ‘normality’, trying to stitch our future to our past and refusing to acknowledge the rupture. But the rupture exists. And in the midst of this terrible despair, it offers us a chance to rethink the doomsday machine we have built for ourselves. Nothing could be worse than a return to normality.
“Historically pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, avarice, our data banks and dead skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.”
I wish you a Happy Easter, “Gut yom tov”, or simply a peaceful special long weekend of reflection.
3 April 2020
On 1 April this week, Ninety One entered its thirtieth year. As a public company we are now in a closed period so I will refrain from commenting on numbers until the release of our results in May. Thank you for your enormous effort over the past year. We have made much progress on many fronts, but the 2020 financial year, will be remembered for the demerger, listing, rebranding and for the Coronavirus. If ever there were a team I would want to work with in times like these, it is the Ninety One team. Together we can overcome the current market and economic challenges, just as we have done so many times before. In times like these team spirit, enthusiasm, culture and togetherness trump adversity. In this week’s Skype calls I witnessed these attributes on a daily basis.
Last week, I warned about further volatility and that is exactly what we experienced. On top of that, Moody’s changed the outlook for the credit rating of the UK from stable to negative and downgraded South Africa to “junk” status, which led to a further slide in the value of the South African Rand. Life is not easy in markets at this point in time but it is harder in the real economy. Before we feel sorry for ourselves, we need think about our clients who lost capital in this correction, the many businesses, which through no fault of their own, are approaching bankruptcy as a consequence of the shutdown of economic activity and all the people who have lost their jobs. Governments are stepping up, but need to do more. Industries that were thriving a few weeks ago are now on their knees. Ours is functioning and the markets are open. Even though most of us are in our second or third week at home, we have been able to work with all the support we need to discharge our obligations to our clients. This is a time for stoic professionalism, and also a time for compassion.
During my calls over the past two weeks, I have been pleased to get the question from many of you, “What is Ninety One doing to make a difference?” I’d like to share with you the initiatives we are introducing in order to support the communities and countries in which we operate during this difficult period.
Firstly, we have made the commitment not to cut staff numbers to meet short-term financial objectives. We will honour all our commitments to you so that you can focus on serving our clients and fulfilling our fiduciary duties without distraction. There are no guarantees in life, but I assure you our goal is for us to get through this together. The same applies to our suppliers and immediate ecosystems. As long as we are being paid, we will pay those who supply services to us.
Secondly, we are directing our corporate spend towards supporting national efforts. While all of the countries in which we operate are being impacted by this crisis, we feel it is most important to focus our efforts on Southern Africa, where the governments quite literally do not have the resources to deal with challenges. These economies are at risk of not only a health crisis, but also a humanitarian crisis caused by further unemployment and poverty. We cannot be bystanders. We have allocated R50m for immediate distribution to the government-endorsed solidarity efforts in South Africa, Namibia and Botswana.
Thirdly, we are encouraging our investment team to work with our portfolio companies to support them through these challenging times. In markets where government support is not available fast enough and at the required size, there is a very real need. There are many solid companies that simply need financing to get them through the next few months, without which they are sure to hit the wall. It is an area where we have the skills to help. The combination of sensible engagement and available finance may help to save many jobs and salvage much value. We hope to share details of these initiatives in the coming days.
Fourthly, we are fully engaged through our industry bodies in efforts to ensure that capital markets remain functional and open for business. Where necessary, we have engaged authorities and governments directly with suggestions and views.
Finally, we want to encourage and support your individual efforts. We can’t pretend to know what is best for each country, city, community or household, so we will support your energy. I am pleased to tell you that we will match the charitable efforts you make in the coming month, whether that be a personal donation, or funds you have raised externally. We will separately provide the mechanism for this matching process, but please think about what you and your colleagues want to do in the coming weeks. We will come in, right next to you!
Whereas the efforts mentioned above are important, our main focus remains our clients. As stewards of their capital we carry a huge responsibility to add value to their portfolios and engage them in thoughtful ways, no matter how challenging the market conditions may be. To quote Rassie Erasmus, who coached the Springbok rugby team to victory in the 2019 Rugby World Cup: “Let the main thing be the main thing”.
As we go into another weekend of lockdown, I urge you to use the down time from the mad rush of our normal existence to enjoy the time with those closest to you or those who can benefit from your support.
Make the most of the weekend. Make the most of life. Stay safe.
27 March 2020
Allow me to start with the same words as last week. What a week! After a depressing couple of days, in which equity markets continued to fall and the US Treasury yield nearly halved from February 20, policy makers and governments re-gained the initiative, with the announcements of a plethora of stimulus packages and draconion limitations on the mobility of people. US Equities had their strongest three days since the 1930s and emerging currencies showed composure. The credit markets remain challenged from a liquidity perspective. Bloomberg commented as follows this morning on the US Equity markets: “After falling into a bear market at the fastest rate ever, the S&P just recorded its quickest three-day advance in nine decades. As absurd as it may seem, the Dow’s already started a fresh bull market – up more than 20% from the lows – after more than $2 trillion in value was created in three days.” In spite of strength in the Asian markets, equity markets went into retreat later this morning. We should brace ourselves for ongoing volatility!
On Monday evening, the Prime Minister of the UK delivered a Churchillian message to the British people when he announced a full lockdown to fight the Coronavirus. This happened less than an hour after President Cyril Ramaphosa ordered the Army to mobilise and patrol the streets in South Africa to enforce strict controls of a similar nature. The German government followed the UK and French governments with huge fiscal stimulus packages. At EU level the dithering continues in spite of late, but substantial, action from the ECB. The European lockdowns of last week have been emulated across the world, with Brazil being the odd man out. Singapore once again proved its mettle with additional decisive action to safeguard its population and economy. In Wuhan people have been let out of their homes for the first time in many weeks after a remarkable improvement in the statistics relating to new infections. Outside Hubei the infection rate has dropped for the 16th consecutive day. In Hubei, the centre of the outbreak, there were 346 infections on Wednesday, the first time a daily infection rate of below 1000 was recorded since late January. There is a real battle ahead but the signs of hope are emerging.
Globally, we are now dealing with over half a million Coronavirus cases after 24,114 deaths and 124,395 recoveries, with just under 400,000 active cases remaining. The Covid-19 crisis has moved west with great rapidity. During the week the US has overtaken China and Italy as the country with the largest number of cases. New York has now become the epicentre. Earlier this week, I spoke to our people there. They are prepared but the concern was palpable. At this point they are all safe and working effectively from home.
I can proudly report to you that our business is functioning well under the circumstances. Indeed, it is as if we have not missed a beat in spite of the fact that the vast majority of our people now work from home. The people of Ninety One have been brave, stoic but also responsible over the past week. With the safety and mental wellbeing of our people and delivery on our promises to our clients at the top of our priority list, we have tackled the challenges with enthusiasm. During the past few days I have engaged directly with many of our teams, starting with the Australians on Monday. Many other calls will follow. We have also launched the “Ninety One outreach initiative” where everyone is encouraged to use the period of lockdown to reach out to 91 people in our firm. Dries Vosloo did that to me this morning and made my day with the following message: “Morning Hendrik, how are you and your family? After almost two weeks working from home, I am so encouraged by the positive attitude and dedication from the Ninety One people. It’s really amazing given what is going on.” This encapsulates the spirit of our business. Further highlights have been the conversations among our investment leaders across capability and team lines and the response of our client teams in identifying areas of focus where our clients need our engagement and support. The CIOs have marshalled the very best thinking in the firm to spot challenges and opportunities in these treacherous markets. This process is going to take the investment discourse in our firm to an entirely new level.
Let me conclude by thanking the many heroes of the past two weeks. Our Technology and Workplace teams have worked day and night to enable this seamless move to distance- and fully-flexible working. Our Human Capital team has created the support framework necessary to sustain this way of working for as long as it takes. Our team leaders have truly risen to the occasion. During my calls to individuals they have all confirmed that they have been working harder than usual and getting stuff done. I also want to thank the senior leadership team for the way in which they just kept driving our firm forward in these uncertain times. I am truly privileged and blessed to be working with a team of true professionals. I remind you of the words of Michael Jordan: “Talent wins games, but teamwork and intelligence wins championships”.
None of this would have been possible without the ongoing support of our clients. We owe them decent performance outcomes and ongoing service excellence. We are committed to delivering to the very best of our abilities.
Please take a rest over the weekend. Routine is important. Spend time with your families. These could turn out to be golden moments.
20 March 2020
What a week! Renewal, hopes, dreams, highs, lows, market turmoil, pandemic fears, teamwork, empty offices, challenge and change come to mind. The planned celebrations of the launch of Ninety One turned into more modest, smaller or even virtual gatherings as Covid-19 and market uncertainty loomed. Travel bans, national lockdowns, school closures and hastily-considered economic stimulus packages competed as news headlines. It became clear that the world of Ninety One and its people had changed within a single month.
The fact that the 2020 financial year was on track to end on a high, on the back of good flows, assets and earnings, became academic. Over the past weeks our attention switched to dealing with challenges ahead, including the safety of our families and loved ones and limiting the damage to the capital of our clients. Adapting to remote working, while maintaining our full intensity has moved to the very top of the leadership agenda. We cannot just go and sit at home and feel sorry for ourselves! We have money to manage and clients to serve!
In late 2018 when we embarked on the journey to demerge from Investec, few of us would have imagined that most of us would be working from home during the first week of our life as a newly-listed Ninety One. Fewer of us would have imagined that we would be battling a global pandemic with a looming global recession in the background. Some of us were cautious about markets but few of us really expected the bear market to hit so fast and so hard. A month or so ago life was good. Investment performance and flow momentum was as good as it gets. Beta and alpha were reinforcing each other, and our people were palpably excited about the future. Not even a US-China trade war, Brexit uncertainty, load-shedding in SA, the political upheavals in Hong Kong or the relentless competitive pressures of our industry could affect our collective confidence in the future.
Then came COVID-19 and the consequent market uncertainty. When large parts of China went into lockdown it was, incorrectly, seen as far away, but when Lombardy, followed by Spain, France, Poland and now many others, the UK, the US and South Africa started to implement or talk about lockdown, life changed.
Right now, we need to shift gears. We need to tackle the impact of COVID-19, the looming recession and bear market in financial assets head-on. “Being challenged in life is inevitable, being defeated is optional”.
There is no need for panic. We have a strong business; our teams have adapted brilliantly to working remotely. Three cheers for our IT, Workplace and Human Capital teams, who have worked tirelessly to ensure that most of our people could work productively from home. Our BCP processes have held up, teams have been supportive of those with logistical and other issues and we are functioning at capacity.
Now we need to use this time in which we are relieved from travel obligations to get stuff done. Portfolio managers should use the desk time to exploit the market dislocation to the best of their abilities. Client-facing people should find ways of staying engaged with our clients. We need to tell the Ninety One story with vigour and confidence! Business leadership will be planning and preparing for the worst but strive to achieve the best. Above all, we must keep calm, stay connected and on message. As we have done in similar situations in the past, we will avoid “knee-jerk” reactions and panic. This is a time to encourage communication within and across teams. This is also a time to support all our people to do their best for our clients. Various programmes have already been launched to support team leaders to achieve that.
You will hear more from me next week. For now, I want to sign off with the words from Reinhold Niebuhr: “God grant me the serenity to accept the things I cannot change; courage to change the things I can; and the wisdom to know the difference”. We have a duty to do the best we can under the circumstances.
Have a good weekend.