15 Aug 2022
At the recent Investment Insights event in London, Ninety One founder Hendrik du Toit noted that since its founding 31 years ago, Ninety One has grown AUM organically from $44-million to $163.4-billion.
He resisted the temptation to refer to this growth as a ‘success’.
“Success is relative. We are just a business trying to serve clients. If you think you are there, you are going to be taken out. We are here by the grace of our clients.”
Instead, he used the opportunity to speak truth to power.
“Our two home markets – SA and the UK – are challenged. As stewards of capital, we must not only analyse but must also express our opinions clearly, which may come at a cost.”
South Africa is a country with power, water and security shortages which limits entrepreneurial activity, demotivates the population and leads to a sense of hopelessness.
The UK, he added, faces real structural issues. These may not include the theft of railway lines, but major infrastructure is not working, and policy choices are not stimulating economic development or entrepreneurial activity. The City of London was a beneficiary of tough decisions made by Thatcher’s government in the 1980s. “Now is the time to unleash that same energy.”
Hendrik was not delivering these messages for the pleasure of it. His message to his audience was clear: investment professionals have a role to play that goes beyond money management. It’s a fiduciary duty. While South Africa’s amended offshore limits allow 45% of a Reg28 compliant portfolio to be invested offshore, 55% must be invested in SA. This means preserving the health of the financial sector, at the very least.
So, for instance, it is vital that South Africa is not grey-listed by the Financial Action Task Force.
Hendrik expanded the conversation to include macro-issues facing investment managers, specifically climate change.
One option, which is available to investment managers, is to accelerate the mobilisation of capital into the ‘right’ assets. This is not about ‘buying green’, he tells the audience. It’s also not about score cards and complicated databases that calculate the implied temperature change in a portfolio. “I don’t care about that,” he says.
Instead, he cares about utilising global capital pools to transform the global economy. “We have the money to help businesses that can’t generate the internal capital fast enough to fund the transition. We need to ensure the transition is just. We cannot live in the rich world, while people in the emerging world are dying in coal mines.
“And we need to do that in a way that does not cost our pensioners in the long term.”
With discussion time running out, host Natalie Phillips, deputy MD of the Africa Client Group, had time to take just one question from the audience. It was a perfect close to the discussion:
“What has fundamentally changed in the industry over the last decade?”
“Everything and nothing,” Hendrik replied.
The technology we use, the investment opportunities, the regulation, the burden of reporting and scrutiny, that has all changed. But the fundamental principles of investing have not changed at all.
“No computer or AI will change the concept of net present value. All we are doing is buying future cash flows at the best possible price in order to meet a liability down the line.”
That will not change and has not changed. It’s like basic humanity. We are still very much the same as our parents and grandparents. Maybe the rules have changed, but basic humanity hasn’t. That is the same with investment.
Investments involve risk; losses may be made.