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Allan Gray recently won the Raging Bull Award as South Africa’s best-performing unit trust manager for the sixth time, which didn’t come as a surprise.
It’s been a formidable asset manager, an incredible generator of alpha, and is an extremely passionate custodian of its clients’ interests.
The company’s designated chief operating officer, Rob Formby, says he has no intention of shaking up the business and that, for all intents and purposes, it will continue as usual.
He will succeed Rob Dower shortly.
The group’s roots date back to the Allan Gray Council, which was established by Allan W.B. Gray in 1973.
It won its first client a year later, set up Orbis Investment Management in 1989, incorporated in South Africa in 1992, and changed its name to Allan Gray Limited.
Formby, a qualified mechanical engineer, joined Allan Gray in 2009.
Below are excerpts from our interview with Formby:
Interesting is that you joined Allan Gray without any financial experience. How did that come about?
At Anglo American and McKinsey I was exposed to the broad world of management; at Rebserve and then Rebserve Cleaning I was exposed to the challenges of running companies in tough industries.
The offer to join Allan Gray provided a new challenge to add value. In line with this operational management thread, I was recruited as deputy director of retail operations.
The timing of the opportunity and the fact that Allan Gray was open to hiring me without financial services experience was fortuitous.
What were your initial impressions at Allan Gray?
When I started we had just come out the global financial crisis and our clients were largely unscathed, so the initial period was very positive from a market perspective.
In addition, Allan Gray and its retail business had been operating well and growing strongly for several years.
I was quite worried that I would find myself with little to do and I did not want to be what Warren Buffett described as “any ham sandwich can run that business”.
But as it turned out, even though things were operating extremely well, I soon realised that there were a host of things that could be done to make things even better.
It was an exciting challenge and I was given the freedom to try and lift the bar. In addition, I was impressed with the level and calibre of people in the business.
Asset management, furthermore, is a very interesting industry. It touches a lot of people.
There is considerable benefit that can be added to those who seriously need it. I remain amazed at clients telling me about how we have assisted them. That said, there remains an enormous need for good, preferably independent, advice.
What’s Allan Gray’s secret to success?
A couple of things, but perhaps predominantly a strong purpose to do things well and make a difference for clients.
I recall my first week with the company in 2009. A member of the team came up to my desk to have a correction signed off on a client’s account, and I looked at him and said: “I cannot see that we have done anything wrong on the account.”
He immediately challenged me from the client’s perspective, passionately arguing that the client had been disadvantaged.
That incident has long remained ingrained in my mind, illustrating Allan Gray’s quest for fairness and attention to detail.
What will change at Allan Gray when you succeed Rob Dower?
I don’t see the need to introduce big changes. Much of what is valuable and effective is already firmly in place and a lot of the direction has been set.
One also needs to guard against disrupting a good business that exhibits sound continuity.
Of course, small things might always need attention, and these will be taken care of.
In the business world, I might add, the best possible performance in a competitive environment is almost always expected, and you constantly need to challenge yourself and look at how you can improve.
This requires considerable introspection, flexibility and a willingness to adapt.
Is there not perhaps a case in the wider context to restructure, diversify or increase your product set?
No, I don’t think so. An element of discipline is required not to make changes for the sake of it.
Allan Gray is more about focus and doing a few things really well.
On the other hand, might this not be forced on you as a major asset manager with high capital inflows and faced with SA’s declined economic growth and greatly reduced listed market capitalisation?
Obviously, challenges of that kind make things difficult, but we are still able to distinguish our portfolios and deliver alpha.
Do you expect major changes in the wider asset management environment during the next five to 10 years?
The market is definitely becoming more competitive and this continuously demands attention.
On the regulatory side, the professionalism of advice has generally been positive and hopefully we will continue to see a healthy independent advice offering.
On the technology side, the demand for better information and easier access will grow significantly.
This article originally appeared in the March 2018 edition of FundFocus. Buy and download the magazine here or subscribe to our newsletter here.
