Sec­tor could do more to tackle SA’s cruel ovar­ian lot­tery

Business Day - - COMPANIES & MARKETS - Gil­mour is an in­vest­ment an­a­lyst.

Is the in­vest­ment in­dus­try do­ing any­thing to change SA for the bet­ter? At the re­cent CFA South Africa An­nual In­vest­ment Con­fer­ence, Del­phine Goven­der of Per­petua In­vest­ment Man­agers tack­led this thorny sub­ject, leav­ing one with the dis­tinct im­pres­sion that she be­lieves the sec­tor could be do­ing a lot more.

Goven­der provoca­tively em­pha­sised the high de­gree of in­equal­ity in SA, us­ing ae­rial im­agery of the ob­vi­ous di­vide be­tween the well-off and those sur­viv­ing in poverty. Two of her ex­am­ples were Cape Town’s Hout Bay and its neigh­bour­ing squat­ter camp, and Jo­han­nes­burg’s Sand­ton and Alexan­dra.

“Such in­equal­ity in South African so­ci­ety is not sus­tain­able if pros­per­ity and growth is our vi­sion,” she said.

Her key mes­sage was that in­vest­ment should be a means to an end rather than sim­ply an end, es­pe­cially in a de­vel­op­ing econ­omy. Its fun­da­men­tal pur­pose should be to con­trib­ute to all through an in­crease in so­ci­etal wealth and well­be­ing. But she rep­ri­manded the in­vest­ment in­dus­try as strug­gling to meet these as­pi­ra­tions and said it needed to re­con­nect.

Goven­der brought up the sen­ti­ments of Pa­cific In­vest­ment Man­age­ment Com­pany founder Bill Gross, who be­moans that money is made from se­cu­ri­tis­ing things and shuf­fling pa­per rather than build­ing things.

Com­pare this with decades ago when doc­tors, air­line pi­lots and sim­i­lar — peo­ple with “real” jobs — were the best paid in so­ci­ety. Phi­lan­thropist Gross says today’s so­ci­ety has the un­mis­tak­able odour of Mam­mon — be­ing the greedy pur­suit of gain and ex­ces­sive ma­te­ri­al­ism — and as an in­dus­try we have failed mis­er­ably in the ef­fi­cient use of cap­i­tal.

The in­vest­ment busi­ness should have a broad vi­sion of cre­at­ing and in­creas­ing wealth within well-man­aged risk pa­ram­e­ters, mo­bil­is­ing cap­i­tal for so­ci­ety-wide job cre­ation and well­be­ing. Goven­der said our in­dus­try needed to re­solve its con­stant bat­tle be­tween self­in­ter­est and so­ci­etal in­ter­est.

In my decades as an in­vest­ment pro­fes­sional, I have too of­ten seen highly “re­warded” peo­ple spend an in­or­di­nate amount of time wor­ry­ing and stress­ing about their per­sonal port­fo­lios and po­ten­tial bonuses, let alone the wealth of small clients, and cer­tainly not the in­jus­tices of grind­ing poverty.

Goven­der is also con­cerned about the lack of de­vel­op­ment and trans­for­ma­tion in the in­vest­ment sec­tor, and ob­served a re­mark­able lack of gen­eros­ity in knowl­edge shar­ing.

How many se­nior an­a­lysts and fund man­agers are pre­pared to im­part their depth of knowl­edge and ex­pe­ri­ence to young and aspir­ing new en­trants? I sus­pect this re­luc­tance is due to mis­placed fears and er­ro­neous be­liefs — that this is some­how a zero-sum game and if you share, you lose.

The dra­mat­i­cally skewed na­ture of the in­dus­try was also high­lighted by Goven­der. Of 465 sell-side re­search an­a­lysts in SA, only 19% are fe­male. Even more acute is racial un­der­rep­re­sen­ta­tion. Only 14% of sell­side an­a­lysts in the coun­try are em­ploy­ment eq­uity-des­ig­nated. The in­dus­try per­sists as pre­dom­i­nantly pale and male.

With ref­er­ence to War­ren Buf­fett’s “ovar­ian lot­tery” state­ment, Goven­der em­pha­sised that we must en­sure no­body gets left be­hind. Also in SA, the sec­tor re­mains re­mark­ably con­cen­trated, with just a few in­vest­ment houses con­trol­ling the bulk of fi­nan­cial as­sets.

The con­cept of in­clu­sion is a dif­fi­cult one, not only in SA, but glob­ally. Peo­ple grav­i­tate to those who are like them and even sub­tle bi­ases can lead to ex­clu­sion. We do our­selves no favours, as crit­i­cal think­ing comes from di­ver­sity. Goven­der set out sev­eral prin­ci­ples for those in this busi­ness: be ex­cel­lent in all your work, no mat­ter how me­nial; be a leader in your own right; get rid of the can­cer of cor­rup­tion; demon­strate eth­i­cal and hon­est be­hav­iour; in­vest sus­tain­ably; be re­spon­si­ble in cap­i­tal al­lo­ca­tion; take the long view rather than bask­ing in short-term suc­cess; be a gen­er­ous role model; and recog­nis­ing that you have a head start, im­prove the odds for oth­ers.

CHRIS GIL­MOUR

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