Ann: Investor Presentation - Annual General Meeting, page-8

Tributes for a pioneer
Allan Gray remembered with tremendous respect.
Patrick Cairns / 12 November 2019 00:01
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Of all the words that could be used to describe Allan Gray, the founder of the firm that carries his name, perhaps the most apt is ‘enigmatic’.

Although his company’s brand is one of the most recognisable in the country, it is not widely known that there was a real Allan Gray behind it.

“Some people even wondered if he really existed, because they never saw him or heard him,” says Delphine Govender, who spent more than a decade at Allan Gray before starting her own firm, Perpetua Investment Managers. “That is so unusual compared to the leadership we see today, but he was nevertheless hugely influential.”

Gray, who launched Allan Gray Limited in 1973, passed away this weekend in Bermuda at the age of 81.

Read: Allan Gray passes away

The man who founded South Africa’s largest asset manager was a very private individual who was renowned for his humility. His role as a pioneer in reshaping the local investment industry cannot, however, be exaggerated.

Going where no one has gone before

“He was, in a way, the great disruptor,” says Sandy McGregor, a portfolio manager who has worked at Allan Gray since 1991. “When he arrived on the scene in the early 1970s, the quality of investment management was, by modern standards, rather lax.

“He upped everyone’s game because he was so much better at it,” McGregor explains. “So everyone else had to be better as well.”

When Gray launched his firm in Cape Town, the professional investment industry was the sole preserve of banks and insurers. There were no private asset managers in South Africa, but Gray saw an opportunity to do things differently.

“Nobody else was doing what he was,” says Govender.

“It wasn’t as though he had anyone he could refer to as a role model. Starting Allan Gray was hugely trailblazing.”

He also brought an approach to investing that had not been seen in this country, which in many ways was the true birth of active management in the local market.

“Allan Gray started building portfolios from blank sheets and only buying the stocks that they believed in rather than the ones that would minimise underperformance,” Govender explains. “These things were happening in the US, but there was nobody here doing anything similar.”

A new philosophy

This may seem self-evidently necessary for managers to do now, but it wasn’t the way asset management worked in South Africa before Gray set up his company. And this new perspective didn’t remain just within Allan Gray.

“He was a very good mentor,” McGregor recalls. “Over time there was quite a big diaspora of Allan Gray people around the market, so his ideas spread quite rapidly across the system.”

Fundamental to Gray’s investment philosophy was that the value in markets was to be found where other people weren’t looking.

“He epitomised the true contrarian,” Govender says. “That could mean deep value investing, but also doing something when the rest of the world hadn’t seen the opportunity yet. Most people seem to attach contrarianism with mean reversion, but Allan didn’t only typify that. He would challenge us to find those stories and look where the rest of the world wasn’t looking – totally the opposite to the collective wisdom of the market.”

Gray thrived on identifying these opportunities.

“He was the ultimate share-picker,” says McGregor. “I think he could pick shares in his sleep. He was always at it. He was totally focused on the markets.”

Character

Gray would also never allow complacency. When a share was held in his portfolio, he wanted to know all the arguments for why it shouldn’t be. And when he didn’t hold a particular company, he wanted all the arguments for why he should.

This appetite for information was one of his most memorable characteristics, particularly because he was so reticent about giving any of his own thoughts away.

“If you met Allan, you explained 20 things to him, and he explained nothing to you,” McGregor says. “He was constantly asking questions about everything.”

He also had an incredible ability to retain information.

“I was the Naspers analyst at Allan Gray, and Naspers was a company that Allan followed closely,” recalls Abdul Davids, who spent ten years at Allan Gray and is now head of research at Kagiso Asset Management. “He would sometimes remind me of some earnings numbers or valuation metrics I quoted in our discussions from a few years before – in many cases after I had forgotten them already!”

The man

Gray’s interest in people was not, however, limited to their investment knowledge. After he left South Africa, he returned for a few months every year to engage with staff at his company.

“Allan was a very generous man – both with his wealth and his time when he was in Cape Town,” Davids recalls. “Every year he would have lunch with all the new staff and he would take a personal interest in what everyone said. Another key highlight was the annual Christmas greeting card that was personally written and addressed to select members of staff.”

For Govender, what set Gray apart was that his approach to life and his approach to markets were always fully aligned.

“He always remained a true investor in everything he did and said,” says Govender.

“It’s hard to explain what that means, but even the way he owned the company, and in his philanthropy, he behaved like an investor. He was always concerned about the impact of his actions, rather than the actions in and of themselves.”