GQG - Rajiv Jain interview with Meb Faber, Rajiv's foundation principles

Here is the second excerpt, Rajiv's foundation principles:

Meb: It echoes a phrase my mom loves to say, which is, “Life is not a dress rehearsal.” So, what were some of the foundational principles? You got this exciting opportunity to start from scratch and build the organization an entirely new image and philosophy you’re interested in. So, what was it?

Rajiv: Yeah. First of all, I think one basic aspect if investing is that it’s truly a privilege and honor to manage somebody else’s money. Based on my decision, somebody’s retirement might be at stake. And that easily gets… It’s not about performance, it’s not about anything. First of all, it’s preserve capital. So be careful because by the time the retiree gets the check, it’s too late to sort of say, “I’m going to start again.” It’s not like buying a widget. If the cell phone you buy doesn’t work, it’s not a life-changing event. You either give it back or you buy a new one. But the returns are bad.

So, I believe that investment boutiques should focus first and foremost on how to align ourselves to what clients do and what does “alignment” mean. That, first of all, I’ve committed to have a majority of my net worth, I’m talking about not liquid, entire net worth outside of the value of GQG now, invested in the products we offer to our clients. Not some separate vehicles, same exact vehicles. Tim Carver, who’s the CEO, he has maybe two-thirds or, I know, majority of his net worth, same like me. So, both CEO and myself have committed a majority of our net worth all to the same strategy, because you’ve got to eat your own cooking.

Number two, we don’t allow any personal trading of any sort. One of the dirty little secrets in the business is people spend a lot of time managing their own money, which looks very different from the clients’ money. There’s nothing wrong in managing your own money, but it’s got to be identical to what you’re doing for clients. So, I don’t have a single penny with any other private equity, long-short, long-only, venture capital, or what have you. That’s the commitment in terms of alignment.

Number two is that I was a Co-CEO at Vontobel, didn’t want to do that. Again, so I didn’t want to be a CEO or anything. I enjoy investing, so I’m a CIO, I’m not a CEO.

The other one is that it should focus only on longer-term performance. Which, by the way, kind of, to state the obvious, but… See, one of the fascinating things about this business is you can get average for free. Any other business, you don’t get an average free. You don’t get an average car for free, you don’t get an average cell phone for free, but you can get average management for basically free, maybe one basis point or something.

So, if you can’t add value, you’re not really needed in the long run. The whole investment organization should be entirely focused on that aspect. But it’s not about sort of saying, “This is…I’m the greatest investor,” or something. You need a little bit of humility to say, “Look, this is not about me being the greatest investor. It, first of all, is preserving somebody else’s capital, co-investing then with them, and then see if then you can do a reasonable job on top of that.

This is an excerpt of an interview conducted between Meb Faber and Rajiv Jain located here: https://mebfaber.com/2021/06/16/e321-rajiv-jain/

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