I've pulled the trigger and purchased a small parcel of GQG...

I've pulled the trigger and purchased a small parcel of GQG today for my individual account after following the company for a couple of years and doing some deeper research in the past couple of weeks. It's pretty high risk and in my opinion only suitable for a small weighting but I think it's now reached an attractive risk vs reward proposition.

It's important to accept when investing in GQG that it's essentially a bet on one very high performing persons continuing brilliance (Rajiv Jain) which most of us know all too well is the case with most fund managers and for that reason they shouldn't be purchased at high earnings multiples or in all honesty probably not make up large core weighting in a portfolio.

As is often the case in public markets though I do feel like this one has been lumped in as a future Platinum or Magellan when there are some key differences separating it from those companies.

The first of course is the fees. With an average fee of 50 basis points I feel confident than an experienced active manager should still be able to add value for investors. When you look at the financials their is also very little direct reliance on performance fees which gives the earnings a little bit of short term caution from underperformance (keeping in mind of course that indirectly performance is everything because without it the clients pull their funds).

One of the difficult things for these businesses is that out performance requires occasional brave and contrarian stances like the one that Rajiv is currently taking around US tech stocks being overvalued. The problem is that when you take them your clients are likely to panic and pull their money before the brave bet has enough time to actually play out.

It's also easy to forget that pre it's FUM and share price capitulation Magellan was trading at an earnings multiple in the low 20s...... GQG is currently at 8 so you could argue that some degree of outflows is all ready being priced in and considering the all ready low fees they shouldn't face as much pressure on that front as what Magellan did. It's not as though the GQG earnings were built in the old 2% of assets and 20% of outperformance model that hedge funds were able to run for many years. I don't think active managers are obsolete I just think they'll have to accept a somewhat reduced role in the investing world and be more competitive on fees which GQG clearly saw coming many years ago.

On the positive side I love companies where the manager has a big personal shareholding and in this case it doesn't get much bigger than 70% of the company! I've listened to quite a few podcasts with Rajiv while doing my research (his one on the insightful investor is particularly good) and really enjoy his focus on GQG being the most "aligned" fund manager there is. I also think his son now being involved is a good sign and gives us an obvious succession plan.

I think it's all ready depressed share price is now offering me enough potential upside to take the risk on those downsides that I've outlined above.