Rajiv Jain is every thing that Cathie Wood isn’t. The co-founder of GQG Partners doesn’t have a Twitter account and barely seems on TV. And in his progress inventory funds, there aren’t any driverless-car corporations or hypersonic-missile producers. Instead, you will see a number of industries with a decidedly Twentieth-century really feel: oil, tobacco, banking.
This components has confirmed spectacularly profitable. In lower than seven years, Jain, the previous chief funding officer at Vontobel Asset Management, has constructed GQG right into a $92 billion powerhouse. Few, if any, startup funds in current reminiscence have raised a lot cash in so little time, in keeping with Morningstar Direct.
In 2022, when most asset managers watched purchasers yank money from their funds as markets cratered, GQG thrived. The agency lured $8 billion in recent funding and three of its 4 flagship funds beat benchmark indexes by broad margins.
Pull the lens again additional and the outperformance of GQG’s greatest fund, the $26 billion Goldman Sachs GQG Partners International Opportunities Fund, is even starker. Since its inception in December 2016, the fund has gained 10.8% a 12 months, greater than double the benchmark’s 3.9% annual return.
All this success, courting again to his days as a star supervisor at Vontobel, has given Jain a sure swagger.
He plunks down enormous sums of cash on particular person shares and, in a heartbeat, can bail on a complete place — the form of daring strikes most within the business keep away from. Moreover, in speaking with him, it shortly turns into clear that he doesn’t make a lot of his rival stock-pickers. Jain considers himself a “quality growth manager.” He refers to others, with out naming names, as “quote-unquote quality growth managers.” To him, lots of them are mere imposters who rode the wave of low cost cash, solely to be uncovered when the period of zero rates of interest got here to an abrupt finish.
“These kinds of volatile years actually allow you to differentiate a little bit more,” he says in a phone interview from GQG’s headquarters in Fort Lauderdale, Florida. “A lot of ‘quality growth’ managers basically blew up. We found out whether they really own quality.”
Jain has had his share of missteps, in fact. His massive guess on Russia — 16% of all his emerging-market fund’s cash was invested within the nation firstly of 2022 — backfired badly when President Vladimir Putin invaded Ukraine. He began to tug again because the warfare clouds started to collect however didn’t liquidate all of the fund’s holdings and, in consequence, it tumbled 21% final 12 months, making it the one main GQG fund to underperform its benchmark.
And this 12 months, as US tech shares rebounded on hypothesis the Federal Reserve was near ending its rate-hiking cycle, GQG funds have trailed. His resolution to underweight China has additionally been expensive as the federal government lifted strict Covid lockdowns that had been hamstringing the economic system. Jain’s worldwide fund — which is distributed to buyers by Goldman Sachs Group Inc. — has gained simply 3.4% this 12 months, in contrast with the benchmark’s 7.8% soar, placing it within the backside 6 percentile.
“I’m not a happy camper these days,” Jain says with a chuckle.
Calculated Risks
At some stage, this 12 months’s underperformance isn’t terribly stunning. The shares Jain likes to personal are typically extra defensive in nature, the type that may maintain up properly in a downturn however lag when the economic system and inventory market are ripping.
“He is so much more cautious than other growth managers,” says Gregg Wolper, a senior analyst at Morningstar.
There is a seeming contradiction to all of it, not less than to an outdoor observer. Jain likes protected, defensive shares however then makes outsize, dangerous bets on them. He explains the philosophy this fashion: By loading up on corporations which have what he calls bullet-proof steadiness sheets — names like Exxon Mobil Corp. and Visa Inc. — it’s unlikely any of them will undergo the form of sudden collapse that’d wreak havoc on his portfolio.
“We try to take less absolute risk,” Jain says. “The businesses we own generate lot of free cash flow. So the risk of us losing on an absolute basis is a lot lower. But sometimes that means you have to take more relative risk.”
Jain sometimes invests in 40 to 50 large-cap shares in his worldwide fund, in contrast with the benchmark’s greater than 2,000 corporations. His US fund holds lower than 30 shares, in contrast with over 500 within the S&P index. Two of the worldwide fund’s prime 10 holdings are tobacco corporations — British American Tobacco and Philip Morris International. They account for nearly 10% of the portfolio.
Vontobel Years
Born and raised in India, Jain moved to the US in 1990 to pursue his MBA on the University of Miami. He joined Vontobel in 1994, rising by means of the ranks to change into the Swiss agency’s CIO in 2002. By the time he left the agency to begin GQG in March 2016, Vontobel’s rising market fund returned a complete of 70% in 10 years, greater than double the MSCI Emerging Markets Index.
Jain, who has a majority stake in GQG, invests most of his private wealth in its funds. When GQG went public in Australia in 2021, elevating about $893 million within the nation’s largest IPO that 12 months, Jain pledged to speculate 95% of the IPO proceeds within the firm and hold the cash there for seven years.
There are different issues that make Jain totally different than the everyday boss at an funding agency: He refuses to fulfill with executives who run corporations he’s contemplating investing in so he doesn’t “drink their Kool-Aid”; he bans GQG workers from buying and selling shares of their private accounts; and when his Russia guess went awry final 12 months, he apologized on a convention name to GQG buyers for the losses they took.
“He has a combination of confidence and yet some humility in understanding that he might be wrong about something,” says Wolper.
‘Game of Survival’
This means to acknowledge errors — and quickly change course, in consequence — is one thing Jain believes his rivals lack. For occasion, they failed, he says, to acknowledge final 12 months that the tech-stock increase was about to go bust. He began chopping his tech holdings in late 2021 after driving the pandemic-fueled tech surge — or “the bubble,” as he calls it — for some time.
By March of final 12 months, as inflation was percolating and rates of interest had been hovering, Jain had slashed his worldwide fund’s tech holdings all the way in which down to five% of the portfolio from 23% in mid-2021, whereas growing its weighting of power shares to 19% from lower than 2%. That swap paid off handsomely, serving to restrict the fund’s losses, as international power shares jumped 41% final 12 months whereas tech shares plunged 31%.
“Investing is a game of survival because most people won’t survive in the long run,” says Jain. “So that should be the mindset rather than trying to win all the time. It’s as much about avoiding losing rather than trying to win.”
And what if he’s improper now? What if the current features in tech are only the start of a broader rebound within the business?
Jain is doubtful. To him, the tech giants shouldn’t even be thought-about progress shares anymore. But he’s prepared, he says, to explode his portfolio as soon as once more if wanted. “If the data proves that we are wrong, we are happy to change our mind.”
