The smalls steps, even though you don’t enjoy what you are doing, making sure that whatever you do, you do it to the best of your ability and a high quality ultimately still leads to a better outcome.”
Her move from the auditing space to becoming an analyst
She described her move from the auditing space to an investment analyst role as a simpler transition than what most people would believe. Auditors are business analysts and that forms part of being an investment analyst. “As an investment analyst you try to place a value on a company, you try to work out what the value of the business is. How does the share price of the company relate to the value of the business? If it’s cheaper then we buy it”.
Seema explained that a big part of valuing a business is going through the financial statements and another part of it is to understand how the business works. “Does it make sense that the ROEs are 25% in this industry?” In reality if you have been out there, you might find that this may not be sustainable. “Globally companies in packaging have much lower ROE’s.” She explained that the advantage of auditing experience is that one goes from company to company with full access to their books and get to speak to top levels of management to understand how the company works.
Auditors are exposed to a wide array of companies, from pharmaceuticals, energy companies, to financial companies. Taking that knowledge and using it in picking investments is a smooth transition. She highlighted that naturally, people in the auditing profession have an interest in businesses. This same interest and love of organisation and business is part of what is important in the investment team.
The Institutional Client Servicing team
The Institutional Client servicing team is a very analytical team. The team is made up of actuaries and accountants. Effectively her team tries to solve problems on behalf of our clients. They spend about a third of their time dealing with retail queries instead of just institutional queries. Their reporting line is part of the institutional business because primarily, the responsibility and the complete oversight of the institutional client relationships sits with them.
What that means is that, in every aspect of what the client needs (institutional clients being Pension funds and Medical aid schemes) her team is there to solve the problem. She gave us an example of what a typical query would involve using African Bank (ABIL) as an example:
When ABIL blew up, a query came through and they recognised immediately that this query would have an impact on retail and institutional clients. As gate keepers of the communication with institutional clients, having established that it would impact them, they had to send out a response. The first thing they did was try to work out what the impact was. This involved looking at their portfolios, consulting with the investment team immediately in order to understand the rational of how and why the stock was bought. The next step was to speak to marketing. It was obvious that the Unit Trust and Life pool portfolios had exposure to it, a grey issue needed to be sent out. It was their responsibility to also assist in writing up this document and then eventually put it out. The next step was to send out internal communication and answer all the client questions. Essentially, they had to work out what the impact was and what could potentially happen after the whole thing blew over. The ABIL query involved understanding the investment theory, as well as understanding the impact on the business. With ABIL there was also an impact on Allan Gray. We had liability because we bought into this company that went under. The team also had to work with the operations team to calculate the tax impact on Allan Gray. They worked on the side pocketing with the product development team, where Richard and Mahesh had to make decisions on what would happen with side pocketing.
Basically, whatever it takes to solve a client query, they see themselves as the hub. When a query comes into their space, they reach out to all the people they know in order to deliver a high quality excellent response in a timely and accurate manner to our clients. The queries can vary from ABIL to “tell us about the portfolios you have” or “give us your thoughts on what inflation is going to be in the next five years”.
It is a business analytical role which involves understanding the investment team’s thesis, that is, having a good understanding of what is going on within each investment that we buy, within each portfolio type that we have, within each product that we produce (our retail products are Unit Trust and Life) and within the business as a whole. They are effectively there from the most granular of "why do you want to buy into this business" to "why do you want to take this much indemnity cover as a firm" . The role embarks them ona journey of understanding the industry and what is happening locally and globally in the consultant space and multi-managers. It is a really broad range of interesting stuff across the asset management industry which they need to be aware of.