You may also take heed to this podcast on iono.fm here.
This interview, which initially aired on RSG Geldsake on 8 December, has been translated from Afrikaans into English in the transcript beneath.
RYK VAN NIEKERK: It’s Thursday night and that signifies that I’ll be chatting once more to a well-respected South African in enterprise. We focus on their careers, the companies and corporations through which they’re concerned, in addition to what they do after hours to shake off some of the stress.
My visitor tonight is Jacques Conradie, the chief govt and portfolio manager at Peregrine Capital. Peregrine Capital was based in 1998 and it’s the oldest hedge-fund manager in the nation. Jacques joined Peregrine in 2007, and we are going to shortly chat about what he has achieved with some of the funds.
But Jacques, a heat welcome to the programme. As I mentioned, we’re going to chat about Peregrine however first inform us the place you’ve got come from and when it was that you just determined you wished to be an asset manager?
JACQUES CONRADIE: Hello, Ryk. Good night and it’s a pleasure to talk with you. I grew up in the Cape, in a small city known as Kuilsrivier near Stellenbosch. At faculty I loved arithmetic and I concentrated severely on my tutorial research, since my dad and mom taught me from an early age to work very arduous at something you set your thoughts to. So I targeted on that at college after which went to check actuarial science at Stellenbosch, which I loved very a lot.
After that I went to work for Old Mutual in venture improvement. After some 18 months there, I sat for the CFA exams and realised that I far most popular investments. So to some extent I managed each my father’s and my very own cash after college and loved that. One of the fundamental issues driving me in that path is that I really like studying new issues. One of my life philosophies is to be a lifelong scholar. I realised that in the insurance coverage trade there would at all times be new issues to study shortly.
One of the great issues about the funding trade is that day-after-day there may be new information, there are at all times new corporations to look into, and I realised that this might be one thing that will excite me, which might doubtlessly develop right into a ardour for the relaxation of my life.
RYK VAN NIEKERK: Did I perceive you appropriately? Did you handle your father’s cash whilst you we nonetheless at college? Was that his financial savings and retirement cash, or was it simply an quantity of cash he gave you to maintain you busy?
JACQUES CONRADIE: He nonetheless had his pension fund cash in the pension scheme, however I feel he gave me most of his different unfastened cash to handle, and I had some cash that I had received in arithmetic olympiads over the years, which I added to the cash he gave me to handle.
So that was one thing, giving me accountability at a younger age, and it luckily labored out effectively for each of us.
RYK VAN NIEKERK: That’s attention-grabbing. Let’s chat about you as an actuary. To many individuals, particularly a pair of a long time in the past, an actuary was somebody sporting gray footwear and dealing in a again workplace at an insurer. The trade has modified utterly, and we see an increasing number of actuaries managing cash, concerned in asset administration – not merely calculating the high-quality print of insurance policies. Does that make an enormous distinction to you as to the way you have a look at potential investments – maybe analyzing them from an actuarial level of view, somewhat than from an arithmetic or charted accountant’s level of view?
JACQUES CONRADIE: I feel it undoubtedly provides one a considerably totally different manner of taking a look at issues. The essential factor when you find yourself taking a look at investments is that you have to be clever, however you must also be hungry to hunt info to search out issues that others don’t see. So actually the actuarial side provides you a considerably totally different manner of approaching one thing.
And for a big quantity of our asset managers at Peregrine specifically, the object is to have a look at the threat angle – and as actuaries most of what we learnt at college is to handle threat.
Our view is at all times that should you can shield traders’ capital, then you’re already far forward at the begin of the 12 months. If you may keep away from giant losses, you should have alternatives to become profitable.
So I feel that capability, specifically to recognise the dangers in any funding and in the market as a complete, provides one a considerably totally different perspective.
We additionally of course have accountants in out crew. I feel it makes for an excellent steadiness to have actuaries and accountants, with maybe just a few engineers.
RYK VAN NIEKERK: Let’s chat about your Peregrine Capital High Growth Fund. It began in 2012, and at this time it’s the fund with the highest yield fee since its inception. It’s the best-performing fund and, if I appropriately perceive your documentation, should you had invested R10 000 on this fund in 2000, you’d at this time have R1.2 million in it. Am I appropriate?
JACQUES CONRADIE: Yes, that’s proper. That’s a return of about 120 instances from the place we began 20 years in the past.
RYK VAN NIEKERK: But briefly inform us about this fund and why it’s so profitable.
JACQUES CONRADIE: Ryk, I feel there are a pair of issues that one has to do correctly to make good cash for traders. There aren’t only one or two issues, however a complete handful of issues you must do appropriately.
So, as I mentioned, the very first thing is to guard your capital and be sure that you by no means lose a large amount of traders’ cash. So if the market falls loads, guarantee that your fund is protected as a result of in such instances folks turn into emotional, and controlling one’s feelings is a serious half of being a profitable fund manager.
We are all human. When every little thing is falling and taking place, the typical particular person simply desires to promote. They wish to exit; they wish to be in money and really feel protected. That’s when there are the greatest alternatives. So should you can shield traders in the downs, then you’re forward when there are excellent alternatives, after which you may put capital into the market at the very best time. So that’s of course one of your protections throughout these intervals.
But one other factor is to be really hungry to search out distinctive alternatives. You principally must look by means of an organization’s monetary statements, by means of their outcomes, choices, and search out the clues that different folks miss. Our complete mannequin is to work tougher than anybody else in the market, and attempt to discover investments that others miss, or uncover them earlier than the market does, as a result of a 12 months later or 5 years later folks will see the good alternatives.
You have to search out the (alternatives) earlier than the market does, when there are not more than clues. Once everybody sees them, it’s too late, the share worth is just too excessive.
RYK VAN NIEKERK: Quickly point out one or two that you just picked up in, say, the previous ten years.
JACQUES CONRADIE: I might say my favorite story was Capitec, which I started to have a look at simply after 2008. At that stage they’d solely 100 000 shoppers, and I feel they’ve shut to twenty million shoppers now. So it’s unbelievable to suppose again to how small they have been. And that stage I went to see the firm; I went to see the CEO noticed at that stage, stepping on eggshells. No one actually checked out the firm at the time, as a result of it was a small firm. Only a pair of folks in Stellenbosch owned the shares. Part of my methodology is to go and use the firm’s merchandise.
So we closed my spouse’s Absa account, at R100 a month, and mentioned ‘Let’s go to Capitec, it’s R5 a month’. After a month she mentioned, “It’s unbelievable. I get exactly the same product for R5 instead of R100”. And one thing attention-grabbing that partly defined the funding for me was that, if she was paying at Woolies or a Pick n Pay with that card at that stage, then the teller would say, “I see you use Capitec. I have a friend who opened [an account] and likes it. What do you think of it?” You might see that Capitec customers, the shoppers actually made use of the model and mentioned it amongst themselves. It was simply obvious that this might be an enormous success story.
RYK VAN NIEKERK: Did you pay your spouse a fee?
JACQUES CONRADIE: I purchased her just a few Capitec shares. So she gained rather more than her financial institution charges. I feel the share was at R40 or one thing once I first appeared into it. One would by no means have thought it will get to R2 000/share, and our mannequin is to promote a share when it will get to the proper worth – we most likely offered at R1 100/2 000, nevertheless it nonetheless delivered a ten instances yield, which was unbelievable. In our mannequin you do the analysis, you check the product, and also you attempt to see one thing that others can’t see. I feel that was an excellent one.
And on this 12 months Thungela Coal was our massive winner. That, once more, was one of these tales. We purchased the share final 12 months when nobody wished to personal coal, and everybody thought of it was a useless trade. So, as soon as once more, go and look the place nobody else is wanting, and uncover it earlier than everybody does.
RYK VAN NIEKERK: It is hectic managing portfolios in South Africa, to handle folks’s financial savings and retirement cash. What do you do to loosen up after shutting the door behind you on a Friday afternoon?
JACQUES CONRADIE: I’ve a spouse and three younger kids aged six, 4 and two. So my favorite factor is to spend time with my spouse and the kids, and for younger kids specifically it’s an excellent technique to shake off the stress of the market whenever you get residence. They don’t care what is going on in the world or the firm or in South Africa. They simply wish to play with a ball and run about. It’s great to see the world by means of their eyes and to modify your consideration away from what is going on elsewhere in the world. So that’s my favorite factor to do.
Then I’m loopy about studying. There is a lot to study in the world – how every little thing works, how totally different corporations work, how the world works. And studying is the greatest manner of buying that data.
So many clever folks got here earlier than me, and what higher manner is there to study than to learn their books? I at all times really feel I’d somewhat study from others’ errors than make my very own.
It would save us a lot over time.
RYK VAN NIEKERK: What are you presently studying?
JACQUES CONRADIE: I’ve learn a quantity of good books this 12 months, to grasp what is going on politically in the world at current. In locations like America and Europe specifically the Democrats and the Republicans are largely divorced from each other, and I wished to grasp the capitalist system versus a socialist view of the world; why folks have such divergent outlooks; and if there may be any hope of reconciling issues; and if we maybe undergo cycles from capitalism to a level of socialism in the world. It’s of course very attention-grabbing.
Then of course I like to take heed to and skim traders’ books, books by well-known traders.
RYK VAN NIEKERK: Just lastly, in 30 seconds, here’s a SMS asking: “What does Jacques think of the outlook for the local market over the next two years?” Thirty seconds.
JACQUES CONRADIE: Ryk, we predict the market is pretty low-cost.
We presently see higher worth in SA than in abroad markets, however we predict there are massive dangers of rates of interest rising greater than folks would possibly suppose, and inflation remaining elevated. So our view is to take a seat in money, but when the market falls 15%, possibly put bit of money in the market.
So I might say we’re pretty impartial for now, however I really feel you wish to sit with further money to offer your self the alternative to place it to work if issues turn into ugly. There is a good likelihood of a 20%-something drop someplace over the subsequent whereas.
RYK VAN NIEKERK: Hold your powder dry. Jacques, thanks in your time tonight. That was Jacques Conradie, the chief govt of Peregrine Capital.
