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ASIEF MOHAMED: I grew up in the Cape Flats in Cape Town, and the first bit of investment was an uncle of mine. He dabbled in shares but, as far as I can remember, he lost money, he didn’t make any money. I didn’t get the job. I then joined Metropolitan Venture Capital events started this thing that just started then. It didn’t work out after a year or so, and I told them it was not going to work because they weren’t doing proper venture capital techniques. They were funding all the money. The entrepreneur wasn’t on the line at all. I knew this was a disaster, but nevertheless I closed it up.
RYK VAN NIEKERK: That’s an interesting choice and it shaped your whole career. We’re going to talk about Aeon a bit later because you went on your own, you started your own asset management business. But after you made the mistake by believing a tip and investing based on a tip – and it is very, very dangerous to do so – how did your investment approach change, and what did you do to become more successful as an investor? I’m talking here in your personal capacity.
I think we are one of the few investment management firms that can say that we beat our benchmarks after fees, and the asset management industry does on average not do that. Maybe 30% of asset managers do that. If you look at a longer period of time, it’s even less so. But nevertheless we can probably say that we’ve actually added value to our clients over long periods of time.
RYK VAN NIEKERK: Yes, I know Dimension Data very, very well. I bought it in the late nineties based on a tip and I really, really got burned. I get a lot of phone calls from young professionals, 23/24-year-olds, who have just started a job. They earn an income, they contribute to the pension fund, but then they also would like to invest through a discretionary portfolio – number one to learn how the investment world works, and number two, to also build a portfolio. How do you think those individuals should approach it?
You buy for the long term because we, as professional investors, certainly at a firm of investment management, take a five-year view, take a 10-year view – and our portfolio turnover is exceptionally low relative to a lot of other fund managers. It’s less than 10%. ASIEF MOHAMED: You are right. and that’s what I said about the Chartered Financial Analyst qualification. The fact that you’ve got it doesn’t mean that you’re a good investor at all. That’s what I’m saying to you. Similarly, if you’ve got a master’s in finance or your doctorate in this and that, it doesn’t give you the ability to necessarily discover fraud or discover financial statements that don’t stack up – or whatever the case might be.
I left Metropolitan Asset Managers on negotiated terms, which I thought were very favourable to me. But in that December 2004, as I was reading the Business Day newspaper, there was a big announcement about the restructuring of MGX, which is now Metrofile. The share price was pummelled from R40 or R50 down to about 13c or 10c a share. It went down there. Lots of debt. They bought companies and then there was a restructuring announcement.
ASIEF MOHAMED: Generally, when it comes to what we identify as a quality company reasonably priced. We also hold on behalf of our clients international stocks. As an example, we bought Microsoft many years ago, Alphabet also. We obviously looked at the fundamentals, the annuity revenue, going to a cloud-based business and getting recurring revenue. So we generally hold on to that and we do that.