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The listing of Florida asset manager GQG Partners on the ASX this month will be the biggest of the year, linking local investors to one of the top pandemic winners in the funds management industry and delivering a multi-billion dollar windfall to the stockpicker at the heart of the company.
Rajiv Jain, founder and chief investment officer of GQG, launched the company five years ago after leaving the investment arm of Swiss bank Vontobel, where he helped build client assets from $400 million to $50 billion over two decades.
GQG Partners has amassed $US86 billion ($118 billion) in client assets over the past half-decade, including doubling its funds last year alone after a run of outperformance in its portfolios and soaring investor inflows.
Now, Mr Jain is seeking to cash in on the group’s success, offering Australian shareholders the chance to buy a stake in the company in a deal that values the business at $6.5 billion at the top of the range marketed to investors this week.
Mr Jain will enjoy a windfall of $1.1 billion in cash from the listing as he sells a fifth of his holding in the company, bringing his stake to roughly two -thirds, worth $4.5 billion.
In total, the offering includes the sale of $1.3 billion in GQG shares, making it the largest IPO of the year on the ASX…
The IPO hinges on the hunger of local investors for a rising star in a difficult industry. The active funds management business has endured a prolonged squeeze on fees and a consistent leakage of assets to low cost, passively managed portfolios that track broad indices such as the S&P/ASX 200 and S&P 500 benchmarks.
Mounting evidence over the past few decades has proven that, over time, portfolios managed by professionals fail to outpace the broader market once fees are factored in. Many quick-witted portfolio managers may zip ahead of the market for several quarters or years, but almost none consistently outperforms over time.
“As a whole, the active management industry underperforms the market after fees’, Mr Jain said in a letter accompanying the IPO offering documents. “Few firms are successful in beating the market over the long term.’
“The endeavour to build a long-term sustaining investment culture is therefore daunting, and there is no assurance we will be successful“, he warned.
The types of outperformance GQG has enjoyed can prove fleeting. One senior investment executive at a superannuation fund who has dealt with Mr Jain warned that his investing style has suited the equity market over the past few years and risks falling out of favour, denting future returns.
The prominence of a star portfolio manager such as Mr Jain, who was named international equity fund manager of the year by Morningstar nine years ago, also creates so-called “key man” risk that has plagued other fund managers with name-brand investors.
The 2016 exit of Mr Jain from Vontobel sent the bank share price cratering 11 per cent after the announcement, before recovering to end the day 5 per cent lower. Investors were worried about the impact of Mr Jain’s departure on the investment unit’s portfolios and ability to attract new money.
“Rajiv is an exceptional talent, but his talent transcends stockpicking, it translates into teaching and mentoring“, said Paul Greenwood, chief executive and CIO of Pacific Current, an ASX listed business that holds a stake in GQG and has agreed to join its board. “There is no denying that he is an important figure, but I would put the rest of his team up against any stockpicking organisation“.
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