With a career built on sterling positions within the financial services sector, Kondi Nkosi has found the seat that will forever change his profession: the seat of Schroders, Country Head, South Africa. Kondi Nkosi is a voice of reason, his deep insight, sound knowledge and persuasive perception may be your game-changer. Blue Chip caught up with him to find out what is happening in the off-shore investment sphere.
Please tell us a bit about yourself, including your career history before joining Schroders.
I am the third born of four in my family. My wife and I did not have the strength to follow in my parents’ footsteps in that regard, so we settled on having three children who are now aged 17, 12 and 10. The bulk of my time is spent with them either supervising school work, doing organised activities, such as our newly found interest in hiking or just enjoying one another’s company.
From a career perspective, I have spent my entire working life in the financial services sector. All the roles that I have held, whilst varied, have always had an investments underpinning. My first job was as an analyst in a venture capital firm down in Cape Town and following that, I have held numerous positions that included asset consulting, investment marketing, distribution and a few managerial positions. I have been in the asset management space for around five years now.
You joined Schroders two years ago; please tell us about your journey at the company.
I joined Schroders from another local asset management firm in September 2018. My role was to lead the institutional business development effort in South African and surrounding areas. I worked very closely with the then Country Head, Doug Abbott, and we spent a lot of our time getting the local market familiar with Schroders and the investment capabilities we have. Following some changes in our London business, Doug was earmarked for a senior role in our London Intermediary Distribution business which he officially took up in April 2020. I was asked if I would be open to leading the business here in South Africa. I was honoured that the business had the faith in me to fulfil the role and I duly accepted.
Kondi, you took over as Schroders’ Country Head, South Africa in April 2020. This must have been an extremely difficult time to take over the reins of an off-shore investment company. Please tell us about your last few months.
It was a very challenging time from many perspectives, let alone from an investment markets’ one. The primary focus for us was the health and wellbeing of the team on the ground. Fortunately, in our firm, it is relatively easy to work from home without any impact on the ability to do our work given the investment in technology we have made over the years. I think we managed with the transition relatively smoothly.
We also spent a lot of time interacting with our partners and clients, reassuring them that we were navigating the turbulent times in markets. There were a number of investment management business that either succumbed to the economic fallout of the pandemic or had to reassess how they do business. Schroders was in the fortunate space of having a strong financial position and a diversified business model that allowed us to navigate the tough times without having to seek external assistance or having to reduce staff on a temporary or permanent basis.
What are your aspirations in terms of your leadership of the Schroders’ South African team?
I took over a business that was on a firm footing. The business had made significant inroads in the retail segment and the institutional business was doing well. We had made a number of key hires since September 2019, that brought the size of the team to five people. Our ambition is to be the asset manager of choice when it comes to offshore investing. The South African investor landscape is a sophisticated and discerning one.
We feel our offerings talk very well to the varied desires of the investors here. We have a firm commitment to the country and a stated intention to contribute to the development of the country, such as through our annual internship program. We are confident that we will be able to succeed in our aspirations by helping out investors succeed in achieving their investment objectives.
What has been the highlight of your career?
Without a doubt, it has been taking over as the Schroders South Africa Country Head. We have done well to get the business to its current state. There is a lot more that we can do going forward and I look forward to working with the team to realise the aspirations that we have set for ourselves.
What is your leadership style?
I am a strong believer in leading by actions and bringing people along with you. I had a boss at one of my previous companies who was partial to the African proverb that says, “If you want to go quickly, go alone. If you want to go far, go together.” I am a strong believer in that.
Why should investors consider offshore?
There are a number of reasons why investors should consider going offshore. The first is that it provides diversification to an investor’s portfolio – not all eggs being in one basket. It is a prudent approach for investors to diversify their exposures so that they manage their risk.
Secondly, there are industries in other global markets where there are significant comparative advantages that are just not available in South Africa. You think about industries like aerospace or high tech biomedical research and others. Opening oneself to those opportunity sets can potentially help enhance the returns one can get from an investment portfolio.
Thirdly, it allows investors to get exposure to other economies that may be experiencing higher degrees of economic growth. For example, investing in a fund that invests in domestically listed China A-share companies that derive the bulk of their revenues from the domestic economy allows for diversified exposure to the China theme. Whilst there are South African companies that derive some revenues from that economy, it would not compare to the domestically listed Chinese companies.
In the recently released Schroders’ Global Investor study, which was conducted globally in April to June this year, it was found that 31% of South African investors raised their exposure to higher-risk investments.
What is your view of why investors chose to add to their risk during the global economic downturn?
I think this may be indicative of a couple of things. It could be that investors are becoming increasingly ‘value aware’ or are open to ‘bargain hunting’. We’ve got to remember that Covid-19 came after a long period of rising stock markets, and my sense is that many investors were conscious of valuations becoming high. So they saw the February-March correction as a window of opportunity. I think we’re seeing a large cohort of investors not only committed to stock markets but also increasingly watchful, looking to spot moments of value.
The post-global financial crisis in 2008/2009 experience of rallying stock markets may have given some investors the proverbial Fear Of Missing Out (FOMO), that could have motivated them to act and take advantage of the situation.
What are the biggest changes that have taken place within the sector this year – since before the pandemic to now?
Broadly speaking, what the economic lockdowns as a result of the pandemic have done is accelerate certain trends that we were already seeing playing out in global societies, economies and markets. Where the changes would have taken years to fully manifest, the pandemic has significantly truncated the period of adoption. A simple example that we are all familiar with is the move to flexible working practices that have impacted the communications industry as well as the office space. Another example is how companies now look at their supply chains. If one had over-reliance on a single supplier with operations in one region, perhaps the impact of the lockdown on their operations has forced them to rethink their strategy.
Last year, the FSCA approved four funds to add to the comprehensive range of Schroders’ offshore investment options. Please give an overview of the four funds.
We have been adding to the menu of funds that are approved by the FSCA and made available to the South African investing public. We now have a broad range of 12 funds that have received approval. The additions to our menu that we made last year were the following:
- SISF Global Sustainable Growth Fund – this is a high conviction, global equity offering that is managed by our Global Equity team that focuses on companies that we believe the market has underestimated their growth prospects. These types of companies, will, therefore, provide positive earnings surprises going forward. A cornerstone of the process is also the degree of sustainability these companies display. We use an in-house model to determine this degree of sustainability
- SISF All China Equity Fund – this fund invests in Chinese companies that our team believes are or will be able to consistently generate returns on invested capital above the cost of capital, and thereby generate solid returns for investors. It invests in companies that derive a large portion of their earnings from China, irrespective of where the company is listed
- SISF Asian Equity Yield Fund – this is an Asian equity fund that is managed by our Asian Equity team. We have had a presence in Asia since the early 1970s and the team has a strong track record. The fund invests in companies in the Asia Pacific (excluding Japan) region that pay dividends now but also retain enough cash to reinvest back into the company to generate future growth
- SISF US Dollar Liquidity Fund – this is a Money Market fund that invests in US$ money market instruments
We followed that up with three more funds that were approved by the FSCA in 2020 being the SISF Global Gold Fund (invests in companies worldwide that are involved in the gold industry), SISF Global Equity Fund (another global equity fund that looks for underpriced shares relative to our expectations for future growth) and the SISF Global Managed Growth Fund (a flexible asset allocation, multi-asset offshore fund that aims to outperform a 60% global equity/40% global bond benchmark)
Schroders is structured around a number of strategic capabilities, which combine to meet a variety of client requirements. Please tell us more about these capabilities.
We are a multi-capability business with strategies that run pretty much the entire investments spectrum (perhaps with the exception of pure passive strategies) and these strategies can be global, regional or country-specific in nature. As such, we have a very wide range of investment products.
Clients’ needs are also varied. Instead of focusing on an investment product, our preferred approach is to rather focus on the outcomes they are trying to achieve. We believe that most clients’ goals fall into the 10 strategic capabilities we have identified – these are specialisms that can help different types of clients with these diverse investment aims and needs.
|1||Alpha Equity||Relying solely on “passive” stock market investing is unlikely to meet clients’ financial needs; slower growth and increased geopolitical risks make expected future returns low compared to the past. We aim to add value by actively managing equity mandates to generate benchmark beating returns over time that compound to generate superior outcomes for clients.|
|2||Credit||Bonds, or fixed income, are often considered a more stable investment than equities. The income is also considered to be more consistent. But this world of credit – lending to companies rather than investing in them – is complex, fast-moving and requires expertise to take advantage of the opportunities it presents.|
|3||Multi-Asset||By diversifying across a variety of assets, investors can potentially improve performance and reduce risk to achieve their investment goals. But setting asset allocation is an active decision, and risk and return opportunities shift with the market cycle – active management can take advantage of these changing opportunities.|
|4||Private Assets||Institutional and professional investors have long recognised the importance private assets bring to portfolio performance. This includes the likes of private equity, real estate, infrastructure debt and equity, and securitised credit. Major developments in the asset classes over recent years have opened up access to more strategies than ever before, fulfilling all manner of investment objectives. As such private assets are now regarded as a core part of portfolio construction.|
|5||Liquid Alternatives||Returns from traditional assets have tended to move more in tandem since the financial crisis of 2008. This may not necessarily be the case in the future but if it is, it may be harder to meet your financial goals. Liquid alternatives may help to limit the impact on your investment during market turbulence, create genuine differentiation in your portfolio, or offer protection from inflation.|
|6||Income||Investors seeking income are facing a different investment landscape now to in the past. Gone are the days of savings accounts offering high rates of interest, and safe government bonds with inflation-beating yields. Investors seeking higher real returns (i.e. returns that out-pace inflation) instead may now need to turn to different, higher-risk solutions by investing money in financial markets.|
|7||Emerging Markets||Emerging markets are benefiting from rapid industrialisation, urbanisation and the adoption of new technologies. This may provide a good source of meaningful growth, compared to developed economies, both now and into the future.|
|8||Retirement||Retirement is an increasingly important issue for many. As responsibility shifts from governments and companies to individuals, many people now have no choice but to take more responsibility for their pension. This provides an opportunity for those who want to engage with their investments to reap the potential rewards once they finish working.|
|9||Solutions||A genuine partnership approach and an on-going focus on the investment aims of a solution are required to navigate the current investment environment and deliver the specific outcomes expected by our clients.|
|10||Sustainability||Social and environmental change is happening faster than ever. Climate change, shifting demographics and the technology revolution are reshaping our planet. Those companies that can adapt and thrive will be more successful in attracting customers, employees and growing their business. Environmental, social and governance (ESG) factors should be of critical importance to investors.|
What is your favourite pastime?
I really enjoy playing golf. I have been playing for around 14 years now and I can confidently say that there is still a great deal of room for improvement.
What book are you currently reading?
I have had this book for a little while now but I have only recently started reading it. It is called “Why Innovation Fails” by Carl Franklin. It has some interesting lessons on why things that seem like great ideas, do not see the success the people who conceived them hoped they would. The lessons are from different vantage points from sociologists, venture capitalists, inventors and so on.