Lessons learnt from a career of investing through crises

Rajiv Jain is used to a crisis. The founder of boutique GQG Partners made his name as a star emerging markets trader during a long career at Vontobel Asset Management, the Swiss group where at the peak he ran about $50bn in assets. Trying to survive the financial crises common in those markets has, he feels, helped him prepare for the current one.

“I’ve evolved a lot over the years,” he says, describing losses suffered in previous periods of market turmoil as “early learning years”. He adds: “I tend to react a lot faster [now] — though not fast enough.”

We meet, as it has become the norm these days, via Zoom, and the conversation inevitably turns to the coronavirus pandemic. US jobless data have just been released, with claims surging by 6.6m, which smashed expectations. 

“I’m surprised why people are surprised. We’re in the middle of a pandemic, what do you expect?” the self-deprecating 52-year-old says from his roomy Florida home. He moved to the Sunshine State from New York 10 years ago in search of a better quality of life. As we talk he moves around his home in search of a quieter spot — I glimpse immaculate white rooms and an imposing central staircase.

He started at Vontobel just weeks before Mexico’s so-called Tequila crisis in December 1994 — a huge devaluation of the peso followed by a banking crisis.

“My boss had just gone to Switzerland for the Christmas break,” recalls Mr Jain. He remembers Mexican finance minister Pedro Aspe’s strong opposition to the devaluation of the peso following capital outflows from the country. When a finance minister takes such a stance “you know they’re going to devalue”, he says.

That experience was to help in the Asian crisis of 1997-98, teaching him to react quicker when the situation deteriorates.

“In currency devaluations, things start melting and your initial reaction is that it can’t be that bad,” he says. But, if you are caught in it, “it melts in such an explosive fashion you can’t do anything”. The Tequila and Asian crises “have maybe made me a lot more sceptical and cautious”.

The global financial crisis was another tough learning experience.

“Fifteen years ago I remember saying that if I spent five minutes out of an hour on top-down [analysis], that would mean I’d spent too much time,” he says. “That almost got me killed in 2008.”

Although he sold out of bank stocks early in 2007 — in hindsight a shrewd move — he admits he did not foresee the full, devastating impact on the wider economy of the credit crunch. “I thought it would be more isolated,” he says. “We had other cyclical areas [in our portfolio]. I didn’t join the dots.”

So how is Mr Jain coping with the coronavirus crisis?

He began 2020 with positions in US and European banks, as well as an airline and an energy company. Equity markets remained buoyant in January and even into February, despite the virus’s spread through Asia, but Mr Jain grew nervous about the economic damage there and what could happen in western economies.

“If China was being shut down, why won’t the rest of the global economy be impacted?” he says, although he concedes he did not anticipate the full extent of the virus’s spread. He reacted by selling his airline and energy stocks in January, cutting back financial stocks in February and March, and rejigging his holdings of medical technology companies.

Mr Jain became interested in financial markets as a teenager, when, to keep him occupied, his father would send him out to cash dividend cheques. “It got me asking, ‘what does this piece of paper mean?’” he says. He began investing at high school in the early 1980s, spending “more time trading stocks than finishing his education”.

After moving to the US in 1990 to do an MBA, Mr Jain tried to get a job by looking through a directory of chartered financial analysts and cold-calling hundreds of chief investment officers and other senior managers. Finally he spoke to Malcolm Clinger, a chief investment officer in the portfolio manager division at Swiss Bank Corporation in New York, who was intrigued. “People typically don’t call me [directly for jobs],” Mr Clinger told him. “Tell me what your story is.”

There were no job openings, but Mr Clinger nevertheless invited Mr Jain in for a meeting. After chatting for an hour in person, a job was found.

Mr Jain followed one of his bosses to Vontobel Asset Management, which would become his home for more than two decades and where he climbed the ladder to become co-chief executive and chief investment officer. He took on the business’s emerging markets equity fund in 1997 and its global fund five years later. From less than $400m in assets in his funds, he is credited with driving much of that business’s huge growth.

Under Mr Jain’s stewardship the emerging markets fund gained more than 310 per cent between 1997 and the start of 2016, compared with a return of about 150 per cent for the benchmark emerging markets index, according to Bloomberg data. The global equity fund gained about 100 per cent from summer 2005, the earliest data available, beating a 66 per cent return for the index.

But in 2016 he left following a “difference of opinion” with the managers in the New York office, in part about how big his fund could grow without hurting returns. News of his departure initially sent Vontobel’s shares tumbling 11 per cent.

He started GQG (short for Global Quality Growth), which has global, emerging market and US funds, in 2016 with backing from Australian asset manager Pacific Current Group.

From the start he has tried to do things differently. In an effort to ensure the firm would not attract analysts who had read his views and could repeat them back to him, he placed job adverts under the pseudonym Roger James, leaving out the company’s name. That brought the firm its first three analysts.

His research team includes three former investigative journalists, whose role is to challenge analysts backing particular stock ideas.

In an environment where launching one’s own fund is far harder and more costly than it used to be, Mr Jain’s firm has grown significantly and has now $29bn in assets. Last year it had $9.5bn in net inflows, followed by a further $4bn in the first quarter of this year.

So far, the venture has worked out: both his US and global funds, for instance, have beaten the benchmark in three of the past four years. In the turbulent first quarter of this year hi
s US fund beat the S&P 500 by almost 10 percentage points. 

When he left Vontobel, he told a colleague “either you’ll kick my ass or I’ll kick your ass”, he says. “I’m glad I’m not the one getting my ass kicked.”