Zero to 100 (billion) in six years – Tim Carver of GQG Partners | ASX CEO Connect Series

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you going? 

Alec: [00:00:31] I am great Bryce. I am very excited for this episode. We love doing two things on this podcast interviewing expert investors and interviewing ASX listed CEOs, and in this interview we're going to do both in the form of one person. 

Bryce: [00:00:45] A super episode coming up. I'm excited as well. Before we do jump into it, this episode of Equity Mates is in partnership with the ASX CEO Connect, which brings together listed companies and retail investors. It's hosted virtually by the ASX every second month and is a great opportunity for you to hear from CEOs and leaders of some of the most popular companies on the ASX from the comfort of your own home. And today we have the privilege of speaking with one of these CEOs. It is our pleasure to welcome to the studio Tim Carver. Tim, welcome. 

Tim Carver: [00:01:16] Thanks, guys. Thanks for having me. I'm excited to be here. 

Bryce: [00:01:19] So Tim is the co-founder and CEO at GQG Partners. The ASX ticker is GQG. Prior to GQG. Tim spent ten years as CEO of Pacific Current Group an ASX listed asset manager. And today we're going to be talking to Tim about all things asset management and the incredible story behind GQG, so Ren let's crack in. 

Alec: [00:01:41] Let's do it. Now, Tim. There may be some listeners who are unfamiliar with GQG, but for those who have been watching the funds management space and ASX listed funds management space, you have taken the market by storm going from 0 to 100, literally 0 to 100 billion in incredible time. So take us back to the beginning. Can you tell us the story of GQG? How is it founded and what should we know about your co-founder, Rajiv Jain? 

Tim Carver: [00:02:07] Well, guys, it's it's a pertinent question because the the story of GQG begins on Manly Beach in Sydney, Australia. Nice as it as you mentioned in my prior life, of course, I served as the CEO of Pacific Group, which is an ASX listed company and it was down with my colleague doing an annual earnings roadshow and the weekend between our journey in Melbourne and Sydney, we were staying at a Manly and we got a call over the weekend from Rajeev and he said, Guys, it's time I'm ready to go, I'm ready to start my own firm. And you know, obviously we were we were incredibly excited that he called us who were the first call. But over that weekend, I personally also thought, gosh, I'd really like to join Rajeev and I. I just remember calling my wife and saying, Honey, there's a big opportunity here. And I remember walking up and down Manly Beach sort of ruminating on the opportunity and obviously had the good fortune of being able to join Rishi personally. And, you know, the rest is history. Wow. The thing is, the guys it's interesting. I often tell people the story of GQG can't be separated from the prologue. In other words, the prologue is part of the story. And what I mean by that is the rigid had built a circa $50 billion asset manager inside a big Swiss bank called Vontobel. He really did that, you know, primarily independently in New York and Florida. You know, on the business side, several of us had been involved in helping start and grow a number of different types of boutiques around the world. And so we came to this with some particular views on, you know, hard earned failures, what doesn't work and things that would work. We came to it with some very deeply held sort of guiding principles, things like, you know, we want to be the most aligned boutique in the in the marketplace. Things like always making sure your client interests are first. And with some views that, you know, this is the most competitive business of the world. And I have to say, it's more competitive here in the US or say than the NFL or, you know, down there, I might say, than Aussie Rules or, you know, but it's the most competitive business in the world. I think people often lose sight of that. And if you if you if you had those guiding principles that guide the way you think about building a team, the way you think about building a culture, frankly, the way you hold yourself every single day. And so I think that the prologue, the idea that we had done this before, really has been critical to forming those views. And those views, in fact, have been critical, critical to the early successes that we've had in this journey. 

Bryce: [00:04:42] So GQG asset manager based in Fort Lauderdale and down in Florida, So, why list on the ASX? 

Tim Carver: [00:04:50] Yeah, look, there are a bunch of reasons for listing on the ASX. Part of it is familiarity. Obviously, given my own background, we have we have a lot of nexus to Australia as well. So our first major institutional client in the world was, was in Australia. We have a reasonably deep institutional business and a growing retail business in Australia. Obviously Pacific Current is our. It was our only outside shareholder prior to the listing and their their ASX listed. So lots of nexus to Australia that made it logical. But I also had the strategic view that ultimately the retail business in Australia for us could grow nicely and that being listed could really augment that. And well, it's early days, we're seeing signs of that already. And I do think that the listing there, you know, created enough notoriety that it should really help strategically help the business as we go forward. 

Alec: [00:05:37] Yeah, well, I don't know if we can say it was the notoriety from the ASX that has contributed to this. But it is a pretty incredible story that you guys are building six years since founding and you've grown to almost $100 billion assets under management. Some fund managers spend a lifetime trying to get to that number and never do. How have you grown so quickly? 

Tim Carver: [00:05:56] Yeah, you know, you know, what you'd find interesting is that we said from day one that we would never have a growth target. So this is one of those stories where, you know, you get what you're not looking for. And, you know, I think that these businesses in the end are all about investment performance. And, you know, I think that clearly Rajiv had a reputation coming into to the establishment of the business. The investment team have put a really extraordinary numbers over the long term. We've done our best to service the heck out of our clients. And you put those things together. And I think that's that's the sort of formula for growth. But I think there's also interestingly, one of the things that we don't talk a lot about is the fact that there's been a real dearth in formation of new investment firms over the past decade. And, you know, I've talked to a number of leading institutional investors around the world about this, and all agree that there's been a real falloff on sort of the establishment of new boutiques. And so I do think that having a credible, scalable sort of platform that we've built in Chicago also positioned us in a way that we could be the credible new option, something new that people wanted to invest with. And we didn't have a lot of competition in that part of the spectrum. And so I think that's that's contributed to it as well. 

Bryce: [00:07:14] So it's often said in funds management that it gets harder as you get bigger. And you said you didn't have a growth target of 100 or a growth target at all, but here are at hundred billion assets under management. So I guess the question from that is how big do you think you can get or do you want to get like here, are you aiming for that for the Big 10 trillion? 

Tim Carver: [00:07:35] No, certainly not. That mantra actually still stands. We will never have a growth target because I think that that's the wrong that's the wrong way to run these businesses. This is in this business growth and margin are outcomes. And I think people sometimes confuse that. They think they're you know, they think you can you can sort of dial is up or down. The reality is that their outcomes, the things that we can control or how do we go about building our investment team, how intensely focussed are we on delivering investment results? How do we service our clients? And if we do those things, I'm confident the growth will follow. And, you know, part of the part of the reason I don't mean to be evasive here at all, but part of the reason I don't have a real target is that I think there are a lot of really creative things we can do with this business in supporting new entrepreneurs, whether that's doing team lift outs or recruiting young talent, developing it, there are lots of different ways that we can do. We can develop talent here, and if we do that effectively, we'll continue to grow outside of what the core investment team is doing today. So, you know, the sky's the limit, but we'll never have a growth target. We're going to be focussed on how do we find great investment talent, how do we bring that to bear to our clients? 

Alec: [00:08:47] So Tim, when we were flicking through your presentation for ASX CEO Connect and if people want to see your presentation, head to the ASX say Connect website. We had one definitional question about JQ Jay's business and we've got you on the show. So we get to ask we get to ask you. JQ GE has $29 billion in a global equity strategy and 33 billion in an international equity strategy. What's the difference between global equity and international equity? 

Tim Carver: [00:09:15] Yeah, yeah, good question. So for us, international equity is global ex-U.S.. So as a U.S. manager, it's the non-U.S. strategy, whereas global of course, is everything in the world, including U.S. stocks. So there's similar. But, you know, U.S. makes a fairly significant portion of global so that there is a fair amount of differentiation there. 

Bryce: [00:09:35] So, Tim, let's turn our attention to the markets in 2022, it's been an absolute rollercoaster, one that feels like it's been going down more than that's for sure. 

Alec: [00:09:45] Although the day that we're recording today, the Federal Reserve raises interest rates 75 basis points and the market rips. It's just it is a confusing time.

Bryce: [00:09:55] It's been one for particularly our audience that have started their investing journey within the last decade and have been privy to a bull market. It's a tough time at the moment, and we're wondering how JQ J approaching the market at the moment. What's your sort of. Hey, so the takeaway at the moment. 

Tim Carver: [00:10:13] One of our mantras is hold your views, but hold them lightly. And what we mean by that is you've got to be reactive to the data. We all you know, we're incredibly data driven. We develop views based on the data. But I think one of the biggest risks that you find as an investor is that you anchor. And so the ability to pivot, the ability to be dynamic is incredibly important. You saw us do that obviously in the second half of last year, and that's been a great outcome for us and our investors over the first half of this year. But this environment, I think that becomes all the more important, you know, making sure that you maintain that dynamism, that you're listening to the data. And to your point, the currents are so extreme right now, that is it's a very, very challenging market environment for sure.

Alec: [00:11:00] I think for people who aren't familiar with JQ, GS Racing Investment Decisions, it was about what, early 2021 when you started selling down tech or getting out of tech and rotating out of it, which I imagine was maybe a difficult decision at the time, given how, you know, how good 2021 was. But in hindsight it was you were right and you were early on it. 

Tim Carver: [00:11:25] It's always feels good to call out your winners. So we make plenty of mistakes, too, obviously. But but yeah, look, if you looked at 20, 21 in our global strategy, for example, you know, we lacked the market a little bit. And that's because we did start to say that some of these businesses that were really ripping, that we thought valuations were getting a bit excessive. And and so we did make some changes. And we had a view that that inflation maybe would be a little bit higher, a little bit more persistent than than perhaps the market as a whole thought. But you have to be careful that you don't just, you know, rest on that on that view. And this is the point that it is so dynamic. The cross currents are so strong right now that we've got to be looking at making sure that that view you refresh our view every single day. 

Alec: [00:12:09] Yeah. So I think, you know, that was a classic example of GK as a fund manager having a contrarian view to the mainstream market. And now in 2022, the, the whole dynamics of the market has changed. But as a fund manager and as an investment team, are you guys looking out and do you think the market is getting anything wrong at the moment? Anything, you know, business media are getting wrong about current market conditions. Are there any other contrarian views that that you guys are holding? 

Tim Carver: [00:12:39] Yeah. Look, I don't know that I'd say that we have particularly contrarian views. I think, you know, the market's come around to a lot of the views that we hold. You know, the like I say, I think the bigger challenge is will we and will our competitors and in the cohort of active managers be effective at navigating this? And that's you know, that's the real question. You've got such such divergent inputs. You know, as you pointed out with said grazing, there is 75 basis points today and markets ripping a little bit on the back of that. You know, so the question is, are we going to be successful in navigating this? And, you know, will how will active managers interpret this data and develop a, you know, forward looking view? 

Bryce: [00:13:21] So Tim, before we move to understanding a little bit more about the actual business of funds management, we're just going to take a quick break to hear from our sponsors. So just a reminder to the Equity Mates community that this episode is part of the CEO Connect, ASX CEO Connect Partnership that we have. And for those that can't attend the live event, be sure to check out the presentation recordings online. We will have that link in the show notes. But Tim, let's turn our attention to the business of funds management. We we were talking offline before the interview ran and I about the competitive advantages in funds management. And you sort of alluded to it at the top. It's one of the most competitive industries out there. So how do you build a competitive advantage in the funds management business? 

Tim Carver: [00:14:09] One of my early mentors said to me early in my career that in the long run, investment outcomes flow from investment cultures. In other words, you have to get the investment culture right to drive long run investment returns. And, you know, I think that that you hear everybody talk about culture, but but it is the be all and end all, in my view, from an operational perspective of how you know, what you have to do to to to develop to develop a moat, to develop a competitive edge. And, you know, I think you alluded to this is the most competitive business in my mind. And so you have to be honing that competitive edge every day. And you might ask a question like, how do you see that? What are the what are the hallmarks of that? And I think for GCG, at least one of the places I point to is you look at just the breadth and diversity of experience that we built into the team. So we've been very intentional about the way we built the team, including traditional buy side analysts, folks with an equity and fixed income, long short backgrounds, people with more growth orientation, people with more valuation orientation. We have folks who used to be journalists, people who used to be professors, even somebody who used to work for the for the EPA, the Environmental Protection Agency. And so when you bring all of that together, what you're really saying is that I want to be devil's advocacy in the team. I want to have different points of view battle every day internally, less the market, prove wrong externally. And so it's that fight that the intellectual battle for ideas and which ideas can survive and which ideas can prosper. That's what you've got to get right. You have to do that, obviously, in a way that's collaborative, that people feel like it's a it's a team effort and they love working there and they thrill in the challenge. To me, that's that's what it's all about. If you can if you can hone that competitive edge, you can create a culture that really is about performance that's very hard to do. And it's something that I think really does give you a sustainable competitive edge.

Alec: [00:16:06] We in Australia we've seen the the challenge of, I guess k man risk in funds management. Kurt Nielsen, Adam Platinum and then Hamish Douglas at Magellan recently come to mind. Obviously we started the interview by talking about Rajiv and his incredible track record, I guess. How do you think about that for a business like GQ and with everything you were talking there about building the investment team and building the investment culture, how do you, I guess mitigate or control for that came and risk. 

Tim Carver: [00:16:36] The world focuses on the risks associated with key people and seldom focuses on the on the real benefits that these key people drive. Right. There's a reason that the key people there, they're creating tremendous value for their colleagues and for their clients. And so my view is actually a little bit different. I don't want to dilute down the key men risk or diversify away the key men risk. I want to go emphasise the key people in our business and that what that means to me is how do we go recruit many, many more key people? How do I how do I want I want to from teaming with with key people in all aspects of the business. So I think that the way you perpetuate these businesses, the way you make them incredibly stable, the way you make them durable, is to add great investment talent, to add more key people who can bring that special talent to bear for clients. And if you do that in the long run, obviously shareholders benefit tremendously from it. So my view is let's, let's, let's, let's double down on key on key people, let's go get as many as we can and really sort of perpetuate a culture where great investment talent wants to want to live and ply their craft. 

Bryce: [00:17:46] It's probably a philosophy that carries across all business, really just get key people in and go hard. So Team India. 

Tim Carver: [00:17:54] Is so true. It's so true. You know, I also honestly, I should make a lot of sports analogies because I think the you know, the endeavours are so similar. But like, look, great athletes want to play with great athletes. Right? And I actually had a mentor early in my career who was an offensive coordinator for the Seattle Seahawks, the professional NFL teams. And he used to say there are three kinds of people. You want three kinds of people in your organisation. The people that you win because of that are the people you win with and they're the people you win in spite of. And the whole goal of a coach is to add to the win because of and get rid of the win in spite of. And I think there's some great wisdom in. You know, we want to go find as many people as we can in this business. Hmm. 

Bryce: [00:18:37] So, Tim, I guess with competitive, competitive landscape comes pressure on, you know, parts of the industry such as fees. And we're seeing downward pressure both here in Australia and globally in funds management. Your your funds average a 50 basis point management fee. And the old days of the two and 20 structure seem to be fast disappearing. So how do you think about this downward pressure on fees in the industry? And and what do you do to ensure that you can, I guess, do more with less? 

Tim Carver: [00:19:06] Yeah, unfortunately, I think it's a one way street, too. I suspect that for the rest of our careers, we'll see we'll continue to see fee pressure across the whole industry. And again, I'll sort of invert this a little bit and say one of the benefits of this is that, of course, fees are part and parcel of your net returns back to shareholders. So if you if you have to operate with lower fees, the good news is that you're delivering better, better net results to your to your clients. And so I think that's you know, that's one perspective that we need to take with respect to fees. For us, we we entered this business relatively recently. Fees were roughly where they are today when we started the businesses. So we did it. You know, we've built this business structurally in a way that we're confident we can operate at at the prevailing fees that are in the market today. I think it's a lot harder for legacy firms that maybe have, you know, fees that are significantly higher on average than ours and maybe have, you know, employee bases that are many multiples in terms of the number of people that they're employing. That's a that's a tough one, because I do believe that everybody ultimately will norm out to, you know, fees, sort of prevailing fees wherever the market is, and and particularly if you don't have great performance. But that's culturally really, really challenging to to to navigate through that. So I'm very happy that we had a blank slate when we when we started the firm. And, you know, I think it's worth calling out a couple of the details of our structure. So one of the benefits of that we talk a lot about is the alignment. And you'll recall that I said culturally, I think, you know, one of the things we came to building with one of the perspectives was we wanted to be one of the most aligned investment boutiques in the world. And so the reality is that as founders, we take the vast majority of our economics as shareholders, not not as employees. And so when you do that, when you have that deep alignment with both shareholders and clients in that way, it means that you're not getting paid to the panel and therefore you're not taxing the panel with the economics for the you know, for the senior folks in the firm. In the same way that there are older firm with less where the senior management has less ownership might be. And so I think those structural pieces are key as well. So if you get it structured right, I think you have a much, you know, again, a huge competitive edge over legacy firms that maybe don't have quite the same flexibility. 

Alec: [00:21:22] Tim, we're fascinated by this idea of what matters and what doesn't. Bryce and I, before doing Equity Mates, before being in the podcast game, we were both in retail and there were some numbers or some metrics that really mattered in that space. You know, in retail you're looking at same store sales, sales per square foot, and then there are a number of metrics that just really didn't matter but seem to get a lot of airtime from, you know, the business news and stuff like that. So one thing that we want to do this year is when we get CEOs on, we want to ask this question about what matters and what doesn't in your industry. So in the business of funds management, one of the most important metrics for you, what are you as CEO of GQG really focussed on to, I guess, check on the health and the growth of GQG

Tim Carver: [00:22:08] You know, because there's, there's one metric that matters in my view, and that is your investment performance and everything else pales in comparison. At the end of the day, this is about about investment for us. Think of it this way. The world doesn't need another active equity manager charged with active fees and delivering average performance. Right. So so investment performance is it. It's the whole thing and you have to sustain it. Now, of course, you know, of course every measure has periods of underperformance. You've got to be careful not to to overreact to short term. But but you've got to have investment performance. That's that's what matters. And I think it dwarfs everything else. Now, we look at some other stuff, too, and you may have heard me talk in the past about one of the things I like to look at as a leading indicator is how many research eyes are we getting on our products? And there's one great database called Investment Alliance that we look to to say, you know, are we being researched by professional investors, whether they be big institutions or IFA's or whoever? Are we being researched as as much as our competitors are? Are there any trends in that? I think that's an important thing for us to make sure that that that our story is is getting out there. And then I think, you know, as on the business side, I would focus on are are we expand? The footprint of distribution, and that doesn't mean growth. What it means is, are there new ways that we can we can access clients or new sets of clients that we're getting to that we didn't get to yesterday? And if we if you put up the numbers and you and you expand the reach and you're getting enough people researching you, you know, the rest takes care of itself. 

Alec: [00:23:50] On that idea of performance, investment performance being the baseline and all, I think people often get confused and especially new investors and retail investors get confused about what they should be looking for in terms of performance, you know, one year, three, five year, seven year. And you know, we've seen Magellan in Australia have a recent period of underperformance and just being punished by the market because of it. When you're thinking about JQ, what are you looking at in terms of performance for you? Is it every year you've got to be beating the index? Is it over a certain period of time? And how do you want your, I guess, your clients to be looking at JC investment performance? 

Tim Carver: [00:24:28] Because the truth is we're looking at every single day I just show up and perform every day. Of course we don't write. Of course we underperform plenty of days. But but you but but the angst inside comes from are we are we performing? And of course, there's so much nuance behind that, because the question is, what are the reasons that you're outperforming or underperforming? Maybe outperforming for all bad reasons. Right. And you may be underperforming for good reasons. So it's it's a complicated question. I do think that over time, clearly, you've got to see performance over the you know, over the intermediate to long term. But but I think internally, certainly we have to feel that drive of we have to show up to show up and play every single day. 

Bryce: [00:25:07] So team, before we move to a couple of final questions just on what matters and what doesn't. Is there anything that, you know is discussed in business media that you feel is really useless? When we talk about funds management business? 

Tim Carver: [00:25:23] You know, I think, these businesses are fairly straightforward. So I think that, you know, I think the market understands what the key drivers are. And I hearken back to what I said earlier and just I do think that there's often a confusion around the the extent to which one can control things like growth rates or margins in a business, and you can control margin in the short term. But but I think that, you know, long term, long term, you really can't in this business. And I think there's maybe a fundamental misunderstanding that from my perspective, at least as a leader in this business, we have got to do whatever it takes to recruit the talent field, the players we want to field. And we've got to do everything we can to put up national performance. And if we do those things, then, you know, margin and growth are outcomes. So I do think that often people think those may be things you can control a little bit more than you really can. But beyond that, no, look, I think the market is these businesses, I think are pretty well understood.

Alec: [00:26:19] Well, Tim, we want to say thank you for joining us today. It is a fascinating story that you're building at GQG from 0 to 100 in six years. And we're very excited to, I guess, keep watching it play out. We always like to finish with a couple of questions about your business today and into the future. So we'll move to those. And on the risk side, when you look at GQG today and you think about its future, what are some of the biggest risks for GQG? 

Tim Carver: [00:26:48] Sitting here, right here and now? I think the real risks right now are just the market we're operating in. And the as we've talked about here, the cross-currents that we're all experiencing and being able to navigate those effectively, you know, can we continue to to perform and can and then by extension, can we continue to attract really great investors who who want this to be the place that they ply their craft? Those are those are the risks we do. We have a thriving culture. And are we done, you know, do we have enough dynamism to, you know, to be effective in markets? 

Alec: [00:27:26] And then final question, where long term investors here at Equity Mates and we we like to think about finding businesses that can compound over the long term. So if you think about GQG in ten years, what would success look like? 

Tim Carver: [00:27:40] I think for me, this would be successful if GQG becomes sort of synonymous with the place where great investors want to hang their hat. And so if you're, you know, if you're a young kid coming out of school or coming out of an investment banking programme, Gigi is where I want to go. That's where the great investors go. Or if you're a you're a team that wants to launch its own its own fund or some firm is looking for partnerships, you say, Gosh, I'd love it if we could do that with GQG. If we become the place that talent wants to go, the really the platform that is most attractive to investment talent, I think this becomes a really a thriving enterprise and one that that should sustain for for quite some time. 

Bryce: [00:28:28] Well, to the Equity Mates community if you have enjoyed. This conversation with Tim just as much as we have. The ASX CEO Connect Day offers more of this style of talks with C-Suites. Their most recent webinar just took place so you can head to the CEO Connect page at the ASX. We'll have the link in our show notes and there's plenty of conversations to be had and to listen to with other CEOs on the ASX around the country. Tim, thank you so much for your time. It's an absolute pleasure. We love understanding more about funds management business and as Alex said, it's a it was a great culmination or combination of CEO and fund manager in this interview. So we we really appreciate you taking the time to to chat with us in the community today. 

Tim Carver: [00:29:13] Thanks, guys. Pleasure's all mine.