GQG Partners: How Rajiv Jain built a $92 billion stock empire

The co-founder of GQG Partners doesn’t person a Twitter relationship and seldom appears connected TV. And successful his maturation banal funds, determination are nary driverless-car companies oregon hypersonic-missile manufacturers. Instead, you volition find tons of industries with a decidedly 20th-century feel: oil, tobacco, banking.

This look has proven spectacularly successful. In little than 7 years, Jain, the erstwhile main concern serviceman astatine Vontobel Asset Management, has built GQG into a $92 cardinal powerhouse. Few, if any, startup funds successful caller representation person raised truthful overmuch wealth successful truthful small time, according to Morningstar Direct.

In 2022, erstwhile astir plus managers watched clients yank currency from their funds arsenic markets cratered, GQG thrived. The steadfast lured $8 cardinal successful caller concern and 3 of its 4 flagship funds bushed benchmark indexes by wide margins.

Pull the lens backmost further and the outperformance of GQG’s biggest fund, the $26 cardinal Goldman Sachs GQG Partners International Opportunities Fund, is adjacent starker. Since its inception successful December 2016, the money has gained 10.8% a year, much than treble the benchmark’s 3.9% yearly return.

All this success, dating backmost to his days arsenic a prima manager astatine Vontobel, has fixed Jain a definite swagger.

He plunks down immense sums of wealth connected idiosyncratic stocks and, successful a heartbeat, tin bail connected an full presumption — the benignant of bold moves astir successful the manufacture avoid. Moreover, successful talking with him, it rapidly becomes wide that helium doesn’t marque overmuch of his rival stock-pickers. Jain considers himself a “quality maturation manager.” He refers to others, without naming names, arsenic “quote-unquote prime maturation managers.” To him, galore of them are specified imposters who rode the question of inexpensive money, lone to beryllium exposed erstwhile the epoch of zero involvement rates came to an abrupt end.

“These kinds of volatile years really let you to differentiate a small spot more,” helium says successful a telephone interrogation from GQG’s office successful Fort Lauderdale, Florida. “A batch of ‘quality growth’ managers fundamentally blew up. We recovered retired whether they truly ain quality.”

Jain has had his stock of missteps, of course. His large stake connected Russia — 16% of each his emerging-market fund’s wealth was invested successful the state astatine the commencement of 2022 — backfired severely erstwhile President Vladimir Putin invaded Ukraine. He started to propulsion backmost arsenic the warfare clouds began to stitchery but didn’t liquidate each the fund’s holdings and, arsenic a result, it tumbled 21% past year, making it the lone large GQG money to underperform its benchmark.

And this year, arsenic US tech stocks rebounded connected speculation the Federal Reserve was adjacent to ending its rate-hiking cycle, GQG funds person trailed. His determination to underweight China has besides been costly arsenic the authorities lifted strict Covid lockdowns that were hamstringing the economy. Jain’s planetary money — which is distributed to investors by Goldman Sachs Group Inc. — has gained conscionable 3.4% this year, compared with the benchmark’s 7.8% jump, putting it successful the bottommost 6 percentile.

“I’m not a blessed camper these days,” Jain says with a chuckle.

Calculated Risks

At immoderate level, this year’s underperformance isn’t terribly surprising. The stocks Jain likes to ain thin to beryllium much antiaircraft successful nature, the benignant that volition clasp up good successful a downturn but lag erstwhile the system and banal marketplace are ripping.

“He is truthful overmuch much cautious than different maturation managers,” says Gregg Wolper, a elder expert astatine Morningstar.

There is simply a seeming contradiction to it all, astatine slightest to an extracurricular observer. Jain likes safe, antiaircraft stocks but past makes outsize, risky bets connected them. He explains the doctrine this way: By loading up connected companies that person what helium calls bullet-proof equilibrium sheets — names similar Exxon Mobil Corp. and Visa Inc. — it’s improbable immoderate of them volition endure the benignant of abrupt illness that’d wreak havoc connected his portfolio.

“We effort to instrumentality little implicit risk,” Jain says. “The businesses we ain make batch of escaped currency flow. So the hazard of america losing connected an implicit ground is simply a batch lower. But sometimes that means you person to instrumentality much comparative risk.”

Jain typically invests successful 40 to 50 large-cap stocks successful his planetary fund, compared with the benchmark’s much than 2,000 companies. His US money holds little than 30 stocks, compared with implicit 500 successful the S&P index. Two of the planetary fund’s apical 10 holdings are baccy companies — British American Tobacco and Philip Morris International. They relationship for astir 10% of the portfolio.

Vontobel Years

Born and raised successful India, Jain moved to the US successful 1990 to prosecute his MBA astatine the University of Miami. He joined Vontobel successful 1994, rising done the ranks to go the Swiss firm’s CIO successful 2002. By the clip helium near the steadfast to commencement GQG successful March 2016, Vontobel’s emerging marketplace money returned a full of 70% successful 10 years, much than treble the MSCI Emerging Markets Index.

Jain, who has a bulk involvement successful GQG, invests astir of his idiosyncratic wealthiness successful its funds. When GQG went nationalist successful Australia successful 2021, raising astir $893 cardinal successful the country’s largest IPO that year, Jain pledged to put 95% of the IPO proceeds successful the institution and support the wealth determination for 7 years.

There are different things that marque Jain antithetic than the emblematic brag astatine an concern firm: He refuses to conscionable with executives who tally companies he’s considering investing successful truthful helium doesn’t “drink their Kool-Aid”; helium bans GQG employees from trading stocks successful their idiosyncratic accounts; and erstwhile his Russia stake went awry past year, helium apologized connected a league telephone to GQG investors for the losses they took.

“He has a operation of assurance and yet immoderate humility successful knowing that helium mightiness beryllium incorrect astir something,” says Wolper.

‘Game of Survival’

This quality to admit errors — and rapidly alteration course, arsenic a effect — is thing Jain believes his rivals lack. For instance, they failed, helium says, to admit past twelvemonth that the tech-stock roar was astir to spell bust. He started cutting his tech holdings successful precocious 2021 aft riding the pandemic-fueled tech surge — oregon “the bubble,” arsenic helium calls it — for a while.

By March of past year, arsenic ostentation was percolating and involvement rates were soaring, Jain had slashed his planetary fund’s tech holdings each the mode down to 5% of the portfolio from 23% successful mid-2021, portion expanding its weighting of vigor stocks to 19% from little than 2%. That power paid disconnected handsomely, helping bounds the fund’s losses, arsenic planetary vigor stocks jumped 41% past twelvemonth portion tech stocks plunged 31%.

“Investing is simply a crippled of endurance due to the fact that astir radical won’t past successful the agelong run,” says Jain. “So that should beryllium the mindset alternatively than trying to triumph each the time. It’s arsenic overmuch astir avoiding losing alternatively than trying to win.”

And what if he’s incorrect now? What if the caller gains successful tech are conscionable the opening of a broader rebound successful the industry?

Jain is dubious. To him, the tech giants shouldn’t adjacent beryllium considered maturation stocks anymore. But he’s ready, helium says, to stroke up his portfolio erstwhile again if needed. “If the information proves that we are wrong, we are blessed to alteration our mind.”