Podcast Summary: The Long View
Episode: Hendrik du Toit: "Small Things Can Make a Big Difference"
Release Date: January 21, 2025
Host/Author: Morningstar
Guest: Hendrik du Toit, CEO and Co-Founder of 91 Asset Management
1. Introduction
In this episode of The Long View, hosts Dan Lefkovitz and Christine Benz engage in an insightful conversation with Hendrik du Toit, the CEO and Co-Founder of 91 Asset Management. Hendrik brings a wealth of experience from his leadership roles in South Africa and international markets, offering a deep dive into investment management, sustainability, and the future of global finance.
2. Guest Background and 91 Asset Management
[01:20] Hendrik Dutoi:
Hendrik introduces himself, highlighting his role at 91 Asset Management, a firm listed in London and Johannesburg. Founded in 1991 in South Africa, 91 Asset Management has evolved from a small startup with two clients to a significant player in the global investment landscape. Hendrik's educational background from Stellenbosch University and Cambridge, coupled with his board roles at Naspers and Prosis, underscores his expertise in the field.
3. South African Investment Market Overview
[02:28] Hendrik Dutoi:
Hendrik discusses why South Africa remains 91's largest market, attributing it to the firm's long-standing presence and organic international growth. He describes the South African market as highly sophisticated, comparable to Canada and Australia, with a mature pension and mutual fund sector supported by a robust intermediary community.
Notable Quote:
"The South African intermediary community is one of the more sophisticated and better ones in the world." [02:28]
4. 91's U.S. Business and Sustainable Strategies
[05:08] Hendrik Dutoi:
Delving into 91's U.S. operations, Hendrik explains their role as sub-advisors for Vanguard's sustainable impact fund. He emphasizes that 91's business model is B2B, focusing on institutional investors rather than individual retail clients.
Notable Quote:
"It's our way of doing business and that's how we reach clients." [05:22]
Hendrik outlines 91's commitment to sustainability, describing their approach as "sustainability with substance." He argues that addressing climate change is not merely about ESG compliance but about investing in solutions that ensure long-term viability and profitability.
5. ESG: Global Perspectives and Controversies
[10:22] Christine Benz:
Christine prompts a discussion on the politicization of ESG, especially in the U.S., contrasting it with other regions.
[10:44] Hendrik Dutoi:
Hendrik provides a global perspective, noting that ESG frameworks vary significantly across regions. In Europe, ESG is heavily regulated, while in the U.S., there is resistance toward mandated ESG practices. He underscores the importance of understanding regional differences in ESG implementation.
Notable Quote:
"We are not ideologues. We simply see risks and opportunities as a firm, not as an investor." [10:44]
6. Active vs. Passive Management and the Future of Public Markets
[37:22] Hendrik Dutoi:
Hendrik shares his bullish stance on active management, arguing that it remains essential for price discovery and capital allocation. He contends that active managers add significant value by outperforming passive strategies, especially in a landscape increasingly dominated by indexing.
Notable Quote:
"Active management... has a massive social utility and... the opportunity for massive outperformance." [41:16]
7. Private Markets and Emerging Market Debt
[37:22] Hendrik Dutoi:
Discussing private markets, Hendrik cautions against the excessive capital flow into private credit, emphasizing the need for proper pricing aligned with public markets. He views emerging market debt as a valuable asset class for diversification and access to high-growth economies.
Notable Quote:
"Emerging market debt is just providing you with both a government but also corporate borrowers who are willing to pay... a substantial premium." [32:19]
8. Board Role with Naspers and Tencent Insights
[27:22] Hendrik Dutoi:
Hendrik elaborates on his involvement with Naspers and its subsidiary Prosus, highlighting the strategic investment in Tencent. He recounts the foresight of Naspers' leadership in recognizing Tencent's potential, which has yielded monumental returns.
[30:35] Hendrik Dutoi:
Addressing recent challenges faced by Tencent due to government crackdowns, Hendrik maintains that Naspers' role as a major investor remains stable. He believes in the resilience of businesses adapting to regulatory environments.
Notable Quote:
"Tencent operates as it operates. That was the deal struck a long time ago." [30:35]
9. South Africa’s Political Landscape and Future Outlook
[47:50] Hendrik Dutoi:
Reflecting on South Africa's political evolution, Hendrik expresses optimism about the country's future. He credits the government of national unity and the cooperative political climate for fostering stability and addressing social challenges.
Notable Quote:
"Once institutions have been eroded... it's very, very hard to come back. But I have hope and I'm very glad to have been involved in the story." [47:50]
10. Personal Interests and Environmental Commitment
[50:20] Hendrik Dutoi:
Hendrik shares his passion for outdoor activities, specifically mountain biking. He recounts participating in the Cape Epic, an arduous eight-day mountain bike race, which underscores his commitment to maintaining balance and mental clarity.
Notable Quote:
"Small things can make big differences and we feel better about it and we know ultimately no one is going to come and sue us for... leaving a warm world behind because we have done our bit." [17:56]
11. Conclusion
The episode wraps up with Hendrik reaffirming his dedication to sustainable investing and his belief in the power of proactive, small-scale changes to drive significant global impact. His balanced approach to ESG, active management, and emerging markets provides valuable insights for long-term investors aiming to navigate the complexities of today's financial landscape.
Key Takeaways:
- Sustainability with Substance: 91 Asset Management focuses on impactful sustainability beyond mere ESG compliance, viewing it through risk and opportunity lenses.
- Active Management's Value: Active investment strategies remain crucial for effective capital allocation and potential outperformance.
- Emerging Markets as Growth Engines: Diversifying into emerging market debt and equities offers access to high-growth economies and valuable diversification.
- Global ESG Perspectives: ESG implementation varies globally, necessitating a nuanced understanding of regional practices and regulations.
- Resilience and Adaptation: Businesses and investors must adapt to changing regulatory and environmental landscapes to ensure long-term viability.
Notable Quotes:
- "Small things can make a big difference." [17:56]
- "Active management... has a massive social utility and... the opportunity for massive outperformance." [41:16]
- "We are not ideologues. We simply see risks and opportunities as a firm, not as an investor." [10:44]
This episode provides a comprehensive exploration of sustainable investing, active versus passive management, and the strategic importance of emerging markets, all through the experienced lens of Hendrik du Toit. Listeners gain valuable perspectives on balancing financial returns with societal impact, navigating global ESG landscapes, and leveraging active management for long-term success.