Transcript: Rajiv Jain



The transcript from this week’s MIB: Rajiv Jain, GQG Partners, is below.

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VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: This week on the podcast I have an extra special guest. His name is Rajiv Jain, and he has quite a fascinating background. He is currently Chairman and Chief Investment Officer at his own firm, GQG Partners, which manages about $24 billion. Previously, he was co-CEO and CIO at Vontobel Asset Management.

If you are at all interested in a wealth of things from global and international and E.M. investing to portfolio management and the process that goes in to putting together a portfolio, you’re going to find this conversation to be absolutely fascinating. Rajiv is — is both humble and soft-spoken, but is filled with all sorts of insights and wisdom. I know I got a ton out of the conversation. I just found lots and lots of things that he said to be intriguing and fascinating, and I think you will also.

So with no further ado, my conversation with Rajiv Jain.

VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: I’m Barry Ritholtz. You’re listening to a Masters in Business on Bloomberg Radio. My extra special guest this week is Rajiv Jain. He is the Chairman and Chief Investment Officer of GQG Partners, a firm with over $24 billion in assets under management. Rajiv was the 2012 Morning Star International Manager of the Year. He runs a number of different funds, the Goldman Sachs, GQG Partners International Opportunities Fund, the Partners Emerging Market Equity Fund and the Partners U.S. Select Equity Funds.

Last year, his global fund was positive while the benchmark was down nine percent. Over the past 20 years, we’ve seen outperformance in all of the areas Rajiv works in between 300 and 400 basis points.

Rajiv Jain, welcome to Bloomberg.

JAIN: Thanks, Barry. Thanks for having me.

RITHOLTZ: I’ve been looking forward to this conversation because you’re one of these people who have been shooting the lights out, and I think most of the investing public is not very familiar with you or your background, which is quite fascinating. Tell us about your personal history and how you got to running a — a large asset management firm.

JAIN: Yes, thanks, Barry. So I think, first of all, I — I was born in India, I grew up in India, and I got hooked onto stocks when I was in high school. I guess, my dad want to keep me busy during the summer so he gave me some — in those days you get old, you know, stock certificates and dividend checks. He said …


JAIN: … “Why don’t you tally those and which dividend haven’t come in?” And I used to go — I remember going to a broker, and he was an ex-army guy and he said, “Look, I need to talk to your dad. Why does he allow a high school kid to come to his broker’s house? Look at – you see the averages around how — all the people sitting here?” So that’s how I ended up getting hooked.

I came to U.S. when I was, you know, 21 — 21, 22 and — and yeah, I’ve been doing the same thing ever since. I guess, I — I can’t do anything else.

RITHOLTZ: So let’s talk a little about your background at Vontobel Asset Management. You were there for a good couple of years. Tell us what’s that shop was like and how that led to the decision to launch your own firm.

JAIN: Yeah. So it was — it was a part of a — a large Swiss bank, and it was kind of a small boutique there. First seven, eight years, we couldn’t even afford a trader site to — I used to put in my own trades. So I joined as a co-P.M. for global and — and emerging markets and international actually in 1994. And what’s the — the most interesting experience I would say would be I became the CIO in 2002, and quickly 70 percent of clients fired us.


JAIN: Yeah.

RITHOLTZ: Why was that?

JAIN: Well, because the past performance wasn’t great and there was a change in P.M. So …


JAIN: … that’s my way of saying it that I wasn’t the one to blame.


RITHOLTZ: So — so you were — did you begin as an analyst also? How did — how did you work your way up to portfolio manager or P.M.?

JAIN: Yes, yes. So I started at — at the UBS, or Swiss Bank Corporation then, as an analyst, and I did become a co-P.M. after a couple of years.

RITHOLTZ: So what — this is a question that I’ve had people ask me. You are the person — perfect person to ask this. What is the difference when you’re looking at stocks as an analyst and trying to take an individual equity apart versus making the buy or sell decision as a portfolio manager? Very different approaches, aren’t they?

JAIN: Yeah, look, I think — I think you’re absolutely right, there’s a big difference between the two. And I will categorize in two parts of that. The first is, as an analyst, you expect to know as much as you can. But as a portfolio manager, you really don’t have that luxury of waiting for getting, let’s say, 90 percent of the information, which is knowable, you can’t get to that level of certainty. But as analyst, you are expected to know more. That’s a big difference. And I think that sometimes when analysts become PMs, they sort of miss that. They keep ending looking for more and more information, which, you know, can — can — can be, you know, paralyzing.

The second part is when you’re looking at a portfolio, the risk manager — you know, the part of the portfolio construction part become paramount. You may love the name and actually tend to love all the names here on the portfolio, but when you’re constructing portfolio, the — the — you may end up taking too much risk in a particular area. And I mean, if you go back to 2008, 2009 crisis, a lot of folks blew up because they had too much in an area because …

RITHOLTZ: Concentrated risk in one space.

JAIN: … concentrated risk because we love this area and got cheaper, and we love it a little more and it kept getting cheaper. So you got to be careful about, you know, and in most time, it’s the things that we love that kill us.

RITHOLTZ: So let’s talk a little bit about that and portfolio construction. I think a lot of individual investors, to them, portfolio construction is really just the stocks they have collected over the years. You obviously approach it very differently. How do you think about portfolio construction in terms of what your holdings are, in terms of how they’re diversified by either sector or geography, and — and lastly, about the risk you just mentioned?

JAIN: So the first part is that you got to make sure that the business would be around for longer-term, right? I mean, if you’re not sure how the business is going to look like five years out, you probably not should — shouldn’t be investing. It doesn’t mean you own for five years, but you got to be careful because markets anticipate to turn fundamentals a lot faster than — than we — we like to think.

If — if — if the drug is expiring in three years, guess what? Markets start discounting a lot sooner. And you see a bunch of names, which are selling at very low multiples because, oh, it’s a few years out and it’s — it’s low multiple zones, so for the markets already discounting deterioration, right? So that’s part of the first risk management.

RITHOLTZ: Is that a little bit of a value trap situation for people?

JAIN: Exactly, and I think — I think if you look at what has happened last year is the reason why a lot of folks have underperformed. And I feel investing is nothing but a journey a learning from your mistakes. If you’re not willing to be evolve and adapt, you won’t survive long-term.

It’s very easy to say, look, I found this mouse trap and how wonderful it has worked since 1930’s. So my question, how many analysts are around in 1980’s, let alone 1930’s? Maybe the market become a little more efficient. So the — the low multiple trap is — is — is essentially markets being much more forward-looking than we would — we give it credit for.

RITHOLTZ: So you sound a little bit like Ray Dalio who talks about mistakes in the learning process and improving. How long should an investor expect that journey to take before they have some degree of competence or even actual skill in managing assets?

JAIN: That’s a hard question to answer because it’s a function of, A, are you truly trying to look at on a — any broad spectrum? The broader the spectrum can say you will learn a little bit faster. In other words, if you — if you’re focusing on one specific sector only, you’re too narrowly focused.

When you operate in the silo, you really don’t know the — you know, the — the — there’s no cross-pollination. I feel I’m a better U.S. manager because I do emerging markets and vice-versa.

RITHOLTZ: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest today is Rajiv Jain. He is the Chairman and Chief Investment Officer of the $24 billion firm GQG Partners. So let’s talk a little bit about the launch of — of the firm.

You co-invest alongside with your clients. I think you’ve — you said previously something like 75 percent of your own assets are in your funds. Discuss the idea behind eating your own cooking.

JAIN: My personal belief is that managing somebody else’s money is a privilege. It’s an art to manage somebody else’s money. And our decision to the impact how our clients do and whether they have a dignified retirement or not, right?

So when we talk about if you have to ask, I personally feel if you have to ask a single question anybody, the question would be what percentage of your net worth are you willing to put it on funds? Rest is talk because that — that that gives you a very good view of, A, how they think about investing because you become much more action-oriented, right? Whether you think about taxes or, you know, after tax returns, the fees and so on and so forth. So it sort of encompasses almost everything.

And I have a vast majority of my wealth. I don’t have money in any of the long-only manager, long/short private equity. We don’t allow any personal trading at GQG, for example. Every employee is an investor, and I’m quite proud of the fact that we have quite a bit of skin in the game.

RITHOLTZ: That’s quite interesting. The — the expression I recall from years ago was I can’t hear what you’re saying because what you’re doing is speaking so loudly. That seems to apply dead center to this, doesn’t it?

JAIN: Thank you. Yes, it does.

RITHOLTZ: So — so let’s talk a little about — about how you go about selecting stocks and making the decision to — to get rid of them. You’ve described your, quote, “clinical approach to shedding positions when they no longer fit your thesis.” Explain that.

JAIN: There’s plenty of evidence that I can tell you with my own experience that buying is easy, selling is where the — where the trouble starts. And there’s been recently an academic, you know, work on that, that portfolio manager do a pretty good job buying, it’s selling when — when — when things tend to go wrong.


JAIN: And — and — and — and — and — and people describe me as a kind of a ruthless seller. I’m happy to go back again and revisit. And sometimes I would sell just to clear my mind and revisit it.

When — when we talk about selling, is the best selling happens when things are subtle, not when they are in papers. And when things are subtle, it means, does the thesis actually hold it or begin to shift a little bit? And I think — I think — I think that’s where you almost have to willing to be wrong and admitted that you’re wrong. In fact, one of the tests I feel for — for my analysts is have you found new ways of losing money?

RITHOLTZ: Explain that, new ways of losing money.

JAIN: Look, investing, as I said, is a journey of learning from mistakes. How do we expand our investing horizon? Horizon means here our brand — our breadth not time horizon. And that means that you have to experiment sometimes in areas that you’re not invested before.

If you all invest in financial, you keep investing in financial, guess what? Last decade hasn’t been too good for you.

RITHOLTZ: That’s right.

JAIN: In the 90’s, if you didn’t know how to invest in financial and tech, you would haven’t done well. In the next decade, if you only did that, you probably wouldn’t have done well either. So you need to be able to experiment, and we need to talk about experimentation. Losses have to be small, but that’s how you would learn because the only way you really learn is by putting some — some money on, you know, on — on — on — on the stocks.

RITHOLTZ: Paper trading doesn’t get it done.

JAIN: Paper trading doesn’t get it done. It overstays the reality because, as somebody has said, the — the money is made by the — how thick is your stomach lining rather than how — how much I.Q. you have.

RITHOLTZ: That’s — that’s really interesting. What about the selection process? You — you seem to have come up with a process that’s a little different from everybody else as the results have shown. What are you doing when you’re thinking about building a portfolio and making individual stock selections?

JAIN: First of all, balance sheet matters, right? So — so that it is — you need to eliminate weaker companies first. In other words, that’s an easy one.

RITHOLTZ: Negative screen, get rid of that problem coming.

JAIN: Yeah, yeah, exactly, so it — it is not about how to find the best company, it’s avoiding the worst. In fact, investing like a lot of things in life, it’s sometimes easier to — to identify what shouldn’t be done rather than what should be done because that just increase the odds of success.

RITHOLTZ: So you avoid mistakes and even if everything else is OK, you’re way ahead of people whose portfolios are filled with mistakes.

JAIN: Exactly. In fact, I kind of joke throughout the reason why I’ve survived over the longer run is because you just avoid blowing up. And I know people blow up and you’ll be top quartile just because you don’t blow up. So I think — I think from a process perspective, first of all, you take out the weaker balance sheets. And the second part is think about the capital allocation decision managements have made. In other words, how much — what returns have they generated on incremental — incremental capital that they put in the business.

Return capital is probably the single biggest, you know, measure that — that — that I feel one has to look at. Valuations comes distant second or third.

RITHOLTZ: Really? So — so let’s start with that first piece screening out the — the weaker companies. What are you looking for? Are you looking for lots of debt? Are you looking for no real growth in revenue or — and income, or are you looking at the management team themselves, or all the above and more?

JAIN: Management team is — is second. First would be numbers. In other words, you know, leverage is an easy one …


JAIN: … but also in terms of, you know, the cyclicality warning stream relative to their own sector. The — the — the return that they’re generating relative to their own space because you can’t compare a bank and — and — and a European utility, right?


JAIN: And I think — I think when people tell us — talk about quality, they look at much more on an absolute basis across the board. But banks, the best time to buy a bank is actually when the numbers don’t look good, right? That’s not necessarily true for staples. In fact, if you look at even technology, the last 40 year — if you backtest the numbers, the most expensive decile has outperformed the — the cheapest decile in tech and in pharma.

RITHOLTZ: So, in other words, momentum is much more powerful than value in those sectors?

JAIN: OK. So I want to be careful.

RITHOLTZ: What am I overstating there?

JAIN: Yeah. No, you’re overstating the momentum issue. It’s not momentum issue, it’s much more about — well, first of all, is the balance sheet good? And the second thing is the growth coming through? So growth is important. But — but — but — but you need the combination of those and then you look at the matter even and then you look at the valuations.

A lot of — because — think about this way, if — if — if — if — if — if you’re moving to Florida, would you call a realtor and say get, you know, give me the cheapest neighborhood?

RITHOLTZ: No, of course not.

JAIN: Why do we do that in stocks?

RITHOLTZ: Well, because there’s this belief that, on average, if your P/E ratio or price to book, whatever your preferred metric is, the cheaper stocks over long periods of time should outperform the most expensive stocks. That, at least, is the common belief that’s out there.

JAIN: Well, you see, I have a lot of problem with averages, averages like your foot might be in oven, your head might be in freezer and, on average, you’re dead.

RITHOLTZ: That — that’s a fair — that’s a fair description.

JAIN: So — so — so I think — I think you got to be careful about averages because in this — especially in this day and age, there isn’t enough appreciation that how many — how many buy-side analysts are operating 30 years ago versus today?

RITHOLTZ: Five percent if — if that much.

JAIN: Exactly, and what about 50 to 60? That you see matters showing how well price-to-book had worked in 1930’s. Well, it’s wonderful you’re fooling yourself, you’re not folling anybody else. That doesn’t work anymore.

RITHOLTZ: It didn’t work in the 70’s also, it’s terrible.

JAIN: It didn’t work in the 70’s. So markets do get efficient. I mean, let’s not kid ourselves. The question how are you evolving to incorporate that, I mean, you can buy eight dozens of ETFs to, you know, which run on quality. So if it’s bad for looking quality, it has stopped working.

RITHOLTZ: I’m Barry Ritholtz. My extra special guest this week is Rajiv Jain. He is Chairman and Chief Investment Officer of the $24 billion firm GQG Partners. He runs a number of different funds, all of which have outperformed over the past 20 years. He has handily beaten his benchmark. Last year, his global funds was about 900 basis points above the benchmark, which was down about nine percent for the year.

Let’s talk a little bit about international investing. One of your biggest holdings is India. It makes up about 27 percent of the fund, ballpark. Why are you so enthusiastic about India? What do you think is happening there? And what companies have caught your attention in that country?

JAIN: Yeah. So India is big only in the emerging market fund and, in fact, we only have five percent and similar in global. I think — I think — I think there are a couple things. One is — well, first of all, there’s a risk of me being biased …


JAIN: … for some strange reason.


JAIN: It’s a — so I think — I think I got to be careful when one buys it.

RITHOLTZ: So you have home country bias even after you leave the country?

JAIN: Look, you — you feel you know it better, right? So that’s what I’m saying you got to be careful.


JAIN: You — you shouldn’t surprise folks over in France (inaudible) said they would have more in France, so home country bias exist.


JAIN: But I think in this case, there’s a difference particularly now, India wasn’t always that big. The reason is because if you look at what’s happening around the world, there’s earnings pressure, so domestic-oriented businesses are actually delivering better earnings growth. And India is a very large domestic market. China is too and so in Brazil in the emerging market context.

Same in U.S. actually, right? I mean, multinational (checks) for a lot of China are not exactly doing that well versus domestic own their stocks are just doing better. So India is a big domestic market and you can get fairly high — high quality, predictable businesses but just through selling at reasonable valuations and, hence, we have higher exposure in the E.M. fund.

RITHOLTZ: So — so let’s talk about Russia. You were, quote, “massively underweight” Russia for 18 or so years. Now you say you’re overweight Russia. What has changed either in your view or in Russia itself to — to have that big shift?

JAIN: But, first of all, from a philosophical perspective, investing is all about changes, not about static. In other words, Singapore might be a wonderful place, but if it’s deteriorating, that’s not — you know, that’s a problem. In Russia, I’m not saying it’s going to be next to deliver anything like that, but it’s improved quite a bit compared to where it was five, 10, 15 years ago.

Corporate governance has improved. And they talk about companies, which are actually very well-positioned and not selling for very attractive prices. So there — there’s a big difference versus let’s say 10, 20 years ago, and that’s — I was very bearish for — I’m talking about 20 years now until a few years ago. And today, it looks actually reasonably attractive.

RITHOLTZ: Some of the folks who have — have pointed out that Russia is always cheap, but the concern is rule of law and how do you know that the state isn’t just going to arrest your CEO or — or capture assets. How confident can you be investing in Russia that the normal rules apply?

JAIN: I thought you were describing China. If CEO gets arrested and it starts collapsing, right? That were the …

RITHOLTZ: I guess it happens in other countries …

JAIN: (Inaudible) 00:00:17.

RITHOLTZ: It happened here also. So we’ve had people arrested and the stocks haven’t done that well, but it seems to be a little more endemic to certain …

JAIN: Yes.

RITHOLTZ: … countries.

JAIN: No, you’re absolutely right. I think — I think, first of all, that’s where you got to see whether the business interests are aligned with the — with the government policy and what the — you know, what the outlook would be longer-term. So — so one interesting fact, for the last 20 years Russia has been one of the best performing markets versus China and most of the other markets by the way, which is not how people think about it. And the reason is that you can get some really high valued true businesses, which are very well-aligned with what the government policy is.

And — and — and ironically because of the capital flight issues, actually a lot of companies pay a lot of dividend, so you’re basically getting dividend return on businesses that are still growing at reasonable, you know, at reasonable prices. So I think — I think it’s a combination of the two. And so if we can buy a business where the bond yields are, foreigners are willing to buy bonds of the same company at 4 and 4.5 percent. Why the stock yielding 12 percent? That’s a question, right? I mean, the corporate governance should apply as much of the bond side.


JAIN: But — but — but if you can get truly good business like Sberbank, for example, it has 60 percent deposit franchise in — in a deposit market share in Russia, and the banking system is consolidating rapidly. I mean, it’s — it’s meaningful consolidation over the last five years. The central banker, Nabiullina, has done a very good job, but it’s yielding almost eight percent, growing at 20 percent plus ROE, selling at six time earning. So it is — I think — I think — I think you can do a lot worse in other places.

RITHOLTZ: So do you bring a different sort of fundamental analysis to different countries? Do you have to think about stock selection in let’s say China or Russia differently than you would think about Singapore or Vietnam? How do you look at each country with their own unique political situation?

You mentioned aligning the interest of the company with the government. Is it the same approach country-to-country or do you have to adapt depending on the local politics?

JAIN: Yes. So I think — I think there’s clearly a little bit adaptation needed. I mean, if you’re investing only in the U.S., it will — for example, if you’re running a U.S. equity fund, there are a lot of things you wouldn’t necessarily have to think about, right? I mean, some country — companies have currency risk but most don’t have that.

On the other side, if you’re investing in emerging markets, you — you know, country risk matters. So what I call a macro switch-off, you don’t look for a good macro, you can’t say oh gee, China is going to six percent. I’m going to try to find companies there. That doesn’t work.

However, if there’s political risk in a company, if the — if the company is getting contract from the government of the orders, for example, last summer, there was increased risk in Chinese tech companies. Now that seemed to have gone down a little bit. I’m not saying you sell out because of that, but you got to be aware of the macro switches.

And by the way, that — if I take a five-year review, I think the political risk is increasing in some of the largest U.S. companies, too. It is not here now, but it’s not zero risk that you could see, you know, you could see some — some anti-trust investigation in some of the larger companies, the Amazons of the world.


JAIN: So it is not a factor today, but it’ll be naive to assume it’s not a factor if you’re taking five plus year review.

RITHOLTZ: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My guest today is Rajiv Jain. He is Chief Investment Officer and Chairman at GQG Partners, a $24 billion firm.

Let’s talk a little bit about your strategies. You’re long-only, so what are your goals? Is it to beat the benchmark? Are you — or are you targeting higher risk-adjusted returns? What — what is the — the goals of — of your specific strategies for each of your funds?

JAIN: So the official objective is outperform the benchmark by a few 100 basis point with less risk. So losing less in down markets is important. It’s much more conservative compounding. And the fact that every employee in an investor, that’s where the alignment of interest matters, right? So we’re not talking about asset growth, these are all about can we compound our money along with our client’s money. And that means that it’s much more absolute oriented rather than relative focused.

RITHOLTZ: And — and just as an example, in 2018, the international benchmark was down about nine percent. Your fund was positive, slightly positive for the year, so there is an example of managing into a downturn. I — I have to think clients are pretty happy about that sort of situation.

JAIN: Yeah, and I think — I think that’s — you know, that’s the reason why we have seen — we continue to see, you know, reasonable influence from some of the most sophisticated institutions is that it’s all about — I think, look, I think — I think you got to be careful about relative returns. You can’t focus on too much, and it doesn’t matter whether it’s a pension fund or an individual.

RITHOLTZ: Right. If the market is now 40 percent and you’re only down 20 percent, you’re still down 20 percent.

JAIN: That — that’s true, but if you’re long-only, you can’t manage that. And — and there’s no free lunch, so if you’re trying to manage it too much, you leave the upside and seeing around the hedge fund side, right? I mean, yes, you — they didn’t lose that much in maybe 2008, but you gave more plus sum (ph) 00:01:24 over the next decade because the markets, you know, tend to go up over the long run.

RITHOLTZ: Right. So let’s talk about capacity. You — you recently announced one of your funds was going to be capped at $10 billion. Is that — is that right? Was it a fund or was it a separate managed account?

JAIN: It’s a — a — well, there are multiple vehicles, so it’s a product issue. I’ll run 30 billion in emerging markets before, performing was fine, but I did lose a lot of flexibility. So we’ve, you know, we said we’ll soft close, in other words, existing clients can add at 10 billion.

RITHOLTZ: So you won’t take into new clients once you hit that $10 billion mark?

JAIN: We’ll keep maybe that some of the mutual funds open for technical reasons, but — but we’ll — we’ll — we’ll start hitting the brakes as we get to 10.

RITHOLTZ: So — so …

JAIN: In emerging only, but globally/internationally we have a lot of capacity because they’re very large liquid portfolio.

RITHOLTZ: So what is it about emerging market that limits the capacity? Is it — it is just not that many big companies or what — what specifically puts the cap on — on that?

JAIN: You know, I was just mentioning that — that I run 30 billion in E.M. and probably was the largest pull under single manager. How — and the performance was OK, but you clearly lose nimbleness.

Emerging market is actually much larger space than — than — than the perception seems to be. There are a lot of very large (inaudible). And I think — I think — oh, and for example, the Chinese tech space itself is probably a $1.5 trillion …


JAIN: … that didn’t exist a decade ago …


JAIN: … pretty much.


JAIN: And this isn’t …

RITHOLTZ: … and is China — is China still technically E.M.? Have we — when does that get moved? Didn’t MSCI just do a whole thing with China and E.M.? Do we still think of China as an emerging market or — or have they graduated yet?

JAIN: Now, look, I think — I think — I think if you look at any sort of a commonsensical problem in terms of rule of law, in terms of, you know, right to — you know — you know, your property rights and so on and so forth, China is clearly an emerging market. Emerging market, it’s not a — now, some — is Shanghai developed more than all of New York? It feels that way if you go there, but it doesn’t mean the whole country is such.

RITHOLTZ: Quite, quite interesting. So — so let’s talk a little bit about how you think about answering positions. I know some managers do a pre-mortem where they write out what their full explanation of why they’re making the investment, so afterwards they can look back and say this is exactly what they were thinking whether it works well or goes bad. What — what do you do when you’re in the midst of adding a new name to a portfolio?

JAIN: First of all, you need true diversity, and everyone talks about diversity. But if you look at our team, there are folks who have done long/short equity, long/short credit, investigative journalists, you know, forensic accountant. You want to — you — you want to have a true devil’s advocacy, right? And — and that means that multiple pairs of eyes will look at the name. And I work as a full-time analyst and a part-time B.M. There’s no one that’ll go — that has gone in over the last 25 years without me actually working on a name. You know, they’re having some sense.

Obviously, some of the analysts will do a lot deeper work on those names. And then we want to have separate pairs of eyes whether from an accounting perspective or from the investigative journalist, which is more to sort of get a sense of where — you know, are there any sort of grassroot issue that you’re missing?

For example, if there is any governance issues, so we don’t talk to existing employees, but are there any governance issue that we should be aware of? Any regulators that we — we should be aware of? Sort of, you know, kind of ESG hygiene, if — if — if — you know, if you will.

So what that does is is that again the idea is to reduce the chance of a blow-up. The idea is not to find the best name. The idea is to eliminate the weakest name.

RITHOLTZ: So you mentioned investigative journalist. You hired Carolyn Cui from the “Wall Street Journal.”

JAIN: Yeah.

RITHOLTZ: What was the thinking behind saying, I know, I need an investigative reporter on my team?

JAIN: (Inaudible) if you think about what we do, it is — it is kind of investigative journalism anyway. Is that — I mean, it’s — it’s actually what a good analyst should be is very similar to making sure we’re getting the facts right, being more objective. So you want to have devil’s advocacy within the team. And investigative journalists kind of work as a separate team. They’re basically there to find faults with our existing names, so what I call them internal critics.

And as we can see, a lot of analysts get pretty uncomfortable with that, internally I’m talking about. But I think the idea is my view is I would rather have internal debate and discussion rather than the markets criticizing you. When the markets criticize you, that’s expensive.


RITHOLTZ: To — to say — to say the very least. So something else you said previously, it seems most investors evaluate managers just by looking at their past performance. You suggest that that’s the wrong approach. How should an investor evaluate a potential manager they’re interested in hiring?

JAIN: You can’t undermine the past performance. It matters because — I mean, that’s — that’s a good starting point, but that’s all it is. It’s a starting point. And I feel that the other way to look at it, which is actually more important, provided there’s a good past track record because as somebody said, past performance is not a good indicator of past performance.

RITHOLTZ: Now why is that?

JAIN: As I’d say, I’m — I’m contradicting myself. So I like the yin and yang debate in every — every discussion. So the reason is decision-makers can change. So you, you know, firm sell (ph) past performance, but, you know, but who took the decisions 10 years ago? Maybe a totally different guy, so you got to be careful about — because, you know, people sell the teams and so on and so forth, but it’s not an indicator of decision-maker and who was the decision-maker. So you got to be careful when we look at long-term track records. Is the same individual or individuals who are taking the decision? And if it’s a one individual, like a B.M., you know, somebody might have changed, but the firm might be selling the track record of the firm, right? So, you know …


JAIN: … you got to be careful of that.

But more importantly, I think the way to look at — or to assess a portfolio manager or track record is how did they do in different environments? So, for example, if you’re looking at growth manager today, wasn’t look like geniuses.


JAIN: Right? Now most of these won’t have a good track record going back to — if you go back 2000, 2003 era, how many actually then did well? So this whole growth and value debate is — is kind of — I — I personally believe it’s — it’s — it’s nonsensical in a way because why would you consciously overpay for anything.

RITHOLTZ: So — so you’ve mentioned previously what you described as quality growth. What is that and how does that relate to the — the value growth debate?

JAIN: So, first of all, nobody conscious looks for bad quality. I don’t know if you have somebody …


JAIN: … come across here and said, “Look, we buy low quality high prices,” right?


JAIN: A growth manager, value manager, that’s all wonderful. In fact, one of the things I have observed is the more discipline people found, the more rigid they are and more chance of them blowing up.

Stability is a close cousin of stagnation, and discipline is a close cousin of rigidity. So how they adapted to changing environments? Look at Buffett. I mean, he’s adapted dramatically. He was a low — low, you know, classic low multiple, you know, cigar butt kind of investor and then, you know, moved to — to a different area in terms of quality, you know, behind, you know, big mode, high bad (trends of) businesses. And — and I was buying tech.

RITHOLTZ: And on top of that, he’s done a whole bunch of private deals on the side.

JAIN: Which are all nothing but cyclicals, by the way.


JAIN: I mean, can you tell me one name, one — one large part maybe except See’s Candies and Berkshire, which is not cyclical. I mean, is GEICO not cyclical? Is some of the, you know, both companies of insurance, reinsurance, home building, what — brick companies, railroad. What is not cyclical? Right?

So this whole debate is much more around, I feel, at the end is you’re expected compounding and sometimes a cyclical in the high barrier to entry could be very attractive. And sometimes a very steady area business could be very attractive. So like in today’s environment, if you look at most the value-oriented names, you’re making a cyclical call. In other words, if the economy really start ripping, they would do very well so it is not that they are being given away to you because people — they are being misunderstood.

There’s a fear of downturn. Hence, some of these names as well as car companies in Europe are here or some of the financials, why the banks, I mean, underperforming in the U.S.? Well, the fear is that — you know, and fears will go up.

RITHOLTZ: So it’s a binary bet on — on future ever economic performance, not necessarily a specific on a company.

JAIN: Exactly. And I think — I think — I think — I think that is — it may be a perfect call to make, by the way, so I’m not here to criticize that. But it is not something, gee, they are totally misunderstood and, you know, the kind of under-appreciated assets as such. Obviously, market might be overestimating the downturn if there is one, but I think — I think — I think it’s much more around what are the earnings trajectory and what are we paying for.

So if you look at some of the tech names, for example, some of the SaaS names, right, the cloud names which are some of them don’t even have multiple because they are not earning any money. How much are they are investing in the business and how much of that is a newly like (ph) business?

Now what I call the Amazon effect that — because you made money in Amazon despite it not making any sort of net profit is being extra (pull) in a lot of areas, a lot of areas companies would blow up because they’re not Amazon, right? Amazon did not have cash losses after I believe 2002 or something, you know, because it’s a negative working capital model, which is a different model than — than all of some of the companies you’re looking at today.

But it — it does mean that if businesses that are willing to take longer-term you are willing to invest, chances are they probably would do better than folks who are very focused on short-term margin. And you saw (Culbert) Kraft, right? I mean, if you look at the whole 3G model, why had that debt has not done well? Well, partially because they are too focused on profitability, they cut down everything to the bone. And guess what? You’re not investing in the business and there are not many people interested in cheese spread anymore.

RITHOLTZ: Quite, quite fascinating. Can you stick around a bit? I have a ton more questions for you.

We have been speaking with Rajiv Jain, Chairman and Chief Investment Officer of GQG Partners. If you enjoyed this conversation, well, be sure and come back for the podcast extras where we keep the tape rolling and continue discussing all things international markets. You can find that at Apple iTunes, Google podcast, Spotify, Overcast, wherever finer podcasts are sold.

We love your comments, feedback and suggestions. Write to us at Be sure and check out my daily column. You can find that at Follow me on Twitter @ritholtz. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

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RITHOLTZ: Welcome to the podcast. Rajiv, thank you so much for doing this. I’ve been looking forward …

JAIN: Thanks for having me.

RITHOLTZ: … to having this conversation. You know, there is a group of people who are significant and influential in the world of investing that forget the public, half of the investing world may not be familiar with their background and history. You’re one of those people. You’re — you’ve been running a substantial amount of money for a long time, and I’ve followed your career for a while. I think a lot of people may not know who you are, and I hope this conversation helps more people learn about you and — and your background.

JAIN: Thank you.

RITHOLTZ: So — so we missed a bunch of questions during the broadcast portion. Let — let me — let me go through some of the areas we didn’t get to. We talked about quality growth. We did not talk about the shift from active to passive. So first, what does this mean going forward? Is this a temporary shift or is this more permanent? And I can’t help but wonder does the move to — as more and more people become passive investors, does that create opportunities for the remaining active investors?

JAIN: Yeah, I think that’s — that’s always the most important debate. And frankly, I don’t think there’s a debate anymore, I think it’s the reality and …


JAIN: … it’s not a temporary issue, it’s a permanent structural shift towards passive. And the reasons are, beside the fact that active, you know, has an added value on an average.


JAIN: Seventy percent probably don’t add value, but I think — I think …

RITHOLTZ: You-re — you’re being kind.

JAIN: But I think — I think — I think there are a couple of reasons where — and — and the second part of the question was whether it — it helps active — remaining active, it does because, you know, if — if you’re paying attention over the long run, hopefully, should will add — you should be able to add value.

But I think — I think — I think the big reason why is — is — is number one is active manager charge too much money. They are being boxed into — into in — you know, they’re boxed into their specific sandbox and the market changes — changes colors. So if you’re a — so let’s say mid-cap value manager, that’s wonderful to be compared, but is the — is — is the end client really looking for a U.S. mid-cap value manager or you’re just talking about long-term compounding, right?

So the segmentation has made life more difficult, so if you’re not able to break through that, it’s a problem. In fact, there was a time when people have accused me of being a value manager, the time when people accused me of a growth manager. And I’m doing exactly the same thing, so I think you — you need to have the ability to not be labeled for the rest of your life because, yes, of course, you won’t buy high-quality sensible prices, but sometimes the market gives you very high-quality businesses, very attractive valuations. So why won’t you buy those, right?

And I think — I think that — if — if you are open-minded and if you keep your costs low, and that’s an important part because if you look at especially on the institutional side, institutions’ gross basis do actually outperform. The problem is on net basis, they underperform.


JAIN: Right? I mean, you would …

RITHOLTZ: A structure that gets in the way.

JAIN: Yeah, exactly. So I mean, the question why are people still charging 100, 110 basis points for U.S. large cap growth mandates …

RITHOLTZ: What’s …

JAIN: … makes no sense.

RITHOLTZ: What’s even more shocking is you can find S&P 500 index funds at 150 basis points. That makes no sense whatsoever.

JAIN: That’s highway robbery, right? So that — that — that shouldn’t be allowed actually because of misleading practice because typically institutions would not get — would not get, you know, would not pay for that, but as a retail, it’s just kind of misleading. I personally find it misleading. So …

RITHOLTZ: I mean, it’s been around for a while. So I know you cut fees five basis points on a couple of your funds. What is your thinking? And is this something that you’re doing because you’re comfortable with it? Are you responding to fee pressure in the industry? Do you plan on making more cuts in the future? How do you think about what’s the appropriate level of fees relative to the size of the funds and the performance of the funds?

JAIN: So something you said in the tail end about the performance of the fund, at the end of the day, clients care about net performance not gross performance.


JAIN: Right? And net performance means your fees matter. So what the hedge fund’s problem is not lack of talent, it’s the fee structure, right? There isn’t that much juice in the game to have 220 and be able to add any value …


JAIN: … unfortunately, right? I mean, how many hedge funds around the late 90’s, let alone, you know, 30, 40 years ago, right?

RITHOLTZ: Right, one from 100 hedge funds to 11,000.

JAIN: Exactly. So — so I think — I think — so that’s why one of things we have done consciously is that we want to make sure that our fees are below median and very competitive. Why? Because I want to be, you know, we want to be known as a firm to have added value, which is net performance. So you want to be, you know, very cost-competitive simply because you — I want to have better performance, right? So it’s actually in our interest. And then you can have a long-term sustainable client base because the higher you charge, the expectations go up on — on a short-term basis of outperformance, which is not — not possible.

So I think — I think to build a sustainable investment management shop, you have to be very cost-competitive, and the lower the cost better your net performance is going to be.

RITHOLTZ: Makes — makes perfect sense.

JAIN: It’s not about margin. So my personal view is that you can’t build a business with a specific margin target. That makes absolutely no sense. That should be an — that should be a fall out of what you’re doing, not a target itself.

RITHOLTZ: Quite, quite interesting. So you’re — you’re known as an international manager, but you also run a U.S. domestic fund. How do you balance the two? They’re such different environments, such different stocks. How do — how do you go back and forth between thinking about equities in the U.S. and thinking about international equities?

JAIN: I — I’ve done it for 25 about years, now I both developed in emerging markets. And I feel I’m a better emerging market manager because I do develop and vice-versa. So, for example, last year that the implication of trade we thought were clearly being underappreciated a lot of Chinese companies.

RITHOLTZ: Meaning the tariffs and the trade war.

JAIN: The — the — the tariff and trade war. I mean, it’s not about just putting tariff, but it also impacts Apple and a bunch of other companies here. So if you look at Nike, Starbucks and Apple, I mean, there’s — there’s — there’s — you got to incorporate the potential risk coming from what’s happening in China. So, in fact, some of the names that we did cut back last summer, which added — ultimately added value was primarily because a read on ground in China. So I think there’s a lot of crosspollination/

In fact, I personally feel that if you’re learning a large cap mandate in U.S. — on U.S. equities, I don’t see how you would survive over the longer run without having good insights of what’s happening with the rest of the world.


JAIN: So you — you really need to have that level of sort of some understanding. You don’t have to run the emerging market portfolio, but you need to have some understanding of what happening in — in — in some of these countries because that’s where the growth might become a lot of large multinationals.

RITHOLTZ: Are you in these countries on a regular basis? Do you do a lot of traveling or does — do you have your team put boots on the ground or is that just not necessary these days?

JAIN: Yeah, boots on the ground is not necessary. In fact, what I found is a little bit counterproductive.


JAIN: Yeah.

RITHOLTZ: Why is that?

JAIN: Because people tend to become bias. It’s like trees versus forest. You’re so close to the tree that you forget the forest may be on fire.


JAIN: Right? And — and — and — by the way, it happens more often. So — so you got to be careful with that. But yeah, we do travel, but I think — again that’s part of the evolution. Corporate — access to corporate management is a lot less valuable than it used to be 15, 20 years ago.

RITHOLTZ: Right. Reg FD has changed a lot of that.

JAIN: It’s changed. And I think that’s a lot of why large shops are struggling. You can talk to the CEO and say, “Look, next quarter is going to (inaudible) 00:01:06 and you load up on the stock. That just happened in 90’s all the time.


JAIN: It doesn’t work that — that way anymore and which is why — and you just have to (inaudible) 00:01:14 adapt to it that, you know, corporate access is actually it’s important to understand how they think. But just because you happen to know Zuckerberg, it doesn’t mean you’re going to get the stock right.

RITHOLTZ: Right. So — so you mentioned you do both U.S. and international. U.S. equities have outperformed international now for at least …

JAIN: Yeah.

RITHOLTZ: … a decade and by a substantial amount. Historically, that’s been a much shorter cycle U.S. leads and international leads, and it goes back and forth. What do you attribute this huge outperformance over the past decade? Two, and — and when do you suspect global stocks and international stocks might take the leadership role again?

JAIN: Yeah. I mean, if you take a very long-term view, these things tend — tend to go in cycles, right? I mean, if you look at the U.S. corporate margins — and by the way, why U.S. outperform because (inaudible) 00:02:06 faster as the world. I mean, simple as that, right?

RITHOLTZ: All right, which raises the fundamental question why …

JAIN: Yes.

RITHOLTZ: … have earnings growth have been faster here than internationally? Was it the U.S. response to the crisis? Is it just the nature of the economy? What is it that why U.S. companies have been doing so well compared to their overseas peers?

JAIN: I think — I think it’s a combination of what some of what you said because if you look at the European banking system, it did not sort of, you know, clean up as fast as what happened here. I think one of the best things there we’ll just put everybody in a room and say everybody is going to take capital and you recapitalize everybody whether you like it or not.

RITHOLTZ: Whether you like it or not, right.

JAIN: Yeah. I mean, you force capital down everybody’s throats, which was the best thing that could have happened on hindsight.


JAIN: And Europe can be done, won’t be done. That’s a problem.

RITHOLTZ: What — what about austerity we’ve seen in the U.K. and the E.U.? Was that a — how much of a factor was that that they basically ignored everything Keynes taught us and tried to tighten their belts in the middle of a downturn?

JAIN: Well, that’s a — that’s the whole problem. And euro, in general, is, you know, there’s — there’s a difference between what’s happening or what was happening in Germany and what was happening in Spain and Italy, and Portugal, right? So there were big differences in terms of rate of growth and employment, so on and so forth. And that’s why you’re seeing probably price in Germany go up dramatically now because it’s basically free money. So I think that’s a fundamental flaw in Europe.

Having said that, there are some really good companies, which can allow you to compound your wealth over the long run, so we take sort of 30, 40, 50-year view. You get these cycles in between and it feels like, oh, U.S. oil is going to do well or international is going to do well. For example, if we are sitting here in 2010, ’11, you didn’t make a dime — you didn’t really make any money in U.S. equities or the prior decade …


JAIN: … that is why a meaningful amount of money was going in emerging markets in non-U.S.

Now fast forward about eight, nine years, that’s the opposite. So I think these — these things go in cycles. One aspect I would say — I would highlight that is not being appreciated is the U.S. corporate profitability has gone up dramatically since 2001, 2002. I would argue a lot because of Chinese entry into WTO. And this whole decoupling — notion of decoupling with China means that Apple has to shift its manufacturing base to other areas.

RITHOLTZ: Outside of China?

JAIN: Well, outside of China. Just as an example, right, Apple — Apple is just one example. That has to be negative for margins with the long run, so the corporate profitability, a U.S. corporate margins, are we seeing some sort of secular peak not because of some cycle as such, but because now you have to go somewhere else to set-up a manufacturing base. So again a lot of companies will not be impacted, software will not be impacted, but other companies will be impacted. So — but that’s, you know, that’s — that’s kind of makes — what makes investing interesting.

RITHOLTZ: So you did an interview a couple of years ago with Citywire over in — in London. And your answer to one of the questions was — and I don’t remember the question, but it doesn’t even matter, “Long-term performance, long-term performance, long-term performance.” Explain.

JAIN: I think — I think at the end of the day it’s longer-term performance incorporates multiple cycles and — which is why I feel to — to — to really judge an investor or — or portfolio manager, you got to look at how the — the — how they did survive the inflection points because if you think about it, what kills quants? Inflection points.

It’s almost a guarantee that the market cycles would turn into something else. I can’t sit in forecast, so you need the will to navigate the inflection points. People who lived in the late 90’s got killed in cycle turn in March of 2004, for example …


JAIN: … right? Then there was the commodities of bull market, people got commodities super cycle, but we don’t discuss them anymore as such, right?


JAIN: And I’m sure they’re the same.

RITHOLTZ: (Inaudible) so what’s that?

JAIN: Yeah, super, the same in the tech site, right? I mean …


JAIN: … you — there’s a different breed of tech names that are doing well. You don’t talk about Intel as much. You still talk about Microsoft, but you talk about Intel as much. So I think that’s why you need to able to capture a few inflection points to be able to see whether the manager is adapted or they keep beating the drum off we do A, B, C, D rinse, repeat and don’t worry about it.


JAIN: That — that actually makes me very nervous because, you know, that — that typically is like saying you’re going to drive from New York to Washington 60 miles an hour irrespective of road conditions.

RITHOLTZ: Right. Makes — makes a lot of sense. So — so you mentioned quants don’t do especially well at turning points. Arguably, the past couple of years have not been too kind to quants especially the ones with an emphasis on factor investing. Are we in a turning point now or is this something different that’s causing them to underperform?

JAIN: I think — I think what’s happening is part of that is a lot of the fact that everybody talks about factor investing, the question how much that it arbitraged away?

I mean, there was a recent piece in, you know, academia that once a study is published about a particular type factor or style how well it works historically, the efficacy that goes down …


JAIN: … right? So I think we — sometimes we forget we are competing with ourselves. So once it is recognized it used to do well, the efficacy will be lower.

RITHOLTZ: Makes — makes a lot of sense. You mentioned earlier the academic piece that looked at fund managers who add value when buying, on average, but generally do a terrible job selling. And — and I recall seeing that in January, and I had written about it. And the takeaway seem to be that the two things the fund managers were very poor at selling were either stocks that had gone up a lot that were strong growth with momentum. They sold because look how much money we’ve made or stocks that have gone down a lot and have become very cheap.

How much of that is a fundamental misunderstanding of why stocks go up and down? And how much of that is pure behavioral finance and the application of emotions to — to the decision-making process?

JAIN: But if you think about it, isn’t the second one, i.e., behavior-driving how much stocks gone up and down?


JAIN: My view is that cost to bought the stock is irrelevant. In fact, somebody asked me the other day what — what’s your price of stock XY, you know, X. I said, “Look, I don’t know.” It is not relevant because the moment you think about, oh, I bought it this price, you’re anchoring to that.


JAIN: And therefore (inaudible) irrelevant.

RITHOLTZ: Right. It’s a …

JAIN: Because the market doesn’t care where you bought it, right?


JAIN: So you don’t — and I think that anchoring is the biggest issue. And frankly, we anchor to our own knowledge base because if you think about it knowledge is history.

RITHOLTZ: That makes perfect sense. The — so — so you’re — you’re going to say behavior makes a — a great deal of difference obviously …

JAIN: Yeah.

RITHOLTZ: … to — to — now why doesn’t it have the same impact on buying? I guess, there is no — there’s no endowment effect, there’s no anchor.

JAIN: Exactly.

RITHOLTZ: You don’t own it previously, so it’s a fresh sheet of paper when you’re making a purchase. Is that the thinking?

JAIN: Yeah, exactly. And I think — I think that’s why I’ve done a number of times that I would just sell the stock to clear my own mind because this game is played inside, it’s not outside. You’re not fooling anybody, you’re fooling yourself. So how do you — how do you reboot your own mind? And sometimes you might well sort of take it off the table. And a lot of times you don’t want to review why the name again.

RITHOLTZ: Do not anchor on your previous buy or sell when you’re approaching a name. I’ll give you my favorite example. Before the — when the iPod, not iPhone, iPod first came out, Apple is about 15 bucks with 13 cash, dirt cheap. It ran up to about $45 in a relatively cheap amount of — of short amount of time and then pulled back. And I don’t remember selling that stock in the low 40’s thinking I tripled my money in here, it’s falling.

And I said if it ever gets back over 45, I’m a buyer again. And, of course, it goes back over 45 and I’m like, “I paid $15. How do I pay $45? What — what is this thing? It’ll go even higher.” And, of course, we know what happened. That was a classic anchoring trading error. How do you avoid doing that when you do a — a clean sheet of paper and say, “OK, I’ve sold the stock and I’m just forgetting about where I bought it or sold it.”

JAIN: Yeah, it’s is difficult. I think — I think I’ve been working on it forever and I still have, you know, you know, some, you know, so I still commit the same or similar mistakes. So I think you can only work on reducing that, which is where you want to have the diversity in terms of how people think about the names. You want to have a bull and bear case within the team, right, which is why have we’ve actually hired folks who have good shorting experience.

We’re not going to relaunch long/short. How many long-only folks are willing to entertain folks who have shorting experience in the team?

RITHOLTZ: That’s interesting. So the way you deal with behavioral issues is you make sure that a lot of people at the table have broadly different views and histories and perspective.

JAIN: Yeah. I’m at client meetings where a name — I — I said, “Look, this is a bull and this is a bear, and I’m out of the room. You can talk to both of them. We don’t own the stock right now, you want it before.” So — but look, I think — I think — I think you just sort of worked on reducing that. It’s very hard to get over that.

RITHOLTZ: To — to say the very least. I know I only have you for a finite amount of time, so let’s jump to our favorite questions that we ask all of our guests. Tell us what was the first car you owned, year, make and model.

JAIN: It was a Honda Civic ’92.

RITHOLTZ: Right. It’s hard to kill those cars.

JAIN: And it was stick shift because I’m trying to save a little bit of money.

RITHOLTZ: Right, same — same for me.


Those cars are all but impossible to kill. They — they run forever.

JAIN: Yes.

RITHOLTZ: What’s the most important thing that people don’t know about Rajiv Jain?

JAIN: Yeah, it’s — it’s kind of hard to say because a lot of — pretty much everything is public. But — but maybe the fact that I’ve not been on the golf course for the last 10 years now, so …

RITHOLTZ: Were you a big golfer?

JAIN: No, no, I was never a big golfer so that’s I’m saying.


But I live in Florida and it’s a drive through golf course.

RITHOLTZ: And it’s all golf courses, right.

JAIN: It’s all golf courses so.

RITHOLTZ: So who are your early mentors? Who helped influence the way you think about stocks and investing?

JAIN: I can’t say I walked with any individual investor who has mentored me, but obviously you learn a lot from reading Buffett, I think, or — there’s a whole slew of — you know, Phil Fisher …

RITHOLTZ: Phil Fisher, what — well, the name is familiar. Where is …

JAIN: Yeah, he — he wrote that, you know, the — the famous book in the 50’s and he’s influenced, you know, a lot of folks including — including Buffett, common stocks, uncommon profit.

RITHOLTZ: Oh, sure.

JAIN: Yeah.

RITHOLTZ: That’s — that’s not Ken Fisher’s father, is it (inaudible)?

JAIN: I — I — I think it is.

RITHOLTZ: I think it is, too.

JAIN: Yes.

RITHOLTZ: That’s quite interesting. Speaking of books, what are some of your favorite books, fiction, nonfiction? What — what do you like to read?

JAIN: So I — I — I think the “Lessons for Corporate America” probably is one of the better from an investment perspective, I feel. And anything Buffett has written obviously is — is what — you know, worth reading and re-reading.

RITHOLTZ: Meaning, his annual letters or …

JAIN: Annual letters and, you know, some of the transcripts from his — you know, AGMs, that kind of thing.

RITHOLTZ: I — I went to grad school with a guy named Lawrence Cunningham who came up with a brilliant idea 25 plus years ago of taking Buffett’s annual letters and printing them in a book and …

JAIN: Well, that’s what I’m talking about called “Lessons for Corporate America,” so that’s Cunningham’s book.

RITHOLTZ: … that — that I went to school with him …

JAIN: Yeah.

RITHOLTZ: … and who would have known back 25 years ago that was the thing, and it’s become, I think, an annuity. Any other books you want to mention?

JAIN: Yeah, look, I think — I think — I think I feel that it has to be a little more holistic, so I do quite like “The Art of Happiness” by — I think it’s by Howard Cutler or something. That’s an interview of Dalai Lama.

RITHOLTZ: Oh, really?

JAIN: Yeah. And, you know, recently I have a — this book by Annie Duke on betting that is a purchasing book.

RITHOLTZ: Oh, sure, “Thinking in Bets.”

JAIN: “Thinking in Bets.” Actually, I’m reading this book by Rory Sutherland, which I quite like, the “Alchemy,” just came out.

RITHOLTZ: The “Alchemy”?

JAIN: The “Alchemy,” yeah. He’s — from the advertising side, so it’s kind of colorful book. It’s — it’s a fun read, so I read rather collectively.

RITHOLTZ: That — that’s quite, quite interesting. Tell us about a time you failed and what you learned from the experience.

JAIN: I think — I think from an investment perspective, if I go back in 2008, you know, I actually pretty much ended up exiting all our financial exposure by 2007 thereabouts, but still a lot of exposure which could have been impacted negatively because of slowing economy. And the fact that I was so nervous on the financial side, the question why didn’t I connect the dots, and that actually led me to revamping the whole investment team over the years, how I thought about investment team.

And, in fact, GQG, as you know, I didn’t bring anybody from my prior. This is a brand new team.

RITHOLTZ: Yeah, this was a — this was really a — I keep using clean sheet of paper. You started from scratch and launched with nobody from your prior firm. What was the thinking there?

JAIN: The thinking is again, you know, what have I learned, I mean, over the years in terms of what works and doesn’t work, how can I create more diversity? And so try to hide with a lot more doors in terms of folks with long/short experience, credit long — credit experience, full cap of structure analysis, so different type of investigative journalist. And I think — I think that’s part of learning evolving.

In fact, there was again somebody who has covered — a consultant who has covered this space for a while said to me something, which is interesting. What they found was that the team that had no employee analyst turnover, the chance of them going under was the highest.

RITHOLTZ: Really? That’s interesting.

JAIN: And that actually makes sense. This industry does a very good job selling how everything is stable. Everybody has been here since they were childhood and don’t worry about it kind of stuff, but that’s misleading. That leads to group think. So how do you sort of — and by the way, I’ve done that kind of, you know, re-structuring before, too, because I feel I’m better hiding now than I was 20 years ago, 15 years ago, right? I mean, you got to learn from the mistakes so …


JAIN: … that’s part and parcel of which is why I have a — I thought I’ll have a clean sheet of paper. And what would I redo? And — and one of the reason, I think, we have done better now is partially because of, OK, these is a mistake. It’s like tennis. If your back end is weak, the good news is you can — in tennis you can add somebody else who play a backhand.


JAIN: In this game, you can. So what — how can I address my own weakness is let me hide those rather than sort of saying, gee, it is the same group of people and we all happily live ever after.

RITHOLTZ: So — so you mentioned golf and now tennis. Tell us what you do for fun when you’re not in the office.

JAIN: Unfortunately, I need — I needed — I’ve tried everything including golf and tennis, so I don’t think that I would say that I’m good at tennis all. I like to read. I mean, you know, eclectically, because I’m in the investment role, so I think my best day would be having a good book and a cup of coffee and sitting alone and reading on a Sunday morning. That probably would be — that is right what I like.

RITHOLTZ: That sounds like fun. So what is it these days that you’re most optimistic about? And what are you most pessimistic about?

JAIN: I think that there’s still quite a bit of pessimism generally speaking on — on markets. I’m talking about equity markets. The focus on — on what fate is going to do is — and it’s not unimportant, don’t get me wrong, but there’s real corporate earnings picture, which is important — not — it’s not unimportant …

RITHOLTZ: But it’s separate from just where rates are. If rates go lower, how much does that really help Apple or Amazon?

JAIN: Yeah, it — it won’t — it won’t make that big a difference, right? I mean, Amazon has not done well because of rates collapsing or something, right? It’s — it’s a — they’re fundamentally transformed how we, you know, how we transact. And that kind of transformation happening a lot differently. And so I feel that we need to focus on that to find the next group of winners. And — and some of the old companies have started to restructure themselves in a — in a dramatic fashion so that’s (inaudible) were important. So I’m actually pretty optimistic in terms of where the world is. I’m not saying the market is going to go up next year or something.

But — but — because sometimes too much focus on Fed policy and, you know, and — and other things that are wrong in the world — and by the way, that’s why the “Factfulness” list by Rosling is another fantastic book. I think — I think the world is a lot better place today than — than — than we give it credit for anywhere in the world. I mean, I — I’ve invested in frontier markets 20 years ago. I mean, I’ve almost invested in Zimbabwe ‘98 after visiting there. Thank God I didn’t.

We’ve invested in Botswana, in Namibia, Mauritius and all of the place. Generally, you go things are better today than they were 10, 20, 30 years ago, I mean, broadly speaking.

RITHOLTZ: So that’s the optimistic side. What — what are you pessimistic about?

JAIN: I think — I think — I think this — the trade war issues, I feel, are much more deeply rooted. This is a paradigm shift that is basically unfolding and driving in front of our eyes. And I think — I think there will be a transition period needed, you know, because of — because of what is happening. And I think — I think if it’s slow, I think we should have handled it. I hope it’s not too fast.

Position is just a matter of life, so I’m not saying it’s good or bad. They happen.

RITHOLTZ: Makes sense. So if a millennial or recent college grad came up to you and said they were interested in a career in investing, what sort of advice would you give them?

JAIN: First of all, I would say that you have to be open-minded and humble about — about things. If you’re not humble, because what arrogance leads to is you become dogmatic about two views. And that’s the worst thing to do in investing is become arrogant. In fact, what I’ve seen is my worst losses came when I knew — I thought I knew the most because you become dogmatic. So being open-minded and humble is important.

The second part is you always have to think about giving back. So we, for example, at GQG, launched our foundation within basically a year and a half of launching with employee matching. We, you know, it’s important to give back. I mean, this industry pays well, we need to think about how we sort of — you know, from a societal perspective how — what are we actually ending up giving back to society.

RITHOLTZ: So — so how does that work, your — your matching? If an employee makes a — comes up to you with a appropriate philanthropy or charity, GQG will match whatever the employee puts there.

JAIN: Yeah, so there’s — yeah, so we — we try to be thoughtful about it. So there’s a separate committee — I’m not on the committee within the firm — from different areas of the firm who would approve that, and then we would match. But — but that foundation has also now started actively giving you out from an, you know, education, health care, you know, especially kids and — and then few other causes.

RITHOLTZ: And finally, what is it that you know about the world of investing today that you wish you knew 30 years or so ago when you were first ramping up?

JAIN: That I — that I know a lot less than what I think. I think you — you begin to appreciate your own, you know, you — you — let me rephrase that. As you grow older you tend to appreciate what you don’t know a lot more, and that is part of this trend and that action makes you not only a better investor, but a better human being. So I think — I think it’s important to — that I — I feel I — I feel I know a lot less today than I thought I knew within 30 years ago. And that’s the important part of not just investing the life.

RITHOLTZ: Makes perfect sense. Rajiv, thank you so much for being so generous with your time. We have been speaking to Rajiv Jain. He is the Chairman and Chief Investment Officer of GQG Partners.

If you enjoyed this conversation, well, look up an inch or down an inch on Apple iTunes, and you can see any of the other 250 such conversations we’ve had over the previous five years. Be sure and give us a review. And if you want to make any suggestions, comments, feedback, write to us at

I would be remiss if I do not thank the crack staff that helps put these podcasts together each week. Michael Batnick is my Head of Research. Atika Valbrun is our Project Manager. Michael Boyle is my Producer.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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