A fund manager's view of management

{product-noshow 20|name|cart|picture|link|border|menuid:206|pricedis3|pricetax1}

An interesting approach matches management competency and values, ie
"...the numbers are important, but if you gave me an hour just looking at the books or an hour talking really deeply to management, I would choose management because understanding who's running the business, what their values are, what they think about culture, drive the numbers.  You have got to understand the people who are managing the business..."
Paul Skamvougeras (Perpetual) as quoted by Joanna Gray et al 2016

The interaction between culture and financial goals is important, ie how much emphasis is on achieving financial goals as against cultural performance?

care factor -
"...Most organisations are people dealing with people; you can care about people you are dealing with as much as you care about optimising and earning a decent return......getting a sense that the management team really care and they are not just a bunch of empty suits..."
John Sevior as quoted by Joanna Gray et al, 2016

It is interesting to note that many senior management people claim that fund managers have short-term horizons but this ignores the fact that fund managers often have a better and longer corporate memory and their tenure is considerably longer than those of most senior management and/or Boards. Some examples,
- IAG (Australian-based insurance group) which expanded overseas in 2007 and then lost more than A$ 1 b.,  was contemplating venturing overseas again; their shareholders vetoed it (2016). Furthermore, IAG's expansion in 2007 was the outcome of a remuneration scheme which encouraged senior management to grow the company at 15% a year. 
- ANZ's (Australian Bank) expansion into Asia in around 2007 and its recent (2016) withdrawal
- Rio Tinto and BHP (Australian mining giants) made at the "top of the cycle" acquisitions in the 2000s and the more recent write-downs (2016)
This type of approach of growth just for growth's sake can lead to bad decision-making. Other factors needed for evaluation include shareholder returns (dividends, capital growth, capital management, etc.).

Also, just because an organisation is successful in one situation/environment does not mean that its formula will work elsewhere.

Management responsibility is to invest to make a return for a given, acceptable level of risk including reputational risk.

Any expansion plan needs to be evaluated on the management's track record and capability.

Most executives need to understand

"...You've got to be able to deal with knowing that you know a lot less than you probably should to make a decision..."
John Sevior as quoted by Joanna Gray, 2016

Technological changes are one of the biggest unknowns.

Successfully venturing overseas can take time (decades), requires patience and timing; it is best done by starting small, proving itself and then waiting for the right time to further expand.  Some of these markets can be highly risky with corruption issues, legislative changes, etc. Some examples, in the late 1990s include
- Fosters (an Australian brewing company) invested heavily in China but overnight the Government changed the law which resulted in Fosters losing money and quitting China
- Mayne Nickless (transport) ventured into Spain and had problems with the Spanish trade unions

Most Boards are ineffective as they only meet monthly
(source: Joanna Gray, 2016)

Search For Answers

designed by: bluetinweb

We use cookies to provide you with a better service.
By continuing to use our site, you are agreeing to the use of cookies as set in our policy. I understand