Few people will have had as traumatic, and as storied, an introduction to their professional life as Mark Lovett, the head of investments at Stanlib Asset Management.
“I started my career seven months before the 1987 crash, which was immensely valuable,” he tells Currency in an interview. “So when people complain to me about ‘volatility’ and how tough it is, I tell them what it was like to live through Black Monday, when the Dow Jones fell 23% on a single day.”
It’s important context in a world where US President Donald Trump’s tariff lurches have led to a rollercoaster in global markets: the S&P 500 tumbled 15% in April, before spiking as fears ebbed. Gold has hit a record $3,400 too.
But Black Friday in 1987 was no picnic either. Rather than any single event, it was a culmination of anxiety over American inflation, a falling dollar, rising oil prices, and sabre-rattling between Iran and the US. It wiped $1.7-trillion off global stocks, with the Daily News capturing the sentiment on its front page in a word: “Panic.”
But Lovett’s bad luck didn’t end there. A few years later, he was hired as an analyst at the asset management arm of Barings. It was Britain’s oldest merchant bank – dating back to 1762 – and had, famously, been the banker to the Queen.
At the time, Lovett had a junior role – “I would be the person in the back row of the morning meetings who would only say something if he was asked,” he says – but the impact on his career was immense.
Today, Barings is rather more famous as the bank that collapsed thanks to outsize bets taken on the direction of the Singapore and Tokyo stock exchanges by one of the bank’s star traders, Nick Leeson. After the Great Hanshin earthquake hit, Leeson’s positions unravelled to the tune of £2bn – and so did the bank.
Lovett vividly remembers the weekend it all collapsed.
It was 1995, an era before cellphones, where news of crippling financial scandals travelled slowly. But Lovett was on a course that weekend at the London School of Economics.
“We were in a lecture hall, and every few minutes, somebody would come in and whisper to someone who’d promptly rush out. Eventually, there were just six of us left, so I said: ‘Look, something is clearly up, so we have to stop.’ I walked outside and asked someone what was going on, and he said: ‘A trader has bust the bank.’”
Shocked, Lovett had no idea how to confirm this. He walked sombrely to a nearby phone box and called his boss at home to ask if it was true.
“There was silence on the other end of the phone for 45 seconds, then he told me: ‘Go home, don’t talk to anyone about it, and phone me later this evening.’ When I did, he told me the Bank of England is trying to save the bank, but I should come in on Monday with a plastic bag in case I had to take my stuff,” he says.
The next day, the rest of the world knew, as the Sunday Times ran with a simple devastating headline: “Barings is Bust.” Months later, Dutch bank ING would buy Barings for £1, but the lessons from the debacle still resonate with Lovett.
“I remember arriving on Monday and one of the analysts I’d most respected – he was so detailed, so commercial, so focused – said to me, ‘Mark, all my pension savings are here.’ I explained to him that the pension fund was ring-fenced, so it would be fine, but it showed me that under stress, even the smartest people can be completely irrational and reduced to gibbering wrecks,” he says.
For Lovett, who from the age of 14 had voraciously read the business pages in the broadsheet newspaper that his father, a mechanical engineer, would bring home, it was a moment that would shape his philosophy of life.
“It moulded my thinking about how to manage a team of bright people in difficult circumstances that can be stressful – from a company underperforming for some time, to the sort of chaotic investment landscape we see now,” he says.
And, of course, Barings’ collapse underscored the value of quantifying risk, and calibrating for that risk, in as vivid a technicolour as you’ll ever see.
‘It’s a lovely fixer-upper’
These are lessons that Lovett has brought to bear at Stanlib, the asset manager formed in 2002 as a joint venture between the continent’s largest bank, Standard Bank, and life insurer Liberty Life.
The fact that Lovett, a Brit born in Henley-on-Thames with 35 years’ experience, was hired to head Stanlib’s investment teams in 2017 tells you much about the specific role he had to play.
At the time, Stanlib had endured a horrible decade, marked by a succession of CEOs and investment heads, and headlined by lacklustre performance. Stanlib retreated into its laager, barely raising its head.
It was a dire period for such a large company; Stanlib remains South Africa’s second-largest fund manager, with total assets of R714bn at last count, behind only Ninety One (R860bn).
But it showed that Stanlib was ripe for an overhaul – and Lovett seemed to be just the man for the job.
Over the previous years in London, he’d built up a reputation as asset management’s “Mr Fix-It”, turning around a number of large firms. This included merging the European equities business for Allianz Global Investors, then turning around the performance at Ignis Asset Management.
“I loved doing this and found it immensely stimulating,” he says.
“I was managing money, but I was managing teams as well, and we had an objective to restructure and re-energise investment teams that had gone through a dreadful period.”
So, when he was contacted by a head-hunter in 2017, and asked if he’d consider working in South Africa turning around Stanlib, he leapt at it.
“It was something that I hoped I could make a material difference to. And my kids are now all adults, so I was at a stage of life that I could make a more disruptive decision and be selfish around a professional opportunity,” he says.
Lovett says Stanlib was ripe for an overhaul: it had lost a lot of business, a lot of its drive, and had been destabilised by all the management changes.
He began working with Giles Heeger, head of Stanlib South Africa, in October 2017 and Derrick Msibi, Stanlib CEO. (“Talking of the things that South Africa needs to resolve,” he says, “it took me eight months and a huge amount of effort to get a work visa.”)
Their priority was, first, to stabilise the company and make sure it built an executive team who would be there for at least 10 years. “And then we also had to focus on improving the investment performance,” he says.
So how has Stanlib turnaround gone?
Well, as far as the revolving door goes, the bleeding has stopped. Msibi, Heeger and Lovett remain in their roles, and the investment team of nearly 70 people remains intact.
Crucially, performance has also risen.
According to Morningstar, two of Stanlib’s funds (the global equity, and global multi-manager funds) are within the top 10 best-performing unit trusts over the previous decade.
Its equity fund – in which Naspers, Capitec and Harmony Gold are the top three holdings – has delivered a 15.9% return over one year to April, marginally behind the benchmark. Over three years, it has delivered 11.8% per year, ahead of the 9.27% benchmark, and in the top quartile.
So how did Lovett do this?
In part, it was about changing the product mix; Lovett says that when he joined, Stanlib’s funds were, for the most part, vanilla and traditional.
“You could almost have rolled back 30 years ago and it would have been very similar. It was very much a backward-looking business,” he says.
He focused on two areas: first, fix the performance of the vanilla products, because those were still Stanlib’s flagship funds; then, introduce new funds, centred on areas like private debt, private equity and systemic active equity.
“Then we used asset allocation to a far greater extent in our fixed-income business to get the diversity of returns and the income that was required, and we built our infrastructure business, which has grown from R500m to R12.5bn.”
The change was also necessarily cultural (though Lovett doesn’t like to use the word “culture”, as this sounds fluffy, preferring the term “behaviour” instead).
“In the first 18 months, we focused [on] the right set of behaviours to ensure we made the right decisions. You’re expected to challenge each other, but respectfully. The moment we see someone acting like a bully, we draw the line,” he says.
And if someone doesn’t behave accordingly?
Lovett is coy, saying only that Stanlib had to “make some changes” to embed the right behaviour. “You really just have to move on from people who are not aligned to your philosophy. And not everyone wanted to come on this journey.”
Plane crash
Turnaround CEOs are fond of saying they’re trying to fix a plane while it’s in mid-air. But that is a cliché never more apt than in the money-management industry.
It used to be simple: flog some vanilla equity funds to retirement funds, maybe open a bond fund and some money-market accounts, and wait for the performance fees to roll in. Today, in the aftermath of the global finance crisis of 2008, it has become vastly more competitive.
“There’s a balance you need to get right in asset management, and I haven’t always been able to,” says Lovett. “You have to think genuinely long term, but you must also be dynamic. It’s fluid, so you need to adjust to the growth of passive funds, the move away from vanilla products, private equity and impact funds.”
Over the next few years, he believes the relative performance of asset managers will be determined by the extent to which they are able to show this “dynamism” by adapting to technological change – both in terms of what it means for their own industry, but also as an investment class.
Until now, this has manifested in the rise of companies like chipmaker Nvidia (up 1,529% over five years) and cybersecurity firm CrowdStrike (up 401% over that time), but this is likely to lead to gains in adjacent industries too.
“AI is obviously grabbing the headlines, but all the branches that come off it are going to be massively stimulatory to the global economy. Technology will continue to be the driver of growth and productivity,” says Lovett.
Which is all fine for investors, but what role will there be for money managers in a world where AI bots will be able to provide compelling investment ideas based on the data faster than their human counterparts? Is there even a role?
“Look, I believe there is still a decision-making component in most industries, including asset management,” Lovett replies. “But it will be a hybrid approach, where the amount of data available will be far more efficiently processed.”
But it is yet another disruption in an industry that is rethinking its relevance – and its structure – in a world where passive instruments like exchange traded funds are all the rage, having grown by about 20% a year since 2008.
Even in South Africa, this has sparked consolidation. In November, Sanlam said it would sell its asset management arm – which had R400bn in assets – to Ninety One. Of this deal, Ninety One CEO Hendrik du Toit said: “The way I see is that we have won a big mandate, not that we went to buy someone’s business.”
Does Lovett foresee a spate of similar deals in the next few years?
The short answer is yes. “Look, I’ve been involved in the consolidation of the industry in Europe, where it has been massive, and South Africa has been much slower. So this is a mirror of what we’ve seen internationally,” he says.
But just because it’s happening doesn’t mean it’ll always be successful. Lovett says that his experience in merging asset management teams in Europe has taught him a few harsh lessons.
“It’s important to remember that if two full-service businesses come together, that’s where you get the most cost savings, but that is also when you get the most challenges in terms of integration and culture,” he says.
It’s one thing for an asset manager to buy a new capability it didn’t have; quite another to buy a business doing the same thing without compromising its fundamental investment engine.
In other words, the jury is still out on whether these deals will succeed. But either way, where will the asset management industry be in 20 years? Will we see a dystopian world where firms will consist of a receptionist and a series of AI bots, trading passive funds using algorithms?
“Not at all,” says Lovett. “I don’t think technology destroys the industry. Far from it – it just allows portfolio managers to be more efficient. And I still think the ultimate people decisions will be the fundamental differentiator.”
The jury is out on South Africa
And South Africa? Where will the economy be?
Much depends on the success, or failure, of the new coalition government, which will shape the country’s economic prospects over the next few decades. And again, it could go either way.
Lovett says, so far, the progress has been solid: the first part was striking a coalition deal, and that has largely delivered, but the part “where the homework will really be marked” is whether the new government can deliver on its economic promises.
“I’m comfortable that there is clear evidence of reforms being implemented, but the pressure point is for the country to deliver. I would say, the direction is good, but when it comes to the pace of play, the jury is still out,” he says.
Not that everything is entirely in South Africa’s hands anyway.
Currency’s first interview with Lovett happened the day after President Cyril Ramaphosa’s high-octane meeting with Trump in the Oval Office, where the myth of a white genocide occupied considerable time. Lovett felt Ramaphosa had done pretty well in navigating near-impossible terrain.
“He did just about as well as he could have done, given that he’s a consummate diplomat. The problem with Trump is that he trades in half-truths, and the idea that someone was calling for the murder of all whites was just one of those half-truths. But the reality is, crime is a real runaway problem, and one which the ANC has not distinguished itself in its response,” he says.
It’s a nuanced view, no doubt smoothed by access to top-quality analysts like Kevin Lings. So how important is it to understand politics then, for someone in his position?
“It’s crucial, but it’s especially crucial in South Africa,” he says.
“There’s a naivety to thinking I don’t need to have an understanding of what’s going on in the global economy because I’m only handling equities,” he says.
But in a smaller economy like South Africa, where the success or failure of the economic reform agenda is so fundamental for the country’s trajectory, the stakes in understanding the political economy are fundamental, he says.
Unusually, he likens South Africa’s often haphazard and frequently infuriating politics to the asset management industry.
“You can only be successful by thinking long term, but that should not be an excuse for complacency about dealing with things on a regular basis,” he says. “Everyone thinks the asset management industry is glamorous, but the hard work is about grinding things out.”
This article was produced in partnership with Stanlib.
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