Q: Congratulations on your appointment as the Chief Investment Officer at Kgori Capital. What does this role entail?
A: Thank you. As Chief Investment Officer (CIO), I am ultimately responsible for developing, upholding and implementing the firm’s investment philosophy, strategy and process, as well as overseeing our investment team, which is made up of Portfolio Managers and Investment Analysts. These include asset allocation decisions, portfolio construction and implementation and risk management. The ultimate aim is to construct portfolios that achieve client goals and expectations over the long term.
Q: What are some of the specific goals that you intend to achieve with your new position?
A: Kgori Capital has enjoyed an impressive track record in terms of investment performance as well as administrative efficiency in its 11 years of doing business in Botswana. My overarching objective is to uphold and even improve upon that legacy by continuously identifying opportunities that provide sustainable alpha potential within our clients’ risk parameters.
I believe that our capital markets provide ample opportunity for product development to broaden the depth and quality of investible opportunities, and I have a strong emphasis on product development.
Q: Tell us more about Kgori Capital’s investment philosophy and how you plan to uphold it using your new role.
A: As Kgori Capital, we believe in active, high-conviction investing with a balanced focus on risk and reward. Our active management philosophy revolves around the idea that valuations will ultimately converge with fundamentals, thereby opening up alpha opportunities for undervalued securities, more so for the medium to long term.
My role as CIO means supporting and supervising the investment team through the idea generation phase to identify suitable investible opportunities that fall within these parameters. To uphold our investment philosophy, I believe I will have to inspire our team to be innovative in finding these opportunities, especially given the liquidity constraints of our local capital market, and the ever-evolving and volatile global landscape.
Q: Diversification is a key aspect of investment management. How do you plan to diversify the firm’s portfolio to manage risk and achieve desired returns for your clients?
A: We evaluate asset classes based on their inherent return profile, as well as how the return profiles are correlated with each other to ensure that diversification yields the desired result. We do not engage in diversification for the sake of diversity.
For example, since COVID-19, we have seen bond and equity returns moving in broadly the same direction. For that reason, asset class diversification between bonds and equities has not yielded the intended outcome in the recent past. It is therefore vital to broaden the lens of what diversification looks like within the context of client risk profiles to ensure we achieve the desired outcomes.
Q: With sustainable and responsible investments gradually gaining relevance, how do you envision integrating ESG factors into Kgori Capital’s investment decisions?
A: Kgori Capital has built a strong legacy for sustainable investing by adhering to ESG frameworks, being a signatory of the United Nations Principles for Responsible Investing since its inception. There is therefore a strong emphasis on deepening our ESG framework even further, which naturally becomes the responsibility of the CIO.
Q: Can you highlight any specific industries or sectors in Botswana that you believe hold great potential for investors?
A: We have noted a sharp rise in banking sector profitability, given the high-interest rate environment as well as lower impairments. We believe the sector is set to continue on the same trajectory as digital banking services continue to grow as an important source of revenue and on the back of an anticipated rise in infrastructure and wage spend by government, which should, in turn, reduce the liquidity constraints that have been experienced in the past 18 months or so.
Post SOE and border closures, we believe there is still significant pent-up demand for travel and tourism, and we envisage that the tourism sector in Botswana will continue to enjoy significant revenues, with the major caveat to this being increasing geo-political tensions and their impact on crude oil prices and by consequence, the cost of travel. We believe the property sector will also continue to do well on the back of lower vacancy levels and improved valuations.
Q: What is your outlook on the global investment industry, looking at the current global economic and financial climate? How do you plan to position the firm accordingly?
A: On the global side, we believe that the upcoming market cycles will necessitate a focus on quality, i.e. businesses with strong fundamentals (including a strong balance sheet and strong management credentials). Underlying medium to long-term trends we see include the massive investments needed to achieve the Paris Agreement’s net-zero carbon emissions targets, the diversification of global supply chains, and increasing digitalisation across all industries.
Q: The Botswana financial services industry is still dominated by foreign firms. What role is the firm playing in changing the perception that independent, locally-owned financial services firms are not capable of excellence?
A: For locally-owned investment management firms such as ourselves, the overarching goal is proving that we can provide competitive investment returns sustainably while providing world-class security and administrative efficiency, a feat which we have achieved in our 11 years of doing business. We believe this is important in ascertaining the capabilities of local firms and achieving a level of trust and belief in the market.
Another important pillar for local firms is strong innovation, which is something that we have always upheld and can be more readily observed in our unit trust portfolio and the functionalities of our systems in that regard, having been first to market with an interactive transaction-capable unit trust platform, as an example.
Questions around the sustainability of operations will always arise as local firms do not have regional or global backing. As we all know, Rome was not built in a day, and after 11 years in the market, we look forward to flourishing for decades to come.
Q: The Retirement Act now calls for an increase in the limit of funds that can be invested locally from the previous minimum of 30 percent to a minimum of 50 percent. Has this been a welcome development at Kgori Capital?
A: As Kgori Capital we have always upheld the belief that local capital markets have strong upside potential for good risk-adjusted returns. We believe that the influx of ‘new’ capital will only seek to promote innovation in broadening the local capital market space, and therefore we do welcome it.
Even so, change will always bring challenges, but we believe that all market participants will rise to the occasion and ensure the best possible outcomes for our clients during this transition.
Q: Looking to the future, how do you envision using your CIO role in developing and executing the firm’s long-term strategy?
A: Ultimately, the overarching metric for measuring the performance of an investment management firm is consistent investment performance. In continuing to uphold and even improve on our impressive investment performance track record, I believe we will have a good platform for the firm to grow and attract more investors/clients going forward.
Through innovation, I believe we can broaden our offering to cater for different investors’ specific investment needs because as you are aware, no single investment strategy or product is a one-size-fit all solution.
The combination of these should not only attract more clients but also diversify our product offering, ensuring sustainable growth. Kgori Capital also has a strong emphasis on providing valuable market insights and financial literacy information, a pillar which I plan to uphold in my role as CIO.