Through the fire, Kgori Capital emerges stronger
Mbongeni Mguni | Friday December 20, 2019 12:41
At the height of its success, Kgori Capital held assets under management of P6 billion and was living proof that a young, citizen-owned entity could succeed in the local capital market.
The now 12-year-old firm boasted some of the finest citizen brains in financial services and was able to hold its own in a dog-eat-dog industry where mandates are frequently lost and found.
An existential crisis hit the firm in 2017 when it became embroiled in the P230 million National Petroleum Fund (NPF) scandal, accused of improperly holding an investment mandate and claiming fees. The firm’s funds were seized and its operations squeezed as a result, besides the deep reputational damage it suffered in a notoriously fussy industry.
Lengthy court battles erupted and decisive salvation arrived in July with the Court of Appeal not only clearing the firm, but actually noting it had earned above market returns for the troubled NPF. Managing director, Alphonse Ndzinge, the public face of Kgori during its legal troubles, has his eyes focused on the firm’s future, but clearly recalls the difficult period.
“At the bedrock of our industry is trust and confidence,” Ndzinge says.
“We have been by association entangled in one case and the name of the business has been embroiled in that.”
The local capital market, from an investor perspective, is dominated by a handful of clients holding billions of pula in hand. Asset management firms compete for a slice of this cake and lack of allocation can literally be the difference between life or death.
Despite priding itself on solid returns over the years, the road back from the reputational knock for Kgori was always going to be hard. Ndzinge, supported by the board and team, took a strategic approach.
“Our approach has been to stick with the facts and the truth because everyone has opinions, but we have the facts on our side.
“We had to be completely honest and transparent because we had nothing to hide.
“We had challenges and we had to go out and talk to everyone.
“Even though as a business, we had always had a strong focus on governance, we had to introspect and say ‘how can we do more’. When you go through such an experience, there’s nothing like something being perfect; you can always refine. “We have strengthened the board, brought in a new compliance manager, submitted for voluntary independent audits on our controls and gaps, amongst other measures.”
The firm lost business, but has been clawing its way back ever since and assets under management are currently close to P1 billion. A point of pride for Ndzinge is that the team, which boasts a collective 90 years of experience, remained intact throughout the difficult period. This is despite the well known high-turnover associated with the local asset management industry, where experienced staff frequently hop between firms.
Kgori Capital has a close team culture that can be seen in the office set up, where executives and all other staff sit in an open plan, cubicle-less area, with easy access to one another.
“One of the reasons we survived is the collective strength of the team,” the MD says. “If you cannot stay together during challenging times, the task is much more difficult.”
For asset managers, teams are particularly important as their investors seek out those with proven track records. When portfolio managers leave certain firms, clients have been known to migrate with them.
For Kgori, keeping the team together, supported by governance measures, stakeholder engagement, greater transparency and client commitments amongst others, helped the firm back to recovery.
“Kgori was seen as a tarnished, damaged brand but now it’s seen as a brand that is rebuilding,” Ndzinge says.
“We lost a lot of clients but we are now winning mandates.
“The naysayers are still there and we cannot rebuild trust in six months.
“It takes time, but that’s the journey we are on.
“We are sticking to the virtues and values and we live by them.”
Part of the recovery involves a focus on diversification within the business in order to avoid a dependence on a single line of income. Two years ago, Kgori Capital secured a licence to offer pooled assets to retail investors under the Collective Investment Undertakings Act.
The firm has since launched two unit trust products that are gaining traction amongst investors. Ndzinge says the two trusts, the Enhanced Cash Money Market and Kgori Global Balanced Fund, which is a longer term savings vehicle, are outperforming their peers in the market and are also ahead of other benchmarks.
The firm is particularly proud of an innovation called Kgori Secured Services, which is first in the online market platform, which allows unit trust clients to check their statements and other details, in the interests of transparency, security and control.
Ndzinge says the focus going forward is on “growing the business, growing the team, growing the products”.
“We are very excited about the future and we don’t want to dwell on the past.
“We have gone through the experience and come out a stronger business.
“Throughout the challenges, we maintained our level of quality, and in fact, independent surveys always have us leading on efficiency and quality.
“Next year for us is about doing a lot of new things in the market. We are looking forward to more innovations. Next year is about growth of the company.”
The MD adds: “I have not been this excited in a long time”.