The three syllables that make up the name “Allan Gray” have become so synonymous with investment that it’s easy to forget they represent more than just a brand name. Because Allan Gray, the firm, takes its name from Allan WB Gray, its media-shy South African founder.
“He doesn’t do interviews,” was the immediate reaction to the Mail & Guardian‘s request to speak with Gray. “He’s 70, he lives in Bermuda, and he’s the humblest man on the planet,” said company spokesperson Tracy Hirst.
Gray has never liked the media, but he couldn’t avoid publicity when his South African firm — he also founded its international partner, Bermuda-based Orbis Investment Management — announced its rather unusual empowerment deal last month. Allan Gray Limited is now effectively 27% black-owned by its black staff and entrepreneurship trust E2, a broad-based ownership scheme. E2 will hold 18,9% of Allan Gray Limited and 10% of shares will be held by black staff.
Gray himself has donated R1,1billion to E2, to be used for the Allan Gray Orbis Foundation Africa Endowment. This money will support the Allan Gray Orbis Foundation, which provides bursaries for prospective entrepreneurs, and public-benefit organisations. Gray himself will be the initial chairperson of the endowment’s board of trustees, and is credited with conceptualising and implementing the deal. “He was the architect and ultimately the beneÂfactor,” said Greg Fury, chief operating officer of Allan Gray Limited.
The foundation funds 80 students, known as Allan Gray Fellows, and aims eventually to fund 500 fellows at any one time. It also intends to fund schools from next year in order to increase the quality and size of the potential pool of fellowship applicants.
E2, a long-term capital fund, will provide subsidised funding to new business owners who are graduates of the Allan Gray Fellowship programme. Social entrepreneurs linked to public-benefit organisations will also receive funding. Of its funding, 90% will be given to black entrepreneurs, of which 40% will go to black women. Its trustees, chair Thando Mhlambiso, Imogen Mkhize and Mahesh Cooper, have no beneficial interest in the fund.
Gill and Allan Gray have personally committed themselves to pay for the school and university education of children of Allan Gray Limited staff who earn less than R250 000 a year. “Relative to their needs, this contribution is small, but it comes with the earnest desire to allow those South Africans less fortunate than ourselves to dream, if not for themselves then for their children, of realising through their own efforts and determination their full potential irrespective of their financial circumstances,” said Gray in a press release.
When asked about Gray, staff members commented on his generosity. “His defining characteristic is that he is reserved, but incredibly curious. He is enormously generous personally, with both his time and money,” said Fury.
Gray is still a non-executive director and controlling shareholder. He visits the Cape Town headquarters at least once a year, where he makes a point of greeting new staff members. For the past 18 years, however, he has been based first in London and then in Bermuda, where his other company, Orbis Investment Management, is headquartered. Keeping it in the family, William Gray, his son, is president of Orbis.
“He is an old-school gentleman, and is extremely charming in an old-school kind of way,” said Fury. “He is an incredibly strong-willed guy. He is very reserved and doesn’t give a great deal about himself away. People who have been in meetings with him often comment that they leave feeling slightly drained, because he has a way of extracting information from people in order to make great deals, without giving much of himself away. He is incredibly curious. At dinner parties he will ask people their views on all sorts of matters that don’t seem relevant, but he accumulates information to make a decision.”
This approach, said Fury, is in keeping with Allan Gray Limited’s investment philosophy, which is that individuals make better decisions on their own than by consensus.
Gray started Allan Gray Investment Council in 1974, with himself as the sole proprietor. “At this time, the ‘efficient market hypothesis’ was popular in investment circles. Central to this theory is that share prices reflect all available information and therefore move in a haphazard manner, so the future cannot be predicted in any meaningful way. The conclusion is that it is impossible to consistently outperform the market. Unconvinced by this prevailing view, Allan Gray was confident that he could establish and structure a firm that could deliver superior total rates of return over the long term,” reads the firm’s website.
By the time he relocated to London in 1988, the firm had six partners, a staff of 36, R2,4billion under management and was the top performing and leading independent investment management firm in the country. It was incorporated in 1992 and Allan Gray Limited now manages more than R200billion. It is the largest investment firm in South Africa. Allan Gray’s senior executives are shareholders in the company and all other employees receive substantial performance bonuses.
The M&G asked Fury what he considers the secret of the company’s success. “The single most important factor is that everything about the business has a very long-term orientation. We all think long term [and] have freedom from short-term constraints,” he said.
Because of the incentive structure, the company’s executives and portfolio managers are encouraged to act ethically and in the best interests of the client, he said. “We don’t have a monopoly on the smartest people. It’s all about incentivisation. We believe individuals who are presented with information make the best decisions. We like independent thinking. We are scared of ideas that everyone else has.”