At Omba, we are active managers, but our toolset is ETFs

Many South Africans are flocking to London, either in search of increasingly green pastures for their professional careers, or if they are younger, for a planned stay of two or three years before returning to South Africa. However, many of these South Africans in the latter category end up staying in England, not least because of the rapidly declining stability in their home country. BizNews founder Alec Hogg spoke with one such individual, Mark Perchtold, whose short stint turned into a whole new trajectory when he found himself in a really good job. Almost 18 years later, Perchtold is now a director at Omba Advisory & Investments Ltd. In an informative interview, Perchtold explained how at Omba, “we are not passive managers, we are active managers, we express active opinions, but our tool together is ETFs.

Mark Perchtold on London being a great location from an investment perspective

We started a little closer to my home in Wandsworth, which is in South West London, simply because the cost of having an office in central London was exorbitant. Many of our clients were in South Africa at first, but we now have a much more UK-focused clientele than when we started. Most South Africans coming to London didn’t really care if it was Wandsworth or central London. It was just the London postcode, so it was good to have an office there. We went offside for the team in 2019 before COVID and everyone unanimously agreed except me – as it was close to my home – to move to central London. So we agreed to move, then COVID happened, and then we worked from home for a long time. We decided to go to South Bank because most people go to Waterloo or London Bridge. It’s a very central location and you can pretty much get anywhere in central London in 20 minutes. So a great location for us. We can only see the Thames from our terrace, so we slowly get into the heart of the action.

By October I will have been here for 18 years and Dave Pearson, the co-founder, has been in and out of London for 20 years. We were at university together in Wits but as you know there is a sad brain drain from South Africa. Many qualified people leave and many come to London. Most come for two or three years when they are young, which was my intention, actually. I got caught up in a really good job, and the rest is history. London is an ideal place from an investment point of view. You are truly at the center of the world in terms of financial services. Asia is far away and the States are far away, but we are right in the middle. Many financial services companies have subsidiaries, branches or offices in London, where many are headquartered. So you feel really close to the action, to what’s happening in product development, in financial services, in industry trends. It is also a very well regulated jurisdiction. Investors are reassured to work in a jurisdiction that enjoys good rule of law and good governance. If something goes wrong, you know you’re well-regulated, and sometimes too well-regulated with today’s regulatory burdens, but we think that serves investors well.

Doing business with South Africans

I was in charge of the South African team and went back there at least eight times a year for about 12 years. So I have a lot of good relations and ties with South Africa. They co-founded me as a South African, and a number of our early employees were South Africans in London. We have a very strong South African focus in our business. But we are a British investment manager based in London. So our business evolved, especially during the COVID period when we couldn’t return to South Africa. We have a lot more business in the UK now, but we’re not going to forget South Africa. We love to return there whether for business or pleasure and will continue to do business there in the future. We have the South African flavor going for us and we think that reassures a lot of South African investors by visiting our website, reading our biographies and saying, oh, well, I know Wits University. You know I understand that degree we’re not Oxbridge so we haven’t been to the top universities in the UK but if a South African comes to read our history and educational background they will understand who we are are.

On a unique approach to investing focusing on exchange-traded funds

In my previous role, we were building multi-asset portfolios for clients with fixed income and equities and the constituents of these portfolios were usually either single securities, funds, or the house itself, or third-party funds, sometimes structured products. Very little use of ETFs was taking place at the time. The reason for this was that many wealth management firms earned a margin on the products and construction of these portfolios. I’ve found myself sitting in meetings with trustees, trustees, attorneys and tax advisers of clients asking why are you using these products for this allocation when you could just buy the S&P 500 ETF and it cost seven basis points, and at least you follow it and you don’t underperform. So that really took me on a journey back to 2013, 2014 where I dove deep into ETFs and thought they were fantastic building blocks for building multi-asset portfolios, with the evolution of ETFs since then. Even at this point, you could be expressing active opinions as an active manager with your tool set being ETFs. So we’re not passive managers, we’re active managers, we express active opinions, but our tool set is ETFs.

You can express a point of view on a country, on a sector, on a theme or on a factor. Smart beta investing has also evolved a lot. So you can have a fairly nuanced view. In fixed income you can express an opinion on credit quality or duration or currency all the way through the use of ETFs and that didn’t exist ten years ago, but it’s certainly the case today, and we’ve specialized in that since we started. The big pilot was also trying to cut costs for the customer. ETFs are a low cost implementation tool and we do not charge high fees. Our fees are 0.3%. The overall cost to a client of an actively managed process is inherently diversified because you are using ETFs that track major indices. And these indices are made up of stocks that are seasoned enough to fit into this index. You inherently have high quality companies in these indices, so it’s a great building block for portfolios. We thought we would be differentiated. We would not tie ourselves to a single provider of ETF products. You get solutions from some of the big houses, which are just the ETF product providers’ own multi-asset solution. We are independent of product suppliers. We don’t belong to any big houses and we don’t have any agreements with big houses.

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Geraldine D. Luckett