INTRODUCTION AND PURPOSE
RECM and Calibre (RAC) has been set up as a long term investment company, in the form of a closed-end vehicle, which has access to permanent capital.
The ordinary shares of the company are held by its executive directors: Piet Viljoen, Theunis de Bruyn and Jan van Niekerk, as well as entities associated with them.
(Please refer to various SENS announcements for further details)
Investors were offered the opportunity to subscribe for preference shares in the company, which enables them to participate in the superior long-term growth prospects of the underlying investments of the company. Investors are afforded liquidity through the listing of the company’s preference shares on the JSE.
Regarding Capital Management (Pty) Ltd (“RECM”)
The responsibility for the capital allocation decisions for the company is outsourced to Regarding Capital Management (Pty) Ltd. Piet Viljoen takes specific responsibility for these capital allocation decisions.
(RECM) was founded in early 2003. The controlling shareholders of the company are Piet Viljoen, Jan van Niekerk and Theunis de Bruyn.
The driving force behind the start-up was an identified need for a fund management house that was truly independent and would be able to manage clients’ funds on a sensible basis. Since its inception, RECM has firmly entrenched itself as one of the leading independent fund management houses in South Africa, as a result of a superior track record in both domestic and global funds management. Assets under management have grown to over R20 billion in this period, consisting of a healthy mix of retail and institutional clients. Staff employed by RECM has also grown from three at inception to 40 at present. RECM appeals to the investor who understands that superior investment returns are likely to be generated by acquiring interests in good quality businesses at attractive prices, and then holding on to these interests for the long term.
RECM’s investment activity is grounded in the value philosophy, with an emphasis on consistently applying a sensible investment process. The investment process is a bottom up process, based on proprietary research. In addition, the investment process is risk-conscious, where risk is defined as the possibility of losing money, rather than volatility around a benchmark. The focus is on protecting capital, and growing it where possible and sensible. Ultimately, such an investment process relies on avoiding, as far as possible, deep draw downs of capital. It does this by only accepting investment risk where the investor is clearly being paid handsomely to do so – in other words, by only buying assets when the price is significantly below a reasonable estimation of fair value. Sources of return are thus two-fold: the movement from cheap to fair value, as well as the intrinsic growth that most good quality businesses exhibit over time. RECM believes that these are the only two sources of return that investors can access on a consistent basis.
RECM’s competitive advantage lies in four areas:
- Size. Small scale confers a significant competitive advantage to a fund manager, as the universe of possible investments is as wide as possible. RECM is determined to remain a small fund manager in international terms as it feels this is very strongly in its clients’ best interests.
- Costs. At RECM the costs of managing funds is kept as low as possible. Fees are reasonable and at the low end of the scale. RECM is incentivised to keep fees low, as a significant proportion of its assets under management are those of management and staff of RECM itself – at the same fee level as are applicable to its outside clients. Trading costs are minimised by being long term holders of securities.
- Independence. RECM does not have a controlling shareholder with a different agenda to that of its clients. Indeed, its controlling shareholders are significant clients of RECM.
- Process. The firm structure is such that it fully supports the consistent application of a sound investment philosophy and process.
Combined, these four significant competitive advantages assist in the generation of superior returns.
Calibre Capital Ltd (“CAL”)
Theunis de Bruyn, one of the principals in both RECM and RAC founded CAL, a private equity business, in late 2002. Since its inception CAL has invested in five private businesses. Over this time CAL avoided the debt funded business model of most private equity businesses, which became unstuck during the financial crisis. As a result of its very conservative pricing and financing of deals, CAL has emerged from the crisis in a very strong position. Its underlying businesses do not need to be refinanced, and are in fact in a strong cash position. Investors with CAL have enjoyed very strong returns since inception. Theunis de Bruyn plays a leading role in RAC’s private investments.