The buy-out of Blackstar’s stake in Cadiz Holdings by Stellar Capital Partners last November did two important things: it led to the delisting of the troubled Cadiz Asset Management, and it provided it with a stable and strong capital partner. These steps provided the investment firm with much needed breathing room.
In the asset management world, investors do not separate troubles in the business from the health of their investments, and Cadiz woes over the years saw assets under management (AUM) plunge from R26 billion a year ago to R13 billion currently.
Under CEO Shawn Stockigt, who left Momentum to take up the challenge in September, the firm appears to have stabilised – at the very least it has stopped hemorrhaging assets and staff.
While the loss of high profile (and profitable) teams is a blow to any business, Stockigt has restructured the investment teams in a way that provides growth opportunities to younger talent and capitalises on existing capacity.
In particular Matt Brenzel has become joint chief investment officer alongside Stockigt. “There are not many people in this industry with Matt’s experience and depth of knowledge,” Stockigt says.
“Having experienced Black Monday in 1987 – when the Dow Jones Industrial Average fell 508 points, the largest one day decline in the history of the Dow – there is not much that rattles him.”
Brenzel has been a portfolio manager at Cadiz Asset Management for the last 17 years. Prior to that he spent seven years at Syfrets Managed Assets as an analyst and a portfolio manager and was one of the five team members who left Syfrets in 1993 to start Coronation Fund Managers. In 1998 he was seconded by Coronation to African Harvest, which became Cadiz Asset Management.
The investment teams now report into specialized divisional heads. The equities team is headed by Graeme Ronne; multi-assets by Brian Munro and fixed income by Alastair Sellick, former head of South Easter Fund Management, which was acquired last year. In addition the research function has been strengthened with the addition of three new senior analysts.
With joint CIOs at the helm, and three divisions reporting in to them, the business is now investment led, rather than professionally led as in the past.
There are no longer walls between the teams. “We are a multi-strategy house which means robust debate and a cross- pollination of ideas enables better investment decision making,” says Stockigt.
Fraser Shaw, ex CEO of the holding company, is now COO of the asset manager while Charl Schmahl oversees the burdensome legal and compliance obligations.
Stockigt has also streamlined the products. For instance, structured products are being wound down and the enterprise development and supplier development funds have been moved to Stellar’s credit business.
Relative to AUM the investment team (of 11 professionals) is quite big. This means the company has the opportunity to look for value-based opportunities outside of the Top 40 and the capacity to research offshore opportunities. “We are a multi-asset house and I see this as a competitive advantage in this climate. There are opportunities out there for those who do their research properly,” Stockigt says.
While it could be considered a relatively small asset manager, Cadiz is not necessarily in search of acquisitions. “The market is difficult at the moment and possibly ripe for consolidation. Many asset managers are seeing fund outflows as nervous investors move their money offshore. That said, you don’t make acquisitions to acquire assets, you buy for capabilities,” he says. “Cadiz acquired African Harvest for its R300 million in AUM and I don’t believe any of those assets remain.”
He does not see the small size as a problem, but as a “rebirth opportunity” for Cadiz.
Stellar Capital Partners, led by Charles Pettit and Charl de Villiers, is an active and involved partner. In January it acquired a further 12% of Cadiz, bringing its holding up to 97%. It has been increasing its exposure to Cadiz to benefit from upside in a successful turnaround, according to the latest sens statement.