Meet the man Australian CEOs are starting to fear: Walters

One man is changing the way directors and executives relate to shareholders.

Dr Simon Marais, a South African born physicist-turned-investment-funds-manager – is the founder and part-owner of Allan Gray (formerly called Orbis Funds Management).

Marais began writing cheques in 2006, investing more that $200 million into seven biotechnology companies in the first year. At the time, he had $450 million under management.

Today, he has over $2.4 billion under management. “It’s been okay,” Marais told LeadingCompany today.

The secret of his success? “We are different in the way we pick stock, and we tend to care more, be more activist. We are deemed to be more serious about the stock we invest in,” he says.

Track record

Marais’ active, public approach to funds management is sending shivers down the spine of the directors and management of Australian listed companies. He has no qualms about agitating for change. He has come up against some of Australia’s most powerful directors and business owners, including the wealthiest woman in Australia, Gina Rinehart.

Over recent months and years, Marais’ activism has seen him:

• Call for the chair of PaperlinX, Harry Boon, to be removed, in order to unseat the company’s CEO.
• Refuse to support to Gina Rinehart’s pitch for two board seats at Fairfax Media until she affirmed publicly that she would act in the interest of all shareholders.
• Agitate for a private equity takeover of the cleaning company, Spotless, against the recommendation of the board and chair, Peter Smedley.
• Help spark a bidding war for Hastings Diversified Utilities Fund.
• Comment on proposed changes to the ASX listing rules.
• Help remove three directors in one afternoon from Salmon company, Tassal.
• Agitate successfully for Valad Property Group to be bought out by Blackstone.
• Shift the terms of a merger between Centro Retail and the beleaguered Centro Properties.

Marais will not say which company’s board will be next to feel the scorch of his scrutiny. “The next guy who doesn’t act in the interests of shareholders, I suppose,” he says.

It might be Fairfax. Marais is not happy with the Fairfax board, who today appointed former CEO of Ernst & Young and currently chair of David Jones, James Millar. “I don’t know what I think about it, but I can’t say that I am delighted that they have not spoken to shareholders,” he says.

A refreshing change

Stephen Mayne, a director of the Australian Shareholders Association, who has a reputation for asking directors hard questions at company AGMs, says Marais is a welcome presence in the Australian investment scene.

“He is very bright. I saw him perform in a debate at a recent conference. He is a straight talker, honest, tough, with a great investment track record,” he says. “He picks appropriate fights. I am impressed with how he stood up to Gina Rinehart, and took a long handle to the PaperlinX board, which is appropriate given the company’s woeful performance.”

The results speak for themselves. The three years return from the $1.2 billion Alan Gray Australian Equities Fund is 21.7% compared to the S&P/ASX300 Accumulated Index return of 11.4%. The second, smaller Allan Gray Opportunities Fund, started in July last year, has returned 6.7% compared to RBA Cash of 3.5%. There are 12 institutional investors and about 500 individuals reaping the benefits of Marais’ unequivocal style.

Dean Paatsch, founder of institutional governance adviser, Ownership Matters, says Australian shareholders are too passive. “Australian shareholders are blessed with powers… they can vote directors off the board, but the average incumbent director gets 96% of the vote,” he says. “It is clear that shareholders are not 96% happy and Allan Gray’s approach is refreshing, to see all those tools used.”