Kokkie Kooyman at 70: Reflections on his journey

0:00Welcome to the Denker Capital Podcast, where our highly experienced team of in-depth thinkers and other experts share their insights on a range of investment-related topics. In this podcast, we have conversations about developments in South African and global markets and what these may mean for investors. We analyze specific stocks and sectors and explore general themes relating to the fundamental principles that underpin sound investment decisions in an ever-changing world.

0:34Koki Kwame turned 70 in January, so at this milestone, we thought it would be fitting to do a quick podcast on his investment career and global investing experiences. In this episode, Nigel Barnes chats to Koki, who shares his insights on meeting management teams around the world, attending Berkshire Hathaway meetings, and his perspectives on the global financial sector, touching on the past and the future. Hello, everyone. I'm very pleased this morning to be joined by Koki Koyman, who has reached a major

1:06milestone, eh, Koki? Recently had your 70th birthday. So, many congratulations. How are you feeling? Strong. Strong. Strong as ever. I can't run marathons anymore. I've adjusted downwards. It's both slower and smaller distance, but physically, I'm very thankful that I'm still very healthy and cycle and swim and can still run a bit. Good man. Awesome. Well, you're looking well. And, you know, I see Koki most days, and I can tell you,

1:38all the listeners, that, you know, he's as full of as much energy and enthusiasm as he always was. So, Koki, well done on reaching that milestone. Looking back, so out of the 70 years, how many years in the industry? Yeah, it's interesting. I'm going to join the industry at the age of 35. Okay. So, that's 35 years in the industry. But before that, I followed quite an interesting route in first teaching and then lecturing at UCT. And from there, again, doing articles at Arthur Young,

2:11now Ernst & Young. And from there, landed up at Truett's, which was my major audit client. And, yeah, that was a hugely professional firm where I learned a lot. And from there, going into a a subsidiary inside a bank, a failing bank, and the subsidiary had failed. I wasn't aware of it because its clients, most of its clients were bankrupt. This was all post the 1982 recession, which you didn't have a clue of as a student, but arriving there suddenly. And from there, doing a lot of turnarounds, I, again, a long story, but I ended up at, of mutual asset managers,

2:48OMAM, as it was called then. Yeah. And in fact, because of my background of being in retail and in banking, I was first given the retail and the banking sectors to, to analyze. And very quickly thereafter, Johannes van Horst was so interested in the then Asian tigers, you know, the older listeners might still remember it was then Korea was a tiger. Sure. And, you know, Thailand and, and the Philippines and Indonesia. And he said, why don't you go and go on a trip and look at those

3:24countries? Okay. And I was going to go with Dave Moore, then the chief economist, but last moment, he couldn't. So I went with Terence Moll, doctor Terence Moll, as an economist, we went to see all the central banks, we went to see the treasury departments of each of those countries, we went to see the banking sectors. At the same time, what was important for us is South Africa was then moving towards a post-apartheid era. Sure. And trying to understand how emerging markets and the bank sectors in emerging markets worked in a freely, an economy where capital flowed freely,

4:00because at that stage, South Africa was always restricted from capital. Long story. I think the main thing that that really gave me is this interesting global investing, you know, seeing all those countries, the banks in those countries, thereafter, you had the emerging market crisis with Thailand, fell flat, it went bankrupt. And all those banks we saw were bankrupt. We actually saw the signs when we were there. We were coming back, we gave the advice also to Kevin Carter, who was running a mutuals investment from London. He said, there's an accident waiting. You know,

4:36we could see the buildup. And so that really gave me the appetite for global investing. And then when did you kick off with the fund? I mean, the fund is, I mean, I think that the Denka Global Financial Fund is coming out for its 20th anniversary this year, but actually had a bit of a life before that, didn't it? I mean, maybe just fill us in on that one. No, it's a good question. I actually started a local financial fund for a mutual, and that's still going. But a mutual, let's say, just didn't have the appetite to go global. And I landed up at Coronation,

5:08who were prepared to give me a toy. Tony Gibson and the guys and Luis Dussin, they said, okay, you can run a global financial fund. And that was September 99. Okay. We did that for five years at Coronation, and then Johan Fundamava convinced me to come across to Sunlum and start something bigger. And we started what we then called Sim Global. And so the fund, as a Sunlum fund, it was 2004, but the five years before we ran the Coronation, and the clients came across

5:40and the assets came across and we continued it here. But I think the benefit we had of those years at OMAM was what I learned there is the importance of data. And, you know, just being able to compare companies across the globe. And for that, you needed models. So we started building models. We've got about 400 models, individual models for each individual large bank in the world. And I had a team, fortunate people like Laura and Liesl, who helped me

6:12with that, to be able to compare any bank with any other bank in the world, not only now, but we can compare it to 2008, to 2003, and, you know, compare different periods and learn from that. Yeah, sure. Okay. And what have been your, you know, two or three sort of lasting memories of the last 20 years or so of running the fund? And I mean, you've been on some great trips around the world, met some interesting people. Yeah. How many Berkshire Hathaway meetings have you been to now? Yeah, I think this year will be my, I think it's the 25th when we go this

6:47year. So that's quite a lot. And that there was, thank you, Walter Aylip, who forced me and pitiful you and forced me to go to the first one. But in terms of, look, we've had, the philosophy was always, if you want to find smaller banks and smaller companies, you've got to go and meet the management. So that was still from my banking days. You know, you had to look the clients in the eyes, see the premises before making a decision whether you make a loan to them. And so we always traveled a lot. At one stage, I think I've traveled, you know, six or eight trips per year of

7:21two weeks to seeing companies all over the world. I actually arrived in, in Chennai, South India once with, with Laura in November. And we were the first foreign investor to see this bank, a federal bank. And they asked, how did you find us? Okay, that was a bit over the top of wind, you know, but, but just the experience you built up in that. And who's, I mean, anyone in particular stand out for you in terms of management of these

7:51financial organizations over the years? I mean, any particular standouts? Yeah, there were, there were quite a few. The one that impressed me in the early days, the most, um, was, was, uh, Dick Kavakovich at, uh, the guy who started, well, started, built Wells Fargo into the giant it was now. Yeah. Uh, Wells Fargo was just actually, it was almost still a small cat thing. Used to go to the UBS conferences in New York with François and, and, and, and their essay management, uh, would also go there as well. And you discuss

8:24all these banks, but Wells just stood out. They were the first to really grow pan national, which you call it that in the U S from, from California. Yeah. And they believed in this cross selling that a huge, different culture. This guy was always driving his staff in client satisfaction. All went wrong post 2012, 14, but it was an amazing business. But, you know, if you, if you think of other businesses, uh, in Turkey are really the Turkish

8:54managements were really good. There was a little bank. We love that TSKB, um, in South Africa, you know, Capitec store. Sure. I think in all my years, there's only been one business that, that beats Capitec just in terms of vision and growth. And it was Tinkov in Russia. And sadly, you know, that ended when Russia invaded Ukraine, but that was an amazing management team. Okay. Interesting. And I mean, just going back to the, to the Berkshire Hathaway situation, obviously, um, you know, with Charlie passing, things are going to look different at the meeting

9:27this year. I mean, you're going, um, at the end of May, I think, um, any thoughts about how that landscape might look going forward? Yeah. I mean, if you, if you quickly just think back, um, I went the first time in, I think it was 2000 when, uh, tech bubble was still on the go, uh, and, and people were pleading with Charlie and, and, and Warren, Mr. Buffett, Mr. Munger, please, please buy some tech shares. And they said, look, we refuse to invest in something we don't

10:02understand. And then, you know, they were always having a go with each other. And Charlie was always very direct. You know, we don't invest in turds. Uh, we only invest in what happens. But then the next year when the tech bubble had collapsed, you know, investors standing up and thanking them and saying, Mr. Munger, Mr. Buffett, thank you so much for not investing in, uh, and then obviously the next one, 2007, eight, again, where there was shocking behavior on this part of the rating agencies,

10:34the accounting firms, the banks, and, you know, Charlie used some big choice words to describe the behavior of what was going on. And, uh, by the way, there was a week period there that I couldn't sleep, but, you know, this stuff can always still talk about that. But now with Charlie gone, yeah, I, I, I'm definitely going, we're taking a group this year. Um, but I think a lot of investors started coming really for the interaction, Charlie and, and Warren, you know, when you've got two

11:05people, 99 and 93, with all that experience of strong personalities and being prepared in front of 40,000 people to disagree with one another and straightforwardly so, and with humor, you know, so that will be missed. So I, I'm not sure how it's going to go from here onward with only Warren. He will obviously bring Greg Abel and Ajit and so in, but it won't be quite the same time. It will most probably deteriorate, but we'll, we'll follow it.

11:36Yeah, interesting. But you've got a few years to go then, eh? I mean, those boys are in the 90s. Yeah, exactly. A bit of time to go. Yeah, yeah, yeah. Okay. And then just, just to finish off, I mean, in terms of the sort of market cycle and, and the financial sector, we're going to do a podcast with, with you and the team in the next couple of weeks and, and get into this in a bit more detail. But, you know, inflation coming under control, starting to cool, rates coming down in time. How does, how do you feel about things in the

12:06broader financial sector globally? Yeah, I'm actually just writing something, you know, reflected back in the last 15 years, post-GFC, the global financial crisis. And it's amazing how all those events that happened and you couldn't, you can forecast and present. Right. And yet the fund and the markets did well. If you look back over 15 years, I mean, it was a lot of volatility in between. Sure. So again, yeah, I find most of the time we, we spend with clients often is answering questions on

12:40interest rates, on inflation. Even if you just think back the past five years from 2019, go and look at the forecasts that were bandied around about inflation then. Recall, pre-COVID, inflation was running very low, global interest rates were very low, actually below 1%. And then COVID came and, you know, growth was being brought down dramatically. And within two years,

13:13we had inflation at very high levels. And suddenly the long bond yield at 10, 85% and then again. So, but sure, the environment has changed. Interest rates will come down. Inflation is coming down. We just don't know how much, but at least it will be an easier to breathe in that regard. And, but I think based on all of that, interest rates will mostly stay higher for longer and they won't go back to negative. We think, and their model, it plays a huge role in challenging

13:47internally and the discussions, but we don't think central banks will make that mistake again of going to such low interest rates. They've learned the lesson. And so that is obviously, as far as my sector goes, it's a much better environment for your financials. And so your financials being, being very attractive, I'm obviously being the barber I am or I recommend come for a haircut. Yeah. There's still plenty of opportunities. There's still plenty of, we actually excited about the opportunities. Yeah, but we'll do that in the

14:18next one. Yeah, we'll do that in the next one. Koki, thank you. I know you've got to get off to a meeting in Stellenbosch now, but really appreciate you taking some time. Once again, many congratulations on reaching the 70th milestone. And yeah, many more years, many more years running the Denka Fund, please, to you and the team. And yeah, we'll catch up with you again soon. Yeah. Thanks a lot, Mark. Thanks, Koki. Thanks. Cheers.

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