Rajiv Jain is not afraid of taking risks. The founder and chief investment officer of GQG Partners proved that last month when he ploughed $1.9bn into Indian conglomerate Adani Group after it was hit by a US short seller’s attack that wiped as much as $145bn from its market value.
The Florida-based firm’s move has thrust 55-year-old Jain, an Indian-born emerging markets investor who has made a career of going against the grain, into the spotlight. While his public image is now tied to that of Gautam Adani’s infrastructure empire, it does not appear to worry him.
“The craziness part is mostly coming from the public relations risk,” he told the Financial Times.
“Nobody who invested in FTX has gotten fired yet,” he said, taking a swipe at the numerous groups that put money into Sam Bankman-Fried’s now bankrupt cryptocurrency exchange. “He was playing video games while talking. Maybe we did a little more work than that. [Adani] doesn’t play video games, I am pretty sure.”
While GQG’s investment in Adani Group caught the market by surprise, Jain said it had been looking at the conglomerate for five years and already had significant exposure to India.
Some of his team met Adani family members last summer while the company was doing a roadshow in New York, although Adani shares had been on a stratospheric rise then, and, as Jain put it, “there were other fish to fry”.
The surge in Adani stock came to an abrupt halt in January when Hindenburg Research released a report alleging accounting fraud and stock manipulation. While the company denied the accusations, investors fled and it was forced to call off a $2.4bn fundraising.
“Things changed with a vengeance this year,” said Jain, with the slide in value providing a compelling entry point for GQG. “The stock is down 75-80 per cent, so that obviously gets your attention.”
Jain said he is not concerned about Hindenburg’s report on Adani and accepts that companies in emerging markets tend to have certain traits that may make some investors uneasy.
“Is this perfectly clean? No it’s not. Is it fraud? No it’s not. So the difference between the two is what we’re talking about. In the meantime you are getting irreplaceable assets, at very attractive valuations, which have some tremendous upside.”
The Adani Group did not respond to a request for comment.
Jain, who moved to the US in 1990, is a seasoned emerging markets investor. He said the early part of his career in the 1990s, when he “lived through one crisis after another”, sharpened his senses and taught him to react quickly when a situation deteriorated.
He joined Vontobel Asset Management weeks before Mexico’s so-called Tequila crisis in December 1994, when a huge devaluation of the peso triggered a banking crisis that was followed by successive crises in Brazil, Asia and then Russia.
Jain spent more than two decades at the Swiss asset manager, where he climbed the ranks to become co-chief operating officer and at its peak managed $50bn.
He departed in 2016 to found GQG, which has amassed more than $90bn in assets, including running more than $20bn for Goldman Sachs Asset Management. Since it launched in 2016 the GQG Partners Global Equity Strategy has gained 10.7 per cent a year, ahead of its benchmark MSCI ACWI index at an annualised 7 per cent, according to fund documents.
Jain believes that if active managers are to justify their existence and their fees, they have to stick their neck out and go against consensus.
“It’s very easy to buy Apple, Google, Microsoft . . . our job is to deliver alpha over the long run,” he said. “If you don’t want to be uncomfortable owning anything, why would you outperform? It will not happen.”
There is perhaps already some cause for discomfort. Shares in Adani Ports and Special Economic Zone last week slipped below the price at which GQG invested after a report that it was seeking more time to pay off some debts.
But with his bet on the Adani Group, spread across four of its listed companies, Jain is looking at a five-year time horizon. He believes Mumbai’s international airport, which sits within the ports-to-power conglomerate, could eventually be worth more than the entire business is now.
He said Hindenburg had failed to mention Adani’s “physical assets, regular assets, monopolistic assets — those are hard to replicate”.
For Jain the Adani trade is no different to other contrarian plays he has made in his career.
Most recently this included aggressively snapping up unloved energy stocks and meaningfully selling down holdings of technology stocks in 2021 because of higher inflation and valuations that were “in la la land”.
This helped GQG’s global equity strategy lose only 4.7 per cent last year when its benchmark was down 18.4 per cent, according to fund documents.
Cutting tech stocks “was damn controversial because the consensus is that these things are the best things since sliced bread”, Jain said. Using his five-year outlook, he thinks Amazon, one of the most popular companies in investment portfolios, “looks like a cult stock”.
Like Hindenburg, Jain’s 20-strong investment team counts former investigative journalists whom he put to work interrogating people in Adani’s ecosystem. Their conclusion was that the core operations were strong.
Jain said “ultimately, this business is about monetising the difference between perception and reality and we see reality differently to Hindenburg”.
GQG has had its own mishaps, most recently with investments in Russia where it had significant exposure before last year’s full-scale invasion of Ukraine. Jain said GQG had started cutting back before the war erupted but still kept some money in companies it believed would do well irrespective of geopolitics.
“The names we left in Russia were the names we thought would be fine even if things turned bad. As luck would have it, all of these companies are minting money still except, what we didn’t predict, was the capital controls.”
Russia exposure accounted for roughly 3 per cent of GQG’s emerging markets equity fund and about 1 per cent of its global quality equity fund, Jain said. GQG was forced to write the investments down to zero because of the sanctions imposed on Russia, which he said “haven’t exactly been really successful, to put it mildly”.
He said the Adani trade had received a positive reception on a roadshow in Australia this month where Jain was meeting some of GQG’s largest investors.
Nonetheless, Jain said he had sized the trade appropriately as with all his investments — which still include holdings in tech titans such as Meta, Microsoft and Google — to make sure it would not be catastrophic for the fund if it failed to play out the way he anticipated.
“If we lose 50 per cent it’s a bad three or six months, it’s not a bad five years . . . we can lose 75 per cent in Meta or maybe 30-40 per cent here. Pick your poison.”
