Why having the right CEO in charge matters for shareholders

Welcome to our inaugural blog post. My name is Tony Scenna and along with my colleagues Corey Vincent and Martin Greenberg we established the Selector Funds Management business in 2002. Through this site my aim is to share views on a range of business topics and in particular the way we go about the job of picking the best managers and the best businesses so that the rightful owners of those businesses – the shareholders – get to enjoy something in return. Sometimes the views expressed are likely to be controversial, sometimes thought provoking but above all my aim is that you leave the site a little more informed than when you first clicked on.

Today I read a story on David Deverall who is now running listed wealth manager Hunter Hall International. He noted that as a 25-year industry veteran, investor sentiment in Australia is the worst in his experience, a situation that has led to a paralysis in decision making. I agree, but uncertainty brings opportunity. What we do every day at Selector is follow a process to find a few of the better businesses run by people that we can trust to do the right thing by its shareholders. It sounds simple but not without its complications. Sometimes the toughest call is actually making investment decisions that are unpopular or at least contrarian in nature.

So would we back Deverall in his new role at Hunter Hall?

Having watched him in action at a place where I cut my investment teeth – Perpetual – the views I have formed thus far are not positive. His time running Perpetual from 2003 and 2011 was marked with a mandate to expand aggressively into multiple new investment fields. Obviously the global crisis that hit in 2008 impacted every investment house including Perpetual. However the new fields in which the group had expanded into led to some serious loss of shareholder capital. Today, Perpetual is aiming to return to its core as is often the way when a business loses its way.

However perhaps what tipped the scales for me were his comments in a newspaper article I recently read. And please remember he is the new CEO. He acknowledged that investors were sticking with cash and even he saw no compulsion to do otherwise. In fact acknowledging that he had some spare money recently, he chose to leave it in cash on the advice of his financial advisor because of the uncertainly in the marketplace. There is nothing wrong in seeking external advice or sometimes doing nothing until things become clearer. However i am concerned that a newly appointed investment veteran who is aiming to drive the business lacks clear direction. On that basis one wonders whether Hunter Hall might be better served employing the financial planner.

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