Tinker, tailor, soldier, sailor or rather, lumberjack, miner, salesman, author and fund manager Peter Major had been all these things when he landed the job of managing the billions of information technology whizz-kid Mark Shuttleworth. And not content with all that, he also stretches himself to the limit physically as a paraglider and distance runner.
Peter Major, investment manager for Mark Shuttleworth, has come a long way since his birth in a Canadian logging camp in May 1955. The range of jobs Major has held over the past 35 years all contribute something towards him playing a key part in investing the R4 billion Shuttleworth made from selling his internet company, Thawte, to United States-based Verisign.
All the proceeds from the sale of Thawte were brought into South Africa and invested locally. Shuttleworth's brief to Major is to get an annual return of between five and seven percent a year in dollars.
Major does not invest every cent himself. He looks after about R1 billion and the other R3 billion has been farmed out to local asset managers, who have strict mandates about what they are expected to deliver. They are paid fees based on their performance.
The list of asset managers, in alphabetic order, is: African Harvest, Allan Gray, Cadiz, Corohedge, Coronation, Decillion, FTNIB, Interneuron, Investec, Oasis and Sanlam.
Initially, an investment strategy of placing the money in banks and simply earning interest on it was considered. This low-risk approach would have earned Shuttleworth a king's ransom of at least R400 million a year (assuming a 10 percent return).
However, Major says Shuttleworth wants to do more with the money. He is committed to South Africa, and he wants to use the money to further develop and build the country to grow the economy and give individuals a head start.
The Shuttleworth fortune is managed by HBD Asset Management, HBD Venture Capital and the Shuttleworth Foundation. Major says that through the two companies and the foundation, Mark wants to put money into people projects, companies, organisations and ideas that benefit South Africa.
This is where Major comes into the picture. At the time of the Thawte sale, Major was very successfully managing FTNIB's Mining and Resources unit trust fund. The fund dominated the resources sector, and picked up the Personal Finance/Association of Unit Trusts Raging Bull Award for top performance for 1997, 1998 and 1999. Major also had a hand in a number of other unit trust and retirement funds.
Major says that when he first read about the sale of Thawte, he was sure the media had misplaced a few noughts. But as he came to realise the significance of the sale, he decided to attend a couple of talks given by Mark to fully understand how it all happened.
He then invited Shuttleworth to attend a few of his presentations. When Mark came along, I tried to interest him in giving some of the money to FTNIB for me to manage as a totally segregated Shuttleworth
special-purpose fund.
A relationship developed over about eight months, until Shuttleworth finally received all the proceeds of the sale of Thawte and asked Major to join his team.
To be precise about his title, Major is the chief investment officer of HBD, the acronym of Shuttleworth's investment company, Here Be Dragons. The name indicates that everyone who works for Shuttleworth must be prepared to push the outer limits. Here Be Dragons was what cartographers of yore inscribed on the edges of maps of the known world.
Down the mine
But how did the son of a Canadian lumberjack get to Shuttleworth's head office - an unpretentious building in Durbanville, in the northern suburbs of Cape Town?
After Major's father was seriously injured in a logging accident in 1961, the family moved from Vancouver, south of the border and took up residence in his mother's home town of Kellogg, Idaho. This move was to play a significant role in Major's future.
Kellogg is not the headquarters of Kellogg's Cornflakes, but the centre of the Coeur d'Alene valley, which contains one of the richest silver deposits in the world. There is so much silver, lead and zinc buried in the valley, that miners have not found the bottom and it is now almost too hot to mine any deeper.
It was an exciting time in the Seventies, Major says. The Vietnam war protests were getting bigger and louder; there was a run on gold all over the world, with people opting to sell dollars to buy gold, with the result that (the then US president) Richard Nixon, delinked gold from the dollar. All metals, particularly precious metals, soared in value. It was like the TMT (technology, media and telecommunications) investment bubble of the Nineties.
It was also a time when the Hunt brothers attempted (unsuccessfully as it turned out) to corner much of the silver bullion in the US, sending already outrageous prices even higher.
I put off going to college. I became what is called a tramp miner in 1973, moving from one mine to another, working as a hard rock miner, drilling and blasting tunnels and shafts. The pay was often one-quarter cash and three-quarters shares, which I was happy to take at the time. I was so sure I was going to be a millionaire before I was 21.
Then Gerald Ford took over the presidency and life in the US seemed to return to normal. The stock market rallied, the price of oil and most other commodities started to fall, and the mines cut back on projects and employment.
I still believed mining was the place to be, but I knew I needed a college education to be able to grow and develop in the industry.
In 1977, Major went to study mining at the Montana School of Mines.
Little did I realise that the four years I was in college would turn out to be even more successful for commodities and commodity producers than the previous four years. Unfortunately, college kept me out of that second boom.
But the boom was not to last and many people lost a lot of money by failing to cash out in time.
After completing his studies in May 1981, Major spent six months working as a mine overseer out of Fairbanks, Alaska, and then decided to come out to South Africa to get real deep-level mining experience - and hopefully set myself up as a mining magnate.
He had been interested in South Africa since Chris Barnard's pioneering heart transplant, and then heard South Africa mentioned in every mining course he took at college.
I was basing much of what I was doing on the book, The Mining Engineer, about Herbert Hoover who became president of the United States and who had spent his early mining years in South Africa and Australia. Hoover is the world's most famous mining engineer. He was my role model in much the same way that escape artiste Harry Houdini was my hero in grade school, Major says.
I had always wanted to work at Western Deep Levels, but Anglo American was not interested in me, so I took a job with Rand Mines and worked at Harmony Gold Mines in the Free State.
Two years later, in 1984, I was offered, simultaneously, a job at Western Deep Levels and a place to study for an MBA at the UCT Business School. I had a long weekend to decide and opted for the MBA.
After completing the MBA course, I had to decide what to do. Again, I followed the route of Herbert Hoover. He had become a consultant and so I tried consulting for a year, but it did not fit with me. I would go out to a mine, establish the problem and, 24 hours later, find a solution. But the consultancy I worked for would say it was a two-month problem. I also thought I was better suited to production than consulting.
In mid-1986, as Major was considering returning to the US, he was approached by a headhunter who offered him a job with the South Africa subsidiary of US-based Eimco Mining Machinery, the world's largest mining equipment company.
I would help develop equipment and then visit the mines to explain how to use it. I got to visit just about every mine in South Africa: coal, copper, platinum, gold, diamonds, manganese, chrome.
After three fun-filled years, I realised I was not going to get rich that way. So, once again, I followed Herbert Hoover and moved to investments.
Riding the markets
During this period Major co-authored a book, South Africa: the 51st state, which suggested that the way out of South Africa's political dilemma would be for the country to become part of the US. This would give South Africans the security of a sound constitution and a growing economy while enabling proper democratic structures to be put in place, which, the authors claimed, would generate significant investment.
At the time, the headhunter who got me the Eimco job asked if I knew of any senior mining person who might work for asset managers Allan Gray as a mining analyst. I became interested, so I went along for an interview. I didn't have any idea what a mining analyst did, but I had visited and knew about 120 mines and their managers in South Africa. I was probably too damn cocky and was a bit surprised when I got the job. Allan Gray obviously decided on my experience rather than my grades.
I had a great two years at Allan Gray as they were really good. The first year, I was blown out of water. It was a very humbling experience. By the second year, I'd improved and felt I could almost go head-to-head with the best of them. I wanted to start a mining fund, but they did not think it was the right time. They also wanted me to become a Certified Financial Analyst first, Major says.
In the end, I joined Leon Campher's up-and-coming team at Syfrets Asset Management (later to become FTNIB). I lived two blocks up the street and worked up to 16 hours a day, six days a week as an analyst of the mining sector. I felt I was on top of the sector, but you never really know until you manage a fund.
In the middle of all this came the walk-out of most of the Syfrets Asset Management team, who left to start Coronation.
Major says he was not told at the time what was happening, but in retrospect I believe Nedcor (which owned Syfrets) blew it. If management had handled the situation better, the walk-out would not have occurred. I don't think the team wanted to leave.
Those who remained had to rescue the situation. Clients withdrew R1 billion of the R7 billion under management, but 12 months later we were back to R7 billion. Three years later, we were back to number one in investment performance. I am still proud of what we accomplished.
In April 1994, Major was made co-manager of the newly launched Syfrets Prime Select, managing half the assets in a fund that was to establish itself as a front-runner. On the strength of how well Prime Select was performing by investing in mining and resources stocks, it was decided to launch a mining and resources fund in October of that year.
I was very concerned as mining shares were then at the highest they had ever been. In early 1995 the financial rand was abolished and most of the rand hedge shares (shares of companies that receive most of their income in foreign currency) lost 20 percent overnight. We were down 18 percent, even though we were third in the sector. The situation was complicated by not having proper control of the asset management process, Major says.
In mid-1995 the situation was made worse by a single multi-manager removing half the assets (nearly R40 million) in the Syfrets Mining and Resources Fund, which meant that Major had to sell many illiquid shares he was still expecting to see perform. Everything seemed to be going against me that year.
In 1996 Ivan Palframan took over Syfrets Asset Management and the fund managers were given a lot more discretion. That year, the Syfrets Mining and Resources Fund was the top-performing unit trust in South Africa, with a total return for the year of 50.2 percent. In 1999, it was first again, with a 131 percent gain.
Musical chairs
Major has quite firm views about the asset management industry. He says many asset managers see themselves as masters of the universe, and focus more on themselves than on their funds.
This situation is made worse by fund manager playing musical chairs, switching from one company to another. This is is not in the interests of the funds they manage, nor of investors, nor of the companies that employ them. How can anyone look a client in the eye and say I have your best interests at heart' if they have changed companies two or more times in as many years? Major asks.
So with 10 years at Syfrets (FTNIB) under his belt, he was hired by Shuttleworth on April 1, 2001.
Major says both he and Shuttleworth are strong believers in indexing (investing in the shares that make up a particular index). For the R1 billion Major manages personally, he uses a combination of indexing and stockpicking (selecting shares).
I believe in indexing if you are investing for the long term. I think most guys are fooling themselves if they think they can beat an index in the long term. There are people who can do it for short to medium periods. I did it, but very few managers can keep it up over the long term.
Major says if Shuttleworth's funds can make a consistent return of five to seven percent a year in dollars, we can do really beneficial and progressive things in South Africa with the excess returns. There are a lot of worthy causes here.
At his peak
Major is not a single-subject person. He's a high-flyer, who seems to be compulsive about everything he does. And he's a fitness freak - to put it mildly.
And his high-flying is literal, as well as figurative: he loves nothing more than jumping off mountains with a paraglider. And if he isn't jumping off mountains, he is running up and down them.
Major is the reigning champion of one of the most arduous sporting events in the world: the Three Peaks Challenge, a race up and across Cape Town's three mountain peaks. The race starts below Rhodes Memorial, goes up to Devil's Peak, down to the saddle between Devil's Peak and Table Mountain, up to the highest point on Table Mountain at Maclear's Beacon, off the front face of the mountain, down Table Mountain Road, and up to the top of Lion's Head ... where it finally ends. Major has won the race nine times. His best time is two hours and 40 minutes.
He used to hike up Lion's Head three days a week, but now finds that his training schedule has been curtailed by age and the need to travel between Durbanville and Cape Town.
But it sounds as though he's wise to keep fit for the challenge of handling the Shuttleworth billions.
Major says Shuttleworth is the neatest guy I have ever met. He is a super guy, who is razor-sharp and knows what he wants. Mark knows the asset management business, and even just one hour with him leaves you exhausted - more so than all three peaks!
The R1 million question
Personal Finance:
What should someone with R1 million to invest do with his or her funds?
Peter Major:
When you have seen Allan Gray's performance over all the time performance judgment periods, and when you have worked there for two years and seen how they achieve their performance, then it's impossible not to want to give them all your money. The same applies to Oasis. But for most people, the Alsi 40, which tracks the country's top 40 companies, is not a bad investment. The JSE Security Exchange's Satrix 40 index investment is probably a good choice too. I am big on index investing. With Satrix the costs are low and you are likely to out-perform most fund managers. But you must invest for the long term and see out the ups and downs.