"There were no secrets anymore."
We are dealing with other people’s hard earned capital, and it’s a very serious responsibility. It’s their family money so I like to make sure I’m managing that money the way I would want my own money managed, and my money is also invested in the fund.” comments Adrian.
Rather bizarrely, “That’s very rare in the funds management business – it’s crazy it’s so rare. I don’t see how you can have confidence in a fund manager if they’re not living in your shoes. That means I manage their money how I manage my own. It may not be the best way, but at least I’m doing it with the right intent.”
It’s that level of credibility Adrian believes sets his business apart, and there’s never a thought of deviating, even if it means slower growth for his company. “At times, things can feel like they’re moving a bit more slowly than you’d like. It’s part of the game, and you need to keep focussed on your objectives and your principles.
“There have been opportunities to grow the business more quickly, but I felt they would result in us compromising our principles. There have been opportunities for us to partner with others, but that would involve making shifts to look more like others in the market place. I think that brings a lot of negatives and drawbacks, and we’re trying very hard to not do that.”
That ability to stay focussed on your beliefs is a trait that has been a part of Adrian’s makeup for as long as he can remember. As a young boy, growing up in Wollongong, there was a fantasy to be a racing car driver and you can’t help believing that in some parallel life Adrian Warner is the Peter Brock of that world. But in this world, when the rubber hits the tarmac, Adrian was clear on where his life was headed.
“I’ve always been one of those people who’ve been very fortunate, in that I’ve always had a clear idea of where I wanted to go.” And that was into business.
“I regarded it as a blessing as I never had to make those decisions about what I would be when I grew up.” Even his mates knew Adrian was a little different; while they were reading Spiderman comics and Richie Rich, he had his head buried in big picture stuff. “I was reading ‘Barbarians at the Gate’.”
For the uninitiated, that might sound like a great action novel, with Arnold Schwarzenegger getting the lead role in the movie version of the book. In fact it’s been described as ‘one of the most influential business books of all time’. Written by Bryan Burrough and John Helyar, it’s ‘a gripping account of the frenzy that overtook Wall Street in October and November 1988. The story of deal makers and publicity flaks, of strategy meetings and society dinners, of boardrooms and bedrooms.’
It’s claimed to be a ‘must read for everyone interested in the way today’s world really works.’ So Adrian was on track and his parents couldn’t have been happier. “I have four siblings; my older sister is a doctor, so they already had that covered, another sister went into marketing and my brother was a physicist so Mum and Dad felt we needed an accountant in the family.”
Adrian studied Economics and Finance at the University of New South Wales and found those to be pretty good years. “I did well enough to achieve what I wanted to achieve, and I had a fairly large social group. I was never an overly studious person but did enough to get by.” ‘Enough to get by’ is code for completing an Economics and Finance degree with first class Honours.
At this stage there was no thought of being an entrepreneur, the focus was more about working overseas and even getting the chance to study at Harvard. Staying in Australia seemed a bit limiting. “I always had the sense that not only was Wollongong a fairly small place, but also that Australia was a small place too.
“I was very fortunate as, coming out of University, I landed a job with Bain and Company, the management consultancy firm, and they had a policy of sending you to one of their big overseas offices to get indoctrinated in the Bain way. Literally my first day working out of Uni was in San Francisco,” Adrian recalls.
Those were fairly unpredictable times in the financial world and Adrian remembers having his travel plans changed repeatedly. In the week before starting, his destination was tossed around from San Francisco, to Boston, to London, before finally settling back at San Francisco. A wild ride for a young University graduate stepping out into the wide, wonderful world of the workforce.
“That was in 1991 and I wasn’t following the world economy. The company was in all sorts of difficulties, firing people and closing offices down. London had some problems in the middle of the Guinness scandal with the big brewer while Bain was only peripherally involved in that. It was all very exciting as a youngster, not knowing quite where I was going to end up.”
A two year stint travelling the cable cars of San Francisco was followed by a transfer back to Australia, but again his native country was too small to keep Adrian. He was offered and took a job in New York, which brought him closer to fulfilling that Harvard dream.
“I spent the next couple of years with a private equity group (AEA Investors) in New York and it was really from there, as I was only a few hours away from Harvard, that the Harvard Business School dream became a bit more real.”
Happily for Adrian, “It fell into place really, and it was very fortunate I had a very clear idea of what I wanted to do. I never had to worry about did I want to be an engineer, or an accountant, or a doctor, or property developer – they were never really temptations to me. I went through the application process with the Harvard Business School, and then moved from New York to Boston for a couple of years.”
Again that clarity was guiding Adrian. Two years of business school and his goal was to get into the private equity industry in the US and, you guessed it, that’s exactly what was about to happen. He applied for and was accepted for a job that would take him back to San Francisco.
“My mind was made up; it was one of those situations where you make a decision and your brain tells you it’s a wonderful opportunity. It was a great group, one of the bluebloods of the private equity industry, doing tremendously well, based in SF which was a city I really liked, how can you turn it down?”
That’s right, how could he turn it down? For the first time in his life, Adrian had doubts. “I woke up the next morning and just felt sick, felt I’d made one of those decisions, that it was just not right. It didn’t feel right, and that had nothing to do with the company, it was just that I felt at the time that it was time to come home. It had a gnawing sense of unease about it, which was really interesting because that had never happened to me before.”
It wouldn’t be the only time, although the second dose of doubt would come a decade later.
Adrian accepted a job back in Australia, with some of his old bosses from Bain who had set up a company called Pacific Equity Partners. So, he did make the move back into the private equity industry, it just wasn’t in the United States. Amazingly it took a country he thought was ‘a small place too’ to steer Adrian to his eventual destiny; the establishment of his own company. A move into entrepreneurialism.
After a couple of years working at Pacific Equity, “I was approached by a large international group, CVC Capital Partners, which is a big global private equity powerhouse, to help set up their operation in Australia. “It was a large organisation globally made up of a lot of small offices. I’d never really been bitten by the entrepreneurial bug myself, but I’ve always enjoyed working in small groups where you can feel like you’re part of the team and can really contribute in a noticeable way. So it had a lot of the characteristics of an entrepreneurial organisation.”
Adrian settled down. He was back home and learning, and while not necessarily realising it, he was being groomed to set up Avenir. He remembers it being a fun time in the industry, with plenty of “really interesting transactions being done” and the business was having a great run.
The doubts then set in again. Adrian had become disenchanted with the industry; he wasn’t enjoying it and tried to get out several times, only to be talked out of it. “The industry had gone from being very entrepreneurial with a lot of creativity and where it was all new and exciting to being much more institutionalised. The novelty went out of it for me personally. A whole infrastructure grew up around the private equity industry, like lawyers and accountants who really built their careers on supporting private equity firms.” In summary, “There were no secrets anymore; everyone knew how you could structure transactio ns. It became harder to differentiate yourself, and it felt like the industry had reached its heyday.”
Imagine always knowing what you wanted to do, being absolutely focussed and achieving it, and now being disillusioned. Adrian was in uncharted waters. He tried working for another company, but just couldn’t re-ignite the passion.
“The main thing is to have real passion for what you’re doing, and that means passion for the idea itself.” It’s advice Adrian now hands out to any prospective entrepreneur and, at that point, it was time to listen to himself.
“You have to truly believe in what you’re setting out to achieve, if you don’t, you won’t be able to maintain that passion and enthusiasm. So passion is the single most important advice I can give to someone starting out their own venture.”
Adrian took a year’s sabbatical to travel the world with his family, and somewhere between France and Greece he rediscovered his passion for business. He also discovered ‘life’ and getting the work-life balance on more of an even keel was a driving force to setting up his own business. Long hours, seven days a week and working to European timeframes were exciting when he was young, but not now.
Young! That was a concern though; Adrian was on the wrong side of 30, in fact the wrong side of 40, and wondered whether it was the right time to be starting something new. To solve that problem, he drew on another success formula followed by enterprising entrepreneurs, the value of mentoring.
“Most of my ‘mentors’ don’t know I exist, but one of the joys of the public market is that people are willing to share their experiences and their learning. I wouldn’t call them mentors as such because they’re not giving personal direct advice and guidance. There are, however, many people in the industry who have written volumes such as Warren Buffett and they become spiritual leaders.”
What most appealed to Adrian about Warren Buffett “is his independence of thinking. What he says is now regarded as common sense and very mainstream, but 50 years ago it wasn’t. He had principles and the courage of his conviction. Over and over again, he always had that courage of conviction.”
On the age problem, Adrian recalled a lesson from his Harvard days. “I remember a business school professor of mine saying if you’re going to start a new venture, don’t start one that’s going to take twenty years before you know if it’s working or not. He said the biggest commodity you’ve got to lose is time.”
There was also the question of enjoyment and his enthusiasm for the project. Adrian believed it was all manageable, and in 2011 created Avenir, his launching pad as an entrepreneur.
Today, “Avenir Capital is an investment firm specialising in fundamental, value oriented and special-situation investments in global equity markets. My background is in private equity and I spent many years buying private businesses and working to create value before selling them on. Now we do a similar thing but in the public market.”
Essentially, “Avenir buys international businesses when the market offers them to us at a bargain price – when we think the market’s made a mistake. We invest in special situations and quality companies undergoing change or transformation which we can buy at a 50% discount to a growing intrinsic value.”
Again, conviction is a vital element as Adrian explains, “You have to have a high level of conviction that what you’re doing is sensible. For me, there’s no other way to manage money – it’s a low risk, sensible way to deliver good compounding returns to our investors. We avoid industries with a lot of change like tech companies or commoditybased businesses. We are not fans of either as there are many unpredictable factors which are out of your control. We stick to straightforward industries we can understand.”
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At the corporate level, Adrian has linked Avenir with Future Generation Global Investment Company (FGG), an investment company providing shareholders with diversified exposure to selected global fund managers while changing the lives of young Australians affected by mental illness.
The objective is to help improve the lives of young people with mental health issues by providing financial support to designated charities. FGG offers investors the opportunity to gain unprecedented access to Australia’s most prominent global fund managers, a number of whom are closed or not accessible to retail investors, through a single ASX-listed investment vehicle.
The company charges no management or performance fees. Fund managers manage the capital entirely pro-bono so 1.0% of net assets each year can be donated to Australian non-profits committed to young Australians affected by mental health issues.
FGG’s hope is that the initiative will inspire the next generation of Australian private and corporate philanthropy. Other than government, FGG hopes to be the biggest funder in the youth mental health space.
“It’s a listed investment vehicle started by Geoff Wilson, of Wilson Asset Management. He’s assembled a panel of fund managers who all invest in international markets and they provide their management for free. It’s a wonderful initiative and we’re very pleased and honored to be able to play a role,” says Adrian.
- “There were no secrets any more.”
- “You have to truly believe in what you’re setting out to achieve.”
- “We buy international businesses when the market offer them at a bargain price- when we think the market’s made a mistake.”
There’s a simple business philosophy taught in Economics 101; ‘if you’re in the business of selling Holdens, don’t drive a Ford’.So, if your business is investing other people’s money, it makes sense to invest your own money in the same areas you’re investing their money. When you break it all down, that is pretty much the philosophy behind the success of Adrian Warner.