Investment secrets of billionaire David Hains

Investment secrets of billionaire David Hains

Published 06 January 2014 10:32, Updated 06 January 2014 12:20

Jonathan Shapiro

David Hains founder of Portland House investment business James Davies

At the far northern end of Melbourne’s ­Collins Street, nestled between an optometrist and a quaint stained-glass coffee shop, is a large wooden door fronted by two ­columns, lanterns and a metal crest.It’s the entrance to Portland House, the grand three-storey Victorian terrace built in 1872 for Henry Miller, a well known financier and politician, and later occupied by the state’s finest surgeons. But for the past 50 years it is has been the global headquarters of one of the world’s most sophisticated and secretive investment funds.

The Portland House Group has managed and grown the fortunes of the Hains family to more than $2.3 billion, making it among the largest private funds in the nation, through the most severe of financial storms.

Motivating People to Perform at Their Peak

by Art Markman  |   9:00 AM January 14, 2014

Almost all decisions, big and small, are choices between exploring new possibilities and exploitingold ones. When you explore, you select an option that’s unknown—or reexamine one that wasn’t optimal in the past to get new information about it. When you exploit, you choose something that’s yielded good results before, believing it will do so again.

Of course, the known course is safer. But if the newer, riskier one works out, chances are it will also pay off more handsomely.

Take the music industry. Every spring, industry reps descend on my hometown of Austin, Texas, to size up hundreds of bands and singer-songwriters at the SXSW conference. Those reps face a difficult decision: They can search for the next Muse, Spoon, or Arcade Fire—bands that will do just fine appealing to an established fan base. Or they can sign artists with a fresh sound and the potential to become a sensation.

If you’re their boss, you probably want them to aim big. But how do you get them to do that?

Quite a bit of research on the psychology of motivation (some of it done in my lab) examines that question. The effect is a little complicated, so let’s take a minute to walk through it:

At any given moment, an individual’s motivational state is rooted in one of two objectives: what that person wants to obtain or achieve or what he or she wants to avoid. (Columbia psychology professor Tory Higgins refers to the former state as promotion focus, the latter as prevention focus.) Salient factors in the work environment can trigger either state. Suppose an employee is working on a big project and knows he’ll get a bonus if he succeeds. That bonus on the horizon may increase his sensitivity to all potential benefits and rewards in the world. Now, say the same person has an upcoming client meeting and fears he’ll lose that client’s business. Those circumstances may shift his focus, heightening his awareness of all potential risks and punishments.

People are more likely to explore new possibilities when their motivational state is in sync with specific rewards or punishments they could receive. For example, in a positive talent-development culture, an ambitious employee is inclined to develop new skills or take on a stretch assignment to advance. In a more negative culture, someone who receives little praise and lots of critical feedback is motivated to explore new job opportunities elsewhere.

But when the motivational state doesn’t match the rewards or punishments, people tend to rely on tried-and-true approaches. If someone strives for advancement despite criticism from her manager, for example, or wants to avoid disappointing a boss who is generous with positive feedback, she’s more likely to exploit known, reliable solutions than to try something new.

To boost people’s desire to explore new options, create motivational consistency. You can do that by adjusting rewards or punishments to match the motivational state. If you’re managing a few of those music industry reps at SXSW, for instance, you might offer some desirable perk for the person who signs the freshest act. The potential for that reward will create a promotion focus that’s consistent with the fun, lively vibe at SXSW. But if your company is struggling financially, you might use consequences, not rewards, to create consistency. It won’t be pleasant in the moment, as people try to avoid those consequences, but it will increase their likelihood to explore new options.

 

Since the Hains family turned to the financial markets in the early 1980s it has invested with the world’s most fabled hedge fund investors, charting their rise and fall.

They include an ambitious young ­Hungarian by the name of George Soros who broke the Bank of England, the market-busting maths genius Jim Simons, and John Meriwether’s notorious Long Term Capital Management. All have had managed money from Collins Street.

The exploits of Portland House are well known among the international prime brokers, consultants and advisers who serve the hedge fund community. Yet Portland House has been largely hidden from the prying eye of the public.

That’s the way 83-year-old patriarch and BRW rich-lister David Hains has wanted it.

“The only appreciation I want is from my Saturday golf partner if I hit a good shot, and that means someone else buys our breakfast on a Saturday,” he says in a rare interview with The Australian Financial Review.

But he agreed to open the doors of Portland House to the Financial Review, offering a glimpse into the workings of a pioneering Australian investment house that many who know it hail as a global gem.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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