Meet Investor extraordinaire Aly-Khan Satchu

Aly-khan Satchu

Aly-Khan Satchu is an active investor in the Nairobi Securities Exchange

(NSE), the USE and various other African stock markets. He invests both his personal finances and those from other parties. He is a point of reference when it comes to trading and a regular feature on Aljazeera and CNBC. His wealth of experience guarantees that he understands how to navigate the choppy waters of the African markets.

He is also a distinguished author, having written the book ‘Anyone Can Be Rich’ which discusses the NSE and the Kenyan economy.

He was born in the year 1966 in Mombasa, Kenya. His parents did their best to expose Aly-khan to the world from an early age and sent him to boarding school in London at the age of 13. Studying abroad had been part of the family tradition passed from father to son and It was rooted in the belief that the centre of the then British empire was the best place for a decent education. Aly-Khan’s father knew his temperament and told him not to study law, but against his father’s wishes, he proceeded to study law at the University of Durham, in North-east England (this must’ve been Aly-Khan’s youthful rebellion). When he was done with school, he moved to the city of London where he got work at one of the lowest positions at Credit Suisse.

The moment he got to the trading floor it was as if something finally locked into place. He always had a passion for numbers and thought that he would enjoy the challenge of the market against his intellect. Every day spent working at the printer on the trading floor affirmed his interests. After long months spent learning how everything worked, he got the opportunity to deliver a document to the bank’s Vice Chairman. He pleaded his case and got the opportunity that launched him onto his career.

In his first year, they had set a million dollar target for him and he broke past and made a whopping 15 million dollars! And just like that, he secured his fate.

In an exclusive interview with White Collar, He reveals a few tricks to his trade, the secret to his drive and we get to find out what makes him such a terrific trader.

I walked into the open plan office, and Mr Satchu was seated at the far right, hunched and facing his computer. He seemed occupied and focused but as soon as my arrival was announced to him, his entire demeanour changed. He calmly invited me over and sat me sit opposite him. A bit of introductory small talk ensued and we eventually settled down and were ready to get into the nitty-gritty of what makes up such an illustrious career.

Who is Aly-Khan?

That’s the most difficult question to answer, hehe. I think discovering one’s self is a journey. Even as an older person you still discover new parts of yourself. And I’ll leave you with the words from a famous thinker San Tzu who said ‘Understand yourself before you understand your enemy’

Who is the enemy in your analogy? The enemy here isn’t a physical enemy per se. The enemy is anything that moves you from your path. And if you’re on the journey of self-discovery every day it gets easier to identify the things that derail you.

What was your childhood like?

I was brought up in Mombasa as a young boy, and I appreciate the upbringing. That was about 45 years ago and a lot of things have changed.

Mombasa used to be a small town where everyone knew everyone else. It was also quite cosmopolitan; there were all kinds of people represented there. I still love to visit the place and have some ‘madafu’ or even enjoy some ‘mhogo'

Who were your role models of your youth?

Being brought up in Kenya I would always admire people from Africa who would go abroad and create a name for themselves. That kind of person inspired me.

From a markets point of view someone like George Soros, and I know it’s a dirty name now. But in those days he was a fantastic trader. Later on, when I started working, I saw him in action. It was when the pound collapsed, and Soros made a billion pounds. It all unfolded in front of me and I was in the middle of it. I admired his instincts to identify an opportunity in the markets and the instinct to capture those opportunities. It’s a difficult task because quite often we are able to identify an opportunity but not capture it. He made both things happen.

Other heroes of mine were people like Nelson Mandela. He was a leader of my generation and I found him to be someone I could identify with. I liked his moral compass and I don’t think there was anything he said that I could disagree with.

Were there any personality traits that signaled a career in investments?

I always liked numbers. As a young boy I remember I’d drive my father mad because I kept trying to calculate the cost of re-developing the Mombasa Gold Club. Hehe.

I would describe myself as someone who likes to ‘understand’ as much as possible. The more information I can absorb the more of an advantage it gives me.

What was the most challenging phase of your life?

I think the most challenging time of my career was when I was about 28, and I had just been made a Managing Director and I had the responsibility of a lot of people. It suddenly woke me up to the fact that I wasn’t just a striker but I was now part of a team. That was quite a dramatic moment for me.

Of all the places you’ve worked, which place stood out and why?

That has to be Credit Suisse First Boston, which is now Credit Suisse.

In fact they appointed their first black CEO, Tidjane Thiam.

I would describe that as the most interesting place I’ve worked for. The reason I’d say that is because they have so many, very brilliant people in one area. It was quite challenging and the people would always push back but at the same time, I have never seen that density of very smart people in one organization.

Today it’s a bit different but in those days… their ability to react to react to events and speed with which they reached a decision was amazing. I have not seen that replicated elsewhere.

These guys were squash-buckling capitalists who moved enormous amounts of money around the world quite quickly and were able to make profits from that, while also supporting their customers.

How does one know it’s the right time to change employment or like in your case begin to trade your personal funds?

The society today is not like it was back in my day. Case in point, I have a friend with a big IT business somewhere in Eastern Europe and all of a sudden these employees would resign and when asked why they’d say ‘we’re just bored and want something different!’

Today the society is more of a gig economy and the decisions that govern career change are up to the individuals. Today it’s a bit more flexible and daring.

In my situation, I was working in the City and I had just turned 40 and I needed a change. But mostly I wanted to be back home because I knew that Africa was about to take off and the last thing I wanted to do was be in London while Africa took off.

What would you say the investment Climate is like in Kenya?

Interesting question. Well, we’ve got to put it in the context where we came off an election and the economy was at standstill but we’re seeing things slowly picking up momentum. Typically the year after an election should be a good year. We saw the two principles shake hands which were symbolic but also sent a very strong message.

One thing that people underestimate about Kenya, especially Kenyans like ourselves, is that we have a free market economy up to a degree. We can freely move money and invest it. We cannot take that for granted.

What’s your outlook on the derivatives market in Africa?

I traded derivatives for a while.

I think when it comes to derivatives markets this is where we are really... (pauses to suggest thinking deeply) this is where we have no sovereignty. If you want to talk about sovereignty talk about derivatives markets; let me give you an example, One time the oil price was over $ 100 a barrel. African governments that were oil producers could have locked in, for say 5 years, an average price of $90 a barrel.

Not one did!

They risked their people’s well-being because they did not understand there was an opportunity here to reduce the risk for themselves.

Africa needs to take more control of its natural resources and one way to do so is through taking control of derivatives. It’s a classic problem, I mean, there is no value addition if we’re selling resources at the spot price offered at the markets.

Countries can also protect themselves against these big surges, for example, the last time the shilling fell out of bed was when the oil price went up.

Why aren’t we competing with the rest of the world here?

Because those are highly paid and highly specialised jobs! Historically the best of banks were in the western world and they managed to concentrate expertise and strength in those capital cities. They paid high salaries and sucked in the talent. Given that, Africa just hasn’t been able to compete so far. But I have confidence that we are going to begin to compete. We’re looking to set up institutions that function at that level, for example, Nairobi is starting to create a financial centre.

Do you have any inclinations to begin a center that trades derivatives?

Yes, in fact within the next 12 months we should have something going.

We have seen Countries use debt to take advantage of unsuspecting countries, how do we make sure Kenya doesn’t end up in a situation like this?

This criticism is pointing at China; in the case of the port of Hambantota that China constructed for Sri Lanka. Sri Lanka could not make the interest payments of the port and the Chinese took the port on a 99-year lease.

I think we should be careful. African countries look at debt as something that can be taken without much thought of repayment. Debt should be invested sensibly. You should get a better return for your investment than the interest you’re paying. We’ve got to scrutinize what our governments are doing and think about our national interests over our personal interests.

Are Cryptocurrencies the future of money?

I think there’s room for alternative non-fiat currencies, and that’s the void that cryptocurrencies are trying to fill.

I was very bullish about Cryptocurrencies in early 2017. I saw it as an asset class that was going to grow and it grew exponentially. However, in 2018 an investor should be a lot more careful. There are more than 1500 cryptocurrencies and not all of them will succeed, so the investor has to turn into a bit of a stock-picker. The rising tide that floats all Cryptocurrencies is gone, so it’s now a bit more complex. The main issue though, is around the parallel economy; governments will not allow these currencies to go on unregulated.

Traders are familiar with making the occasional loss. Give us an example when you did and tell us of any possible lessons you learnt.

Losses are the most difficult thing for any trader. It’s like a punch in the solar plexus.

This, however, is a continuous learning exercise and it’s all about risk management. The best traders are the best risk managers.

The memory that stands out most all was around 1995, I was moving to Sumitomo bank with my team. I had a very strong conviction about Europe, that time Europe was in a recession. The European economy was dead and in that kind of environment central banks cut interest rates in order to stimulate the economy.

I had taken a pretty big position in the T-bill (treasury bill) market in France. At first, we were up $ 5 million which was incredible. Then two things happened. Jack Chirac, the then president of France, set off an underwater nuclear explosion. And at the then, someone poisoned Perrier water bottles. These two events created a lot of pressure on the French currency. Our position which was +5 moved to -10.

I learnt how to deal with that. More clearly I learnt that was too big a bet. You can have a conviction of 110 per cent but you still have to manage your risk. Anything can happen. I also learnt to appreciate that I was with a group of people and it wasn’t just about me.

Are there any missed opportunities that you wish you leveraged?

Oh yea! There’s so many.

In the Markets, you spot numerous opportunities. My problem, however, is spotting it, but then not holding on to it. There’s a book I like, ‘Reminiscence of a Stock market operator’ and in it, the author says ‘You have to run your winners.’ There are times when I didn’t run my winners.

Aly Khan Satchu and Maurice Hennessy

An example is Netflix, It’s grown more than a hundredtimes since I spotted it. People thought it was just anAmerican business, but I put two and two together and sawthat it was going to be a global business

Have you invested in any start-ups?

Yes!

Examples?

I won’t give you the names, Hehe. But I have. I’ve investedin some think-tanks and some financial services startups.And still, I’m looking closely at a few start-ups atNairobi garage; there’s new things popping up there allthe time. I’m also considering going more aggressively intoagriculture because of the potential it has in Kenya.

So yea, ICT and agriculture

You’ve been in close proximity to heads of state. Have you used these opportunities to affect change?

I’ve been very fortunate with that. Sometimes I’d evenposition myself for a ‘chance encounter’. The chancemeeting isn’t really a chance meeting. Hehe.

In moments I’ve met the British Prime Minister, TheJapanese Prime Minister, The head of the IMF and Africanheads of state. I like to think that it’s in moments like that Ireally shine and lobby. But the tragedy is that you can pusha beneficial agenda but the road to policy is very tricky andnot many ideas live to be policy.

What trends in business and policy would you encourage in Africa?

I think for Africans, if we can trade across our borderswithout impediment, it would create a huge and dynamicmomentum for us.

Also the sheer number of people we have to findemployment for is unprecedented in History. We need tofigure out how to create more employment and improvingeducation.

We also have to figure out how to reduce the cost of living.It’s surprising that the cost of living in Kenya is higher thanthat of Poland. Also a friend of mine recently informed me that in Vietnam; you can eat and access the internet 5G, daily for less than a dollar a Day.◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊