Featured Profile: Russel Pillemer
Preserving wealth with Pengana
Pengana Capital chief executive Russel Pillemer tells Jamie Williamson how the company was founded on a friendship with the future Prime Minister of Australia.

Despite always thinking it would be something he would enjoy, it took just one week of medical school and the witnessing of his first surgical procedure for Pengana Capital chief executive Russel Pillemer to realise that a doctor's life was not for him.

"I lasted all of a week. All new students were taken to watch a hernia operation and within minutes I'd decided that all the blood wasn't for me," he says.

We really shine in those markets because we're very focused on protecting investor capital.
"I walked out feeling sick and quickly set about figuring out what did I want to spend my life doing."

Having always enjoyed mathematics and economics, Pillemer decided that a double degree in accounting and commerce would best position him for a career in business. In 1986, while still studying, he packed up his life in South Africa and emigrated to Australia.

He completed his studies at the University of New South Wales and, upon graduating, commenced his professional year with Ernst and Young before getting his start in investment banking at Credit Suisse.

After 18 months learning the ropes, he applied for a job at Goldman Sachs.

"It was the early nineties and, especially in those days, it was where every aspiring investment banker wanted to be," Pillemer says.

Goldman Sachs represented the pinnacle that Pillemer had always wanted to achieve, believing that his time there placed him in good stead to succeed no matter the trajectory of his career.

"I was extremely lucky to grow up in Goldman Sachs' pre-public era. There was a definite feeling in the business around how they nurtured and invested in their young people. A lot of what I used in building Pengana was reflective of what I had observed, learned and had ingrained in me during those days," he says.

For almost a decade Pillemer worked in various roles, travelling back and forth between Sydney and New York before returning to Australia for good in 2002.

"I had spent the last four years buying and selling funds management businesses in the US and, when my wife and I had left for New York, we only had one child. We now had three with another one on the way and we really wanted them to grow up in Australia," he says.

As fate would have it, now-Prime Minister Malcolm Turnbull - who joined Goldman Sachs in 1997 and developed a solid friendship with Pillemer - had just retired from the firm and the two decided to go into business together.

Though he had never managed money himself, Pillemer felt he had gleaned enough from his clients over the years to try his hand at it.

"I thought I had learnt a lot by that point from the various people I'd dealt with and that I was well-placed to develop something special - for Malcolm and myself to build something unique for funds management in Australia," he says.

The partnership proved successful for six years before Turnbull decided to enter the realm of politics and sold his stake in Pengana to the National Australia Bank.

"Getting into business with Malcolm is absolutely a highlight of my career - I wouldn't be where I am if I hadn't. He is a great business partner and mentor to have; we did a lot of good stuff together," Pillemer says.

While most business leaders might have cried at the prospect of such an upheaval in the middle of the Global Financial Crisis, Pillemer was confident the distinctive business model and investment strategy they had designed would endure.

"Our funds performed fantastically throughout the GFC. First and foremost, we look to protect client capital. If the markets go up in a bull market-type phase, we don't expect to outperform, but when they go sideways, and particularly when they drop like in the GFC, we should vastly outperform," Pillemer explains.

"We really shine in those markets because we're very focused on protecting investor capital."

As a brand, Pillemer says Pengana stands for stability, alignment with clients, and the delivery of strong, long-term returns. "It all happened very quickly. Soul Pattinson bought NAB's stake in Pengana just before Christmas and then, within days, they were looking to buy Peter Hall's share of Hunter Hall and we began looking at ways to combine the businesses," Pillemer says.

He describes the reverse takeover as a unique opportunity, saying that the actual business transition ran quite smoothly given that both firms were retail and high-net worth focused.

"Pengana had grown by close to 30% year on year over the last few years, whereas the Hunter Hall business had been diminishing in size for quite some time. It represented a great opportunity for us to bring the Hunter Hall funds under the Pengana umbrella, to reinvigorate them and get investors excited about investing again," he says.

Pillemer knows that this may take time, though he says the response from ex-
Hunter Hall investors has been overwhelmingly positive.

"The way we manage money is fundamentally different to the way Hunter Hall did. We aim to get consistent, long-term returns with minimal volatility, whereas they had quite a high-risk portfolio. We've spoken to a lot of the ex-Hunter Hall investor base and we haven't come across one that doesn't agree that this is a better way to manage money," he says.

Contributing further to the growth of the business, Pengana partnered with UK ESG specialist WHEB and, just before the Hunter Hall transaction, the firm took approximately 10% of the equity within the business and distributed it among staff.

"That is something that I am incredibly proud of. It gave me great pleasure and I believe it will add hugely to the value of our business over time," Pillemer says.

With so much going on at work, Pillemer finds solace in spending as much time with his family as he can. He also tries to keep as fit as possible, though he stays away from competitive sports after a snapped Achilles heel cut his semi-professional soccer career short.

"I just have to imagine where I might have ended up while I watch the kids now," he says.

He also fills his spare time working on The Orah Project; a philanthropic endeavour he co-founded with his wife, working to assist charities for the disadvantaged in the Jewish community as well as Jewish charities that benefit the greater community as well.

This enthusiasm to help others has ultimately shaped the business model at Pengana Capital, with Pillemer saying that while the firm was never looking to go public, the added capability and expertise it now boasts enables Pengana Capital to do what it was doing even better than before - safeguarding clients' wealth.

"We're not that manager who year in year out you'll see at the top of the list, but we're that consistent manager that's always up there in sideways and down markets. That's the kind of manager that people need and want in their portfolios," he says.

"Wealth is a pretty precarious world, so there's nothing better than when the markets are down and your clients are calling you up thanking you for protecting them - that's the best feeling."

Link to something pubSnp43