Chris Cuffe is one of Australia’s pioneering fund managers. Now he uses those skills to help others, blending investment savvy with a philanthropic mission.
Chris Cuffe is an Australian funds management legend. Halfway through his career, he flipped to philanthropy. Supplied.
Chris Cuffe is a legend of the Australian funds management industry. Alongside star stock picker Greg Perry, he built First State Fund Managers from a three-person startup into Australia’s largest fund manager.
By the time he left in 2003, the company was valued at more than $5 billion, managed close to $70 billion in investment funds for around 500,000 investors, and employed over 1,000 staff.
Cuffe then joined the struggling Challenger Group, first as CEO and later as head of wealth management, in an effort to rebuild the Packer-backed venture — a vastly different environment from First State.
“At First State, I could create the culture from scratch,” he told Capital Brief for our Past Performance series. “But when you are parachuting into a place with hundreds of people already, with its own culture, which I don’t think was very good at all when I went in, it’s a much bigger challenge. I learned a lot doing that.”
That experience didn’t prompt an outright career change, but it did steer Cuffe in a different direction — towards philanthropy and not-for-profits, though not away from investing.
Today, Cuffe has around a dozen gigs — from chairing Hearts and Minds Investments to sitting on the investment committees of UniSuper and the Paul Ramsay Foundation, and on the boards of Argo Investments and Realside Financial, a private credit fund. “It’s pretty simple,” he says. “For some groups, I help them make money. For other groups, I help them give it away.”
Cuffe’s “main” role is portfolio manager of a fund he founded, Third Link Investment Managers. Third Link donates all net fees earned to a range of charities.
In his four decades in the industry, Cuffe has seen profound change — most notably the rise of superannuation, and particularly industry funds, alongside the collapse of the life companies that once dominated the sector.
Speaking to Capital Brief, Cuffe listed some of his best investments as those salvaged from the wreckage of larger entities — reflecting his focus on inherent value — as well as Canva, which he calls a “two hundred bagger”.
And failures? “Every now and then everybody is going to tread on a landmine. You just hope it doesn’t blow your feet off,” he said.
The following transcript has been edited for length.
I know it will be a challenge, but can you briefly run through what you’re up to now?
I work for about 12 different groups. My last full-time gig was the Challenger Group. I left there and did a couple of years with a not-for-profit, Social Ventures Australia, with Michael Traill, which was pretty interesting.
My main role is Australian Philanthropic Services, an organisation I created — a charitable group, the leader in providing philanthropic services to the market. I founded it, I chair it. It’s a charity and it has an illustrious board.
I work with a number of listed investment companies, on investment committees, including UniSuper, which I’ve been on for 17 years, the Paul Ramsay Foundation, investment committees for a number of ultra-high-net-worth individuals, and I’m also a director of a private credit company. And I manage a couple of portfolios.
For APS, I also manage a $400 million public ancillary fund called APS Foundation. Finally, for 16 years, I’ve managed an unlisted Australian equity fund called Third Link Growth Fund, which gives the fees earned to charity. That’s been a very satisfying thing to do. It’s given over $22 million to charity since I began it.
Then I’m on boards — Argo, an old company, a small group called Global Value Fund, which is one of my most favourite things and just an incredible investment. I chair Hearts and Minds Investments, which has about $700 million capitalisation, and it gives away one and a half percent of its assets to medical research in Australia each year — around $11 million.
What have been the big changes in investment since you started?
In the early 80s, active funds management was very prolific. It added a lot of value, and it was just mainstream asset classes, which nobody had ever had access to before. There was no such thing as index funds. The whole area of alternative assets pretty much didn’t exist. That world has changed.
It’s just been profound to see what’s happened with the industry funds. If you look back in time, how on earth did AMP, National Mutual, Colonial Mutual — whoever else was around — miss? They should have been what the industry funds are now. The industry funds are the goliaths, they are the modern-day mutuals. These are massive organisations that are now controlling most of corporate Australia. It’s a phenomenal change in my lifetime.
I remember talking to John Pearce 11 or 12 years ago, when I was trying to convince him to come to UniSuper. I said, John, these days, Macquarie bring deals to us. I reckon in a decade, we’ll be taking deals to Macquarie. And that’s illustrative.
The other thing during my years is the growth of alternatives — and particularly private credit. We don’t really have a bond market in Australia. It’s been hard to access much fixed interest of much variety. But with the changes in bank regulations, this whole area of private credit came up, and I really like the area. But you have to choose who you invest with. Maybe one day some of the banks will be sorry that they had to let it go. But that was the regulation — post-GFC, things changed.
What have been your best investments?
I’m often buying things that other managers couldn’t buy if they wanted, because they need square pegs to go in square holes. I had an investment in a very large plantation on Kangaroo Island — 5% of the island — Kangaroo Island Plantations. The fires destroyed it. But the shareholders got together. The board wanted to replant forests and we would wait for another 15 years before we can have a party. That’s a long time.
But we said, let’s clear the forest of the burnt logs. Ninety percent of the forest was burned. Now they’re in the middle of clearing the logs and making a very valuable substance from the charred logs called biochar.
And they’re returning the land to pasture. Within about three years from now, that’ll be Australia’s largest sheep farm, with a capacity of 270,000 sheep. I love watching that because it’s one of those great investments. As more logs are cleared and fences put up, stumps taken out, the independent value is clicking up — it just keeps going up in our books.
And at the end of the day, it’ll be a global-class agricultural asset that probably some very large institution would take out, or an ultra-high-net-worth individual, in a couple of years.
Another was when GenesisCare went belly up. There was a particular asset in there that a couple of guys I know brought to me, because when you get people like administrators and bankers just trying to get their money out of something, they don’t really care about what’s great and what’s not — they just want to get their money back. Now that asset is the software that oncologists around the world use — it’s vital software.
It was nearly too good to be true — they said our worst case was 10 times our money. A year later, we’re definitely on the way to 10 times our money.
And micro caps — you get on the right micro cap and you can go through the roof. I was very lucky in our fund. I have a small amount of Canva. That’s a 200-bagger so far. That’s great.
What hasn’t worked out?
Well, think of micro caps. You don’t need too much wind in the wrong direction to have trouble, by their nature. But it’s alluring. One thing I’ve learned over time — never underestimate a large-cap company, because they’re not just going to sit there and watch other people eat their supper. If it’s a small competitor, they’ll get in there and either buy the thing or block it out or whatever. That’s why large caps do well in stressful times.
Every now and then, everybody is going to tread on a landmine. You just hope it doesn’t blow your feet off. The game of investment management is a bit like a cricketer — you’re going to get some golden ducks every now and then. You get a few centuries, but you hope your batting average, if you’re a great batsman, is over 60.
As an investment manager, whether I’m managing directly or managing the managers, I want a high batting average. That’s why we say we want to be measured over rolling seven-year periods. Don’t measure me over a month or a quarter. I couldn’t care less. And some things aren’t always going to go right.
I’ve also invested, regrettably, with a couple of fund managers that I really should have watched before I put money with them — particularly fund managers who I judged from their story and their earlier returns. We do know, over time, there is a lot of empirical evidence that fund managers and their funds tend to do best in the earlier days. That’s for sure. Maybe that’s got something to do with the size of funds that they ultimately have.
Have you found that personally? What’s the secret to building a successful fund?
When you are part of a team of three versus 1,500, not a lot of people can survive managing that transition, because the personality might not fit or they can’t adapt to different sizes. I’ve always been very fortunate — I’ve been able to adapt as team sizes change. I think I’m a very good delegator. The bigger something gets, the more you have to delegate.
I’ve had to fire some along the way. You’ve got to weed the garden, so to speak. So I’ve had to let people go who were superb workers when the place was a lot smaller, and they didn’t adapt as well when it got bigger.
And there’s that saying — you surround yourself with good people, and they’ll make you look good. So I thought I’ve done pretty well employing various people, including keeping Greg Perry (at First State).
At First State, I could create the culture from scratch. But (with Challenger) when you are parachuting into a place with hundreds of people already, with its own culture, which I don’t think was very good at all when I went in, it’s a much bigger challenge. I learned a lot doing that.
And finally, what was behind your deep involvement in philanthropy?
After Challenger, I reached a stage where I said, well, I don’t need any more money, but I still want to be connected to that end of town. I like managing money. I like hanging around with interesting people. I just don’t need the nine-to-five pressure of a big job anymore.
I thought this Social Ventures thing sounded interesting. I’d never met [founder] Michael Traill, so I just went and knocked on his door. I said my name’s Chris Cuffe, and I’m going to work for you for three months, you don’t have to pay me. And at the end of three months, you can decide whether you think I should hang around. And that was the start of our “marriage”, and we’ve been together ever since.
The dozen or so things I do are all in the investment field. I found, over time, rather than try and work in a soup kitchen or something — because I do like helping people, like most of us — I thought I might as well combine my investment experience from a long time and use that for philanthropy.
