For today's #SpotlightSaturday, we spoke with Jonathan Lijtszain, former QUAAF CEO. His very successful international career has moved him VP of Strategy across many groups at HSBC, stopping briefly for an impactful year at Queen's to do his MBA, and proceeding to manage a billion-dollar multi-family office at GAV Global. Read more about his accomplishments in cleaning up the bank during trying times, his views on Mexico's economy, keys to success as a global investor, and how he earned himself the brand of "the guy who gets things done."
Could you give us a quick summary of who you are, your background prior to what you're doing now, and tell us about GAV Global and what your role is there?
I went to Penn State in the US majoring in Economics and Political Science. I did triple minors and had a bunch of specialties and ended up working afterwards for HSBC. During my time at Penn State, I did a couple internships at HSBC for asset management, where I managed the equity portfolios when I was an intern. Once I was done with college in 2010, it wasn’t the easiest time to find a job, but I wanted to go back into the bank. The managing director and head of all of retail banking and wealth management wanted me as his project manager. I ended up working directly with him. I did everything you can imagine with strategy for the bank; I liaised with McKinsey and BCG consultants, and directed them on strategy requirements from the bank’s side. I increased the efficiency of our branches through cost reductions, presented to the Global Executive Committee; almost anything you can imagine that has to do with our strategy for the bank. And, I created a brand for myself as a guy who was able to get things done and who could be thrown into difficult problems for the bank. That is when I turned over to wealth management as a manager of a team with 100 people. I created KPIs, increased product penetration, cross-selling, and employed a sales and consultative-heavy skill-set.
After a couple of years, the next troublesome area of the bank was commercial banking. They had asked me to do the same thing, solve a difficult problem. I transitioned from vice president of strategy for a whole section of the bank governing 4,000 people to reporting to the managing director of commercial banking. This was during a period that you might see featured in “Dirty Money” on Netflix where Mexican cartels were using HSBC to launder money to the U.S. My job was to clean up the bank and follow up in the deferred prosecution agreement with the Department of Justice, with the Comptroller of Currency, and the SEC. It was a really stressful time for me. I was working 18-hour days, seven days a week, for around six months. So, I decided to take a breather and do an MBA, and a very convincing recruiter pretty much made me apply to Queen’s. I got accepted, then my wife got accepted, and so we went.
When I was about to quit HSBC, I got a call from GAV Global, which is a multi-family office based in El Paso, Texas. All our clients are Mexicans. It is a really boutique firm; I went from managing 20,000 people in all of HSBC, to being part of a team of 20 people, which was huge, huge change. We do everything the families might need. We do M&A, we do private equity, we do venture capital, we do asset management, we even sell insurance for our clients. And we manage around a billion dollars in assets. I do most of the private equity, M&A, and equity investments for the group.
What are your current responsibilities and what would a typical day look like for you?
Usually, a regular day for me would start with a wake up at 6:30 AM, and I would start by reading every single newspaper I can get my hands on. Usually I have a power breakfast at 7:30 with either clients or bankers.
At 9am, I have a call with my investment committee, which is based in New York, San Francisco, and Mexico City. And then we try to look at the market. What we're going to do for the day, that strategy, we try to talk to as many clients as we can to assure and inform them of how their accounts are doing,
Around 3pm we would have lunch with that client or another banker. Once we're done with that, I try to go to my other office up in the northern part of Mexico City to check in. I deal with trade confirmations and submit a general report that we need to send to the to the Central Bank of Mexico and the Exchange Commission. And then, if we have dinners with clients, or if we have another meeting with client, I will try to meet more clients. Every once in a while, we might have a new strategy come up, or a new prospect of a joint venture with another broker dealer, for example if we wanted to expand our insurance business, I would lead those discussions as well.
What kind of opportunities do you get to see that other asset managers might not, by virtue of you being a multi-family office?
It has more to do with our fiduciary duty and understanding the customers’ needs. Everything we do is based on risk profile, investment horizon and overall market sentiment. I'm not going to put our clients into just any opportunity I come across. For example, we have a couple of Canadian Private Equity groups, based in the Bahamas who gave me an offer to invest into some FinTech projects, and we've known them for a while now and we know they're really good at their jobs. Occasionally, we get offers like these, and we try to set up a time at least once or twice a week to meet with them, hear their ideas and see if something can work.
We have the freedom to choose, we can choose whatever we want because we have earned the trust of our clients. However, our end goal is to find the right solution for the right customer. This respect for our fiduciary duty has been a principle that has worked for GAV Global for the past 30 years. So, we're not pressured by anyone; we don't buy anything that we don't want to buy. Even though our bankers may try extremely hard to sell us on new innovative products. We work for our clients not for the Bankers that is what sets us apart.
We recently began an operation to do algorithmic trading. After I was done with Queen’s, the firm gave me the opportunity to gain entrance into Oxford´s Said Business School algorithmic trading program. This allowed us to build more robust risk management practices and create an opportunistic portfolio based on the signals of the algorithm. An added advantage to the course is that nowadays we have been getting pitched by a lot of hedge funds who do follow different algorithmic strategies and I can sit down with them and dissect their strategy.
...our end goal is to find the right solution for the right customer. This respect for our fiduciary duty has been a principle that has worked for GAV Global for the past 30 years.
Tell us about your journey in QUAAF and your role as CEO.
Honestly, I was the guy who had the most experience to begin with. I started managing a $150 million portfolio when I was 19-20 years old at HSBC. Usually, my boss at that time would go on holiday whenever I was doing my internship, so it was up to me to manage the portfolio. For QUAAF I was the only one from the MBA cohort with a lot of investing/asset management experience. For the first six months, Hamilton Petropolous was the CEO and I oversaw special situations.
Then, once Hamilton graduated, the obvious replacement was me. One of the first things I wanted to fix was expediting speed to execution for our investments, specifically for the special situations portfolio. As well, my idea was to make QUAAF as open and inclusive to all our members, to have regular presentations and pitches, and to have a proper risk model to manage our investments.
...my idea was to make QUAAF as open and inclusive to all our members, to have regular presentations and pitches, and to have a proper risk model to manage our investments.
For GAV, how are you thinking about asset allocation, both in terms of geography, and asset classes?
Right now, we have a 50% weighting to the U.S., 30% Europe and 20% emerging markets. Based on current market conditions and the way everything is moving, we've increased our emerging markets position, specifically in China, Japan, countries that are coming into the latest stages of the COVID curve. We stay away from Latin America, because my clients already have a lot of systemic risk here, or they have their businesses and they have a large a network here. We try not to overlap their network with what we manage. We have some investments in Brazil, but that's as much as we go into Latin America.
We always play with ETFs for Japan because there’s transparency there. But if we go into China, where the rules are not as simple, we do not understand the local market as well as the Chinese, or someone who’s in the field. We have an alliance with a big American bank, and we have created a special vehicle that will allow portfolio managers in Hong Kong and Shanghai to manage a portion of our portfolio. We don't have direct access to the CEOs and CFOs of potential investee companies, but they do, so sometimes it's better to outsource knowledge than to try to get in yourself.
How do you think the investment climate has changed in Mexico over the last 10 years, up until the beginning of 2020?
We have seen a complete slowdown since the beginning of 2018 – 2019. Sure, we have corruption and violence. That has been an inherent risk associated with investing in Mexico. Nonetheless, the largest change we have experienced is the coming into power a leftist populist government that is hostile towards the private sector and has used government largesse on white elephant projects and vote buying programs. We have seen a deterioration of business sentiment in the country and constant warning signs from the credit rating agencies. This has led to downgrades by the 3 top rating agencies to a step above junk, in a matter of two years. We have seen institutional controls being thrown away, instead of strengthening them to make business easier for us, to allow us to grow as a country.
What's one book, movie, TV show, or just general activity you like to unwind whenever you have free time?
I've actually read eight books since lockdown started… They're all financial books because my mind works like that. The Man Who Solved the Market, which is about Renaissance Technologies, the most secretive fund full of algorithmic traders and math professionals. It's a fantastic, quick read. Also, Straight to Hell by John Lefevre, about an investment banker who ends up getting a job with syndicate investments in Hong Kong. It mostly about shenanigans that young bankers experience once the join the Street and I can tell you millions of those stories because some of them happened to me.