Get the timing right, and avoid bubbles

Global investment firm bullish on China as nation undergoes huge, unprecedented change, firm's chairman says

Greg Johnson, chairman and CEO of Franklin Templeton Investments, the global financial company, says he owes his success to an innate passion for what he does.

Johnson, who replaced his father, Charles, as chairman of the family empire in the United States in 2014, says he was never pushed into the industry, but a passion for life and interest in things helped him.

"He never expected us to go into the business," he says of his father. "If that was something you were interested in, then fine, but you would have to prove yourself."

Johnson says he now thinks the same with his children. "My daughter is interested in law, that's her passion, and I hope she goes after that." As for his son, he's interested in the business, but "it's not something I would push him toward".

Recently, Greg Johnson spoke on his China strategy, management style and personal life. The following are edited excerpts.

What are the challenges and opportunities from doing business in China?

Well, I think any time you're in a new market that is growing, there are always challenges - challenges on getting clarity, getting the right licenses to do business; there's just no certain path in building your business.

The opportunities are clear, and that really hasn't changed in China. We're seeing the growth of the middle class, wages are increasing, and the need for investment is increasing.

And the other thing we find very exciting is that only 3 percent of the billions in assets managed by China's mutual fund industry are invested in overseas markets, and we know from our experience in other markets that that has to increase over time, and that will be a big opportunity for us.

Could you tell us more about your investment in China? And what are your suggestions for other investors?

We were engaged as early as possible as an investor in China. For every point of entry, we've been the first, whether it's as a qualified foreign institutional investor or a qualified domestic institutional investor. We've pushed, every time we've been allowed to, to get more.

Today, we have a joint venture with Sealand in which we own 49 percent. That's grown and been profitable. We have a joint venture with China Life that's also been profitable. So, all of our experiences to date have been profitable.

Like any CEO, I'd like to see greater growth with those entities, and we'd like to control our own destiny in China. We have a long history of having entered new markets where we have to be a minority stakeholder, but we've seen that increase in countries like India and South Korea, where we now control 100 percent - and that's something we're hopeful for in China.

Has your business been affected by the global economic slowdown and China's transition to the new normal?

Our business has been affected because so many of the emerging markets are dependent on China and the perception of growth.

We're firm believers that the transition in China to the new normal is a healthy transition and one that has to take place. You can't rely on the manufacturing side or depend on government growth numbers, and I think the markets have grown to expect a set growth rate from China. As we transform to a more services-based economy, it'll be a more natural up and down cycle, and it'll take a while for the markets to understand that.

So, we're bullish on China and aware that this transition is a major one that's never been seen before, and there's going to be volatility that comes with that.

What kind of leader do you think you are?

That's always a tough one. It's always better to ask others, but hopefully I'm the type of leader that listens quite a bit and pays attention. I'm quite open-minded and, if new information is presented, will change course.

I'm a leader that recognizes my limitations and has the best people with more experience than I have in various areas and give them the responsibility to run those businesses.

What I worry about is making sure the right people are in the right place with the right understanding of shareholders to generate long-term returns. For them to take the right kind of risks and to get the right kind of compensation that's going to retain people.

If you look at the type of culture and the retention of people that we have, it's probably over two times the industry average in retention, and probably more than 10 percent of our workforce has been with us for over 20 years, which are the things that I'm most proud of.

How do you handle setbacks?

There have been periods in my career, when I look back, that were very difficult in managing the firm. One of them was during the internet craze and the bubble that was created in technology stocks, and we as a company, especially with a more value-based orientation, avoided a lot of those stocks. But there was probably a five-year period where we had outflows and people thought that we were out of touch. That quickly changed when that bubble burst.

So it's having the long-term perspective and experience, and understanding the nature of investing and how bubbles are created, and having the patience to stick to your discipline when your style is out of favor. The worst thing you can do is to adjust your style at the wrong time and then miss the other side.

What are your hobbies?

Travel, which is part of my job. It's incredible when you get immersed in any city or country for a few days to find how much you learn and how interesting that is.

Fitness is another one because I'm on planes a lot, and I try to stay healthy. I also spend a lot of quality time with my family, whether skiing or fly fishing.

What books are you reading?

I like to read both fiction and nonfiction, depending on my mood. I'm reading Henry Kissinger's On China right now. It's important to understand the history and culture to build a business, and there's so much to understand about China. It's such a complex history and story.

caixiao@chinadaily.com.cn

(China Daily Africa Weekly 08/12/2016 page31)