Philippe Jabre is not who you think he is. Born in 1960 in Beirut to an affluent family who owned the very successful Almaza brewery (88 per cent of which was later bought by Heineken), he grew up in Lebanon before the war forced him to continue his education in France, then Canada and the US. For my part, I had read about him being a high-flying, cigar smoking and risk-taking trader whose favourite way to ‘unwind’ was a spot of extreme skiing and I must admit that I imagined some sort of insufferable shark.
The reality however took me completely by surprise. Jabre is actually very soft-spoken and gentle. He’s not at all self-centred, nor does he brag. In fact, he claims to never feel happiness or frustration when it comes to his work life, as “emotions are the enemy of a balanced person”. Jabre reels off trading accomplishments in the matter-of-fact manner that a surgeon might explain a procedure. But upon our meeting, two things strike me most. The first is his formidable memory and ability to remember even the tiny minutiae of almost every transaction he has ever undertaken. The second is his evident generosity both in terms of the time he affords others as well as the money he gives away.
Sadly, many people never get to know who Jabre really is. Instead, they judge him based on an infamous run he had with the British Financial Services Authority (FSA) in the early Noughties. Market abuse may seem like a ruinous indictment and Jabre was certainly slapped with a then-record fine of 750,000 GBP (1.40 million USD at that time) but crucially, the ruling stated that he did not violate the FSA’s principle governing market integrity. In the end, he was given a slap on the wrist for his failure to use “due skill, care and diligence” or observe “proper standards of market conduct”.
The lesson was learnt – both by him personally as well as every single compliance officer in Britain – and Jabre chose to leave London and start afresh in Geneva where he set up his own firm, Jabre Capital Partners (JABCAP), managing four funds in excess of 2 billion USD and generating formidable returns “by combining a top-down thematic macro-driven approach with rigorous bottom-up fundamental analysis,” as he puts it.
Like you, we do love a great comeback story. But Philippe Jabre represents much more than that. His resurgence might have been prodigious but it also goes to show that one mistake should never define anyone. To me the most significant insight into the man was the very last thing he said to me, “Helping others is the most important success you can ever achieve.” And if that is his legacy what a great one it is.
WHERE DID YOU START YOUR PROFESSIONAL LIFE?
I started as an intern at JPMorgan in New York and within a year, I was hired by BAII [Banque Arabe et Internationale d’Investissement] in Paris.
WHAT WAS YOUR ROLE THERE AND HOW LONG DID YOU REMAIN?
I worked in asset management and I stayed for just over thirteen years, with the first three or four years in Paris and the rest in London. I became responsible for a lot of products that were difficult to understand then. Today it’s very different, everyone is knowledgeable of volatility, option values, warrant values, convertible bonds, credit spreads and so on.
TELL US ABOUT ONE MEMORABLE TRADE FROM THOSE DAYS.
Sure, in 1986 when Elf Aquitaine was being privatised, we bought all the warrants. We made an absolute fortune and no one had a clue what a warrant was. Basically we had bought something at 3 that then went to 20.
WHY DID YOU LEAVE?
BAII lost its structure and support when it became part of BNP so with the approval of the CEO, Robert Sursock, I was approached by GLG, which was part of Lehman Brothers.
SO YOU WERE A PARTNER BUT NOT A FOUNDER OF GLG?
That’s right. I joined nine months after it was incorporated. The founders were: Gottesman, Lagrange and Green, and when I joined, we became four partners and remained like that for ten years or so.
DID EACH PARTNER BRING IN A DIFFERENT EXPERTISE?
Noam Gottesman handled US stocks, Pierre Lagrange was in charge of European ones and Jonathan Green first dealt in US equities too but then became a sort of COO.
WHAT WAS YOUR ROLE AT GLG?
I was looking after convertible bonds, credit strategy and emerging markets.
DO YOU BELIEVE IN LUCK?
A dealer who is lucky is someone who perhaps collects Picassos and then there’s a boom in Picassos. But if he wasn’t collecting this art he wouldn’t have been able to benefit from it. I believe you make your own luck. Good judgement is everything.
SPEAKING OF JUDGEMENT, CAN YOU BRIEFLY TALK ABOUT YOUR RUN IN WITH THE FSA DURING YOUR TIME AT GLG?
Firms today have very strict procedures and controls but at the time, things were less clear. It wasn’t a case of Philippe Jabre did this or that, it was more a case of us not being cautious enough with the information we had.
HOW DID YOU CHOOSE YOUR PARTNERS HERE AT JABCAP?
I’m in a great position because my two partners allow me to focus purely on managing the funds. Mark Cecil was at BAII for ten years and then also at GLG, where he became head of client relations. My other partner [and brother-in-law], Philippe Riachi, used to be head of hedge fund risk at Morgan Stanley.
HOW MANY PEOPLE WORK HERE?
We have 50 people in the firm, 15 are front office – analysts, fund managers and traders. Another 15 are in legal, compliance or control. And the remaining 20 are middle office, accounting or IT.
HOW WOULD YOU DESCRIBE THE MARKETS SINCE THE CRASH OF 2008?
People think in the long term now and there’s a new rational pessimism. But since June 2012 when [President of the European Central Bank Mario] Draghi and [Federal Reserve Chairman Ben] Bernanke affirmed that they would inject money into the markets and do whatever it took to stabilise them, funds like ours have been performing very strongly.
IS THIS GROWTH TENABLE?
Absolutely, look at the US now, the Fed is disengaging and growth is stronger than expected. Unemployment is doing very well. The deficit is slowly contracting and all of this despite the stalemate between Republicans and Democrats, which has curbed the passing of any new laws.
BUT HAVE THE CAUSES OF THE CRISIS BEEN DEALT WITH?
The crisis was predominantly caused by leverage and leverage has been sorted out, so yes.
HOW HAS THE MARKET BEEN SINCE 2012?
2012 was a very difficult year because you needed to have four dimensions of investing: the stocks, the macro, the interest rates and the human element. Now you only need to worry about one of those and that’s stock picking.
SO WOULD YOU SAY THE MARKET IS COMPREHENSIBLE AGAIN?
Yes. MSCI equity volatility is down to about 10 per cent whereas it used to be above 20 a few years ago. I myself look at global markets through three matrices: geography, product and sector.
AND HOW DO YOU SEE THINGS PANNING OUT?
I see today as a great opportunity. There are still many people who are selling because they’re scared and have placed stop-losses. Personally, I am buying. The ECB is going to intervene in Europe and the US is still undervalued. You have 7.5 trillion USD of cash on global corporate balance sheets. Five years ago, you had 2 trillion. Banks and insurance companies are over-capitalised. I would say choose well and don’t be over-invested or too in love with your stocks. Be willing to make moves. And, make sure you understand the forces affecting the market.
FOR INVESTMENT DECISIONS, HOW IMPORTANT IS NEWS VERSUS VALUE?
News is a catalyst but value is fundamental. This is why you need to always know your values.
HOW WOULD YOU EXPLAIN THE INCREDIBLE APPRECIATION OF TANGIBLE ASSETS LIKE ART, WINE, JEWELLERY AND CLASSIC CARS?
I think a slight slowdown in the economy, higher interest rates and a general contraction of liquidity would prune any over-valuation of lesser worthy assets. But the appreciation of such assets is more an expression of the amount of money in circulation and the fact that interest rates are so low. Investment perceptions tend to change in cycles, people see stocks as dull right now so they don’t want to invest in them. Instead, they are venturing into real estate or art.
DOES HISTORY REPEAT ITSELF WHEN IT COMES TO THE MARKET?
Yes, you see repetition of cycles but each period is still unique.
FOR YOU, WHAT’S THE DIFFERENCE BETWEEN BANKERS AND FUND MANAGERS?
I would say bankers generally only perform as well as the market. They’re good at sales and relationships but at the end of the day, banks cannot retain their best traders. Anyone who’s any good will leave and start their own thing.
SO ANY PERFORMANCE DIFFERENTIAL IS DOWN TO TALENT RETENTION?
No, flexibility. For example, when I was at BAII, the investment committee would spend endless hours reviewing investments. They didn’t want me to take risks and as a result, everything was vetted a thousand times. The biggest difference is that at a bank you have your hands tied but at a structure like ours we have the freedom to invest right.
WHY ELSE SHOULD A CLIENT INVEST WITH JABCAP RATHER THAN A BANK?
First, positive alignment. This means we invest our own money alongside that of our clients. Second, focus. My time is spent trading so I am not distracted. Third, we do not differentiate between a big client and a small client – everyone is treated equally. Lastly, and this is key, I am here to make money for my investors. Banks are more concerned with generating fees for themselves.
YES BUT FUND MANAGERS ALSO TAKE LARGE FEES.
Yes but a good fund manager’s fees are an insignificance compared to the gains he creates. And conversely, bad fund managers invariably lose their clients.
WHAT DO YOU SAY ABOUT THE STATISTIC THAT SHOWS LESS THAN 1 PER CENT OF MUTUAL FUND MANAGERS ACTUALLY BEAT THE MARKET?
I call it the big revenge of index funds. Index funds are unemotional, whereas long-only mutual fund managers can be overweight in the wrong sector or the right sector, at the right time or at the wrong time. But in my opinion, the talent is not in the mutual fund business; it’s in the hedge fund business. Hedge fund managers are in the absolute return business.
ARE YOU IN COMPETITION WITH OTHER FUNDS?
I used to be, although not because I would look myself but because clients would compare us to firms with a similar investment profile. But since 2008 a lot of them have disappeared due to bad performance, clients redeeming or maybe even becoming fed up with the pressure.
SO WHAT IS YOUR BENCHMARK?
Our benchmark is our own historical performance. Last year we won the prestigious EuroHedge Firm of the Year award and when I look at others’ performances, I see fewer competitors. So yes, I would say that there is a real change in the landscape, there are fewer hedge funds, fewer newcomers, and also fewer clients.
WHAT DO YOU MEAN FEWER CLIENTS?
In the past some of our natural clients were family offices and funds of funds at banks. Today, family offices have less of their money invested in hedge funds and the funds of funds business in Europe is a shadow of itself.
WHAT DOES IT TAKE TO BE A SUCCESSFUL TRADER?
I think character plays a large role. You have to react well under pressure. You have to have a nose for choosing, detecting and reading. There’s so much information out there that the key is being able to filter it and see warning signals. These inform your decisions so that even if the markets are doing well, you’ll be able to see the storm coming from somewhere else.
WHERE DOES YOUR MOTIVATION COME FROM?
I love trading. I love outperforming the market. For example, today I was up at 2am because I knew Japan was going to be very strong and I had a large position waiting for this move. Even if we have people over for dinner tonight and even if my wife has asked that I be a good host, I’ll do so without sleep because I love what I do.
IS THERE A SECRET TO SUCCESS?
CAN YOU TELL ME ABOUT YOUR CHARITY?
In 2001 I created a foundation in Lebanon, L’Association Philippe Jabre, with the primary aim of providing educational grants to students. We also donate to institutions such as universities and hospitals. And the last facet of our aid programme is to offer medical grants.
How many students are you currently helping?
This year we have in excess of 300 students, half of which are studying in Lebanon, the other half internationally, and we’ll do our best to do whatever it takes to get them where they want to go.
IS ALL THIS DONE THROUGH AN ENDOWMENT?
No, we simply give away a sum every year.
HOW IMPORTANT IS THIS PHILANTHROPY TO YOU?
I am proud to make a positive difference in the lives of others. I believe that helping others is the most important success you can ever achieve.