Meet the Manager: Dharma Laloobhai

To mark the registration of 5 Institutional equity Index Mutual Funds in South Africa, this month we spotlight their manager Dharma Laloobhai, Co-Head of International Index Equity Investments (EMEA &APAC). With a career that began in a small firm and evolved through to large global companies, Dharma has built a robust foundation in delivering on index management, her journey and experiences continue to shape her approach to fund management.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Tell us about your journey to your current role, and how have these various experiences shaped your approach?

Like most people, I didn’t anticipate where my career was going to take me when I was completing my studies at Wits (The University of Witwatersrand) or when I went for my first role at one of the few index fund managers in the country at the time. This role laid my foundation in understanding what it means to deliver on an index, the necessary skills, and how market participants interact across the ecosystem. It also introduced me to corporate structures and even exposed me to potential acquisitions.

After this I moved to the UK and began working for an index provider, Initially, I was unsure about the move as it took me away from money management, but it turned out to be one of the most valuable building blocks in my indexing career. This role embedded deep index knowledge and highlighted the importance of risk models, both integral in managing any index fund over time as the landscape keeps changing.

From there, joining Barclays Global Investors (later acquired by BlackRock) was a dream role, allowing me to transition back into money management and pioneer better investments for investors. After two years in equity portfolio management, I was approached to work on commodity funds. This unexpected shift required mental flexibility and challenged me to build a new body of knowledge and way of thinking.

This helped to build depth in understanding how the macro marries with the micro, which is crucial in managing an index investment as the make-up of the indices can be broad. Being able to anticipate events and understand market microstructure is key when finding ways to deliver the index return - ensuring to be mindful of some of the inefficiencies of the index and preserving value for the client.

Since then, I have moved more into a management role and returned to equities. It’s fantastic because the team around me is brilliant and I also have the chance to connect more directly with clients. A significant part of my work in the past decade has involved client mandates, giving me exposure to our largest clients. These interactions have been instrumental in understanding clients' expectations and the bespoke nature of constraints applied in delivering client outcomes. The greatest testament to what an index fund manager brings to the table was when a client said, "Wow, that's impressive. That's much more detail than any active manager I have come across," and that is because of the breadth and depth of knowledge required to deliver with precision and quality for our clients.

What do you think are the most important factors clients should consider when selecting an index to invest in?

I think it’s important clients understand the index that they choose to invest in, and what the outcomes of that index investment represents. Indices historically served as a gauge of the market and remain as such when constructed using market capitalization of companies, but with the advent of technology almost any strategy can be indexed today. The less traditional indices represent different investment outcomes for clients, and clients should understand the risks that are associated with such strategies relative to traditional indices.

I think in addition to that, transaction costs are a major source of difference in an investment relative to the theoretical index. It’s important that clients have a thorough understanding not just with regards to the investment universe, but also around additional sources of transaction costs besides execution. Understanding the annual expected turnover of the index is also indicative of associated transaction costs in managing index changes.

If clients have a direct relationship with the custodian, they should really be asking about what they're being charged for services provided and challenge the costs where relevant. This is especially important in the emerging market space as some of the costs in transacting in certain markets can be significant and will impact realized tracking difference.

Why work with BlackRock?

Not only does the BlackRock team have access to global insights, we also leverage local expertise with our teams across the world. The core thing for us is delivering client value, not only through the value of our expertise but also through the transaction costs of the funds. The fact that BlackRock thinks about these things means that if you're investing in a BlackRock fund, you know we will be negotiating to really try and get competitive rates from our providers.

What are you most proud of throughout your career?

I’ve been extremely fortunate in my career. Not only have I received some incredible recognition including being nominated in 2021 for ‘Fund Manager of the Year’ and ‘Role Model of the Year’ for the Women in Investments awards and being recognized in 2022 as a ‘Future Leader’ in the Yahoo! Finance HERoes Women Role Model list, I’ve also had the opportunity to try and make a difference to the fabric of the industry.

Risk. Performance is not a reliable indicator of current or future results.

Coming from South Africa, I’ve seen firsthand what it means for people to not have equal opportunities. I feel very fortunate to be where I am today, thanks to those who sacrificed to pave the way.

Finance has made great strides but remains an area where there is room for further balance on representation. From my first job, I often found myself as the only woman in the room. I’m proud of my efforts to address this imbalance, not just in gender but in broader representation too.

I have been extremely fortunate to have had great role models, and also been fortunate to be involved in various initiatives like leading ‘WIN for Men’ (advocating for more allies); ‘Taking the Stage’ a Women’s Development Program, leading a Financial Inclusion pillar in our Culture Club, and co-leading our Women in Investments initiative as a founding member. Externally, I have also served as a mentor for multiple programs. Education and dialogue between everyone that's involved (be that women and allies or other advocates in general) is important in moving the dial. This sort of work is something I am passionate about and find very fulfilling.

If you could choose one thing for people to take from our discussion today, what would it be?

Everything comes down to laying a proper foundation. Just like how index investments can be key building blocks in a broader investment strategy (which is why it's important to understand the nature of your index investments and how they relate to your overall investment objectives), when thinking about building a career being open to a range of opportunities is key. As the many experiences you gain along the way are what contribute to a meaningful career journey.

¹ The Rise of Passive Investing in Today's Market, Morningstar, 6 Jun 2024