Seated in a lecture theatre as a student of bachelor of Quantitative Economics at Makerere University (MAK) in 2001, Aeko Ongodia asked himself: “What is Dow Jones?”
This curiosity marked the beginning of his career in financial markets, and later shaped the investment professional he has become. At 36, Ongodia has worked with Stanbic bank, Bank of Uganda (BOU) and the National Social Security Fund (NSSF).
The most intriguing thing about him, however, is that he has already retired from such ‘juicy’ jobs. He has gone on to launch two investment companies: one is focused on advising large institutional investors, while the other focuses on providing investment management to individual investors.
“We grew up watching CNN television at home. On CNN, there is main news, but down there is a sticker (strip bar) that reads: ‘the Dow Jones industrial average…’ It explains how Dow Jones has gone up by this much, and how it has fallen by that much and the reasons why. I later became curious to know what Dow Jones is and its drivers. That’s how I [my career] started,” he narrates, adding that it is one of the hardest areas to start from if you are interested in financial markets.
Nosiness saw him spend sleepless nights in the computer science lab at Makerere, googling about Dow Jones and financial markets in order to gain insights into how they work and why.
He had to manage his time well because at the time, only the Computer Sciences department had computers. Only Information Technology and Computer Science students could access the computers during day.
“The rest of the students could only access computers between midnight and 6am. I will tell you this: I spent each and every night in that computer lab researching what stocks are and how do you make money out of them…,” he reminisces. “I started running dummy portfolios and possessions – assuming that if I held Google, Microsoft, or Amazon for one month and invested $1,000 – how much money would I make every week? I also learnt that you need to make analysis before taking possessions.”
Spending nights in the computer lab and daytime in the main library reading up on theory of finance and investment helped him realise he absolutely had to work in the financial services industry. This private research, however, did not compromise his studies; he still had to put in the requisite and graduate at the end of his course.
WORK EXPERIENCE
After his first degree in 2004, he joined Stanbic bank at the beginning of 2005 as an account analyst.
“This job was all about dealing with large sets of data. The job involved cleaning, analyzing and manipulating the data and then providing an action point. It was my first practical experience which involved using computers to manipulate data, making reconciliations, and providing recommendations” he says.
Although this job was well-paying, he “quickly got bored” because he always met and went beyond his office targets ahead of time. For example, he would be in office by 8am and complete work before midday.
“In the meantime, I was looking for a job that would put me in a real analyst position – either analyzing stocks or the economy – analyzing a number of things,” says the PhD student of Applied Mathematics at Stony Brook University in New York. “I wanted a much more technical job.”
Perhaps, an invisible power was always availing chances in line with his career ambition. When his one-year contract at Stanbic bank expired, he did not apply for its renewal because a better opportunity from BOU availed.
In February 2006, Ongodia was appointed research analyst in the financial markets department at BOU for 10 months, and later transferred to a junior economist position in the department of research.
“At the Bank of Uganda is where my career was really shaped. I was fortunate to go through the three most important departments. I got a lot of challenging work,” he says. “I also got several chances to present my research to the most important committee in the bank – the monetary and credit policy committee.”
Despite the challenges at work, Ongodia attributes his successful stay at the BOU to the then executive director of the research department.
“I had a very fantastic mentor – Michael Atingi-Ego. He gave me significant guidance,” Ongodia says of his former supervisor. “He had such an incredible work ethic and passion for what he was doing. Those are the two critical things I picked up from him. He was also very encouraging.”
Ongodia adds that presenting to various committees shaped him a lot in his career as a young professional.
“That also gave me exposure to hone the skills that I needed to present to eminent people at that time,” he says.
In 2007, he enrolled and completed two levels for the Chattered Financial Analyst programme; a course for professional investment managers. The following year, Ongodia was given a one-year leave to go for his privately-sponsored MSc in Mathematical Trading and Finance at Cass Business School, part of City University of London.
This course laid the groundwork for the analytical set of skills he would later use to build investment strategies “from the very basic using simple financial instruments like stocks and bonds to the most complicated using financial derivatives”.
After his master’s degree, he was appointed head of risk modeling and stress testing in the financial stability department from September 2009 to February 2011. It was from here that he was “head-hunted” to join the NSSF.
“They [NSSF] were looking for a fixed income analyst,” he explains. “They were looking for particular skills in a person who had training and experience.”
Ongodia says that fixed income is the asset class in the NSSF investment portfolio which also includes allocations to equities, real estate and alternative assets – which include companies that are not listed on any of the exchanges.
“When I got there, the most surprising thing I found at the NSSF was the sheer size of the portfolio (approximately $1.5 billion in 2011). It was really huge and was growing at a tremendous pace; at about 25 per cent annually. The structure of the portfolio was such that the majority of the funds were in fixed income instruments (over 70 per cent). There was very little exposure to equities, but a large exposure to real estate,” he remembers.
“However, on closer inspection and analysis, I realized there was significant exposure to the wrong kind of fixed income instruments. I got to realise 60 per cent of the NSSF portfolio at the time I joined was in short-term instruments – instruments that mature in less than a year.”
Because NSSF is an investment management firm handling funds for people from the time they start to work to the time they retire, it is expected to have a long-term investment horizon.
After computing the average age of an NSSF member, Ongodia worked out that the investment horizon was approximately 20 years.
“Now, a portfolio that has a 20-year investment horizon; what is that portfolio doing putting 60 per cent of the entire funds in instruments of one year or less?” he wondered. “There was an incredible mismatch in the investment horizon between assets and the liability duration.”
He adds that such challenges could have been as a result of an investment management firm being operated by non-professional managers, e.g. accountants –
“people who are excellent bookkeepers, but have no professional training in investment management”.
He had served for less than a year when his supervisor resigned. Ongodia was then promoted to the office of portfolio manager-fixed income. He says the new role came with responsibility for making investment and portfolio management decisions for assets worth $ 1.3 billion.
One of his major achievements at the NSSF, he says, was the fact that he instituted new investment policies, redesigned and repositioned the portfolio and convinced the board to adopt them.
“In addition, I stared the NSSF’s East African bond trading desk in order to expand our trading universe. So, we would buy bonds not only in Uganda, but also on the East African market which helped getting competitive pricing across the board,” he says.
Consequently, by the time he left in 2014 to pursue his PhD, the changes he initiated favoured investments in long-term instruments and arguably laid the ground for the great performance NSSF has achieved in recent years.
Albert Mugyenyi, a policy analyst at the BOU describes Ongodia as “a guy who displayed signs of ability for technical and sophisticated financial and economic analysis”.
“He did some projects [at BOU] that were not exactly simple. At his entry level, he managed to contribute to the analysis and accounting for the financial derivatives,” Mugyenyi says of his former workmate. “It is a sort of assignment you would expect a senior person to do, but he did it brilliantly.”
PRIVATE VENTURES
Before he resigned from the NSSF, Ongodia with other three colleagues had already formed QuantEast Advisory; an investment advisory firm focused on large institutional investors such as retirement benefits schemes. The firm mostly dealt in designing investment policies, constructing investment portfolios, providing criteria for investing, and evaluating investment performance, among other investment and financial markets-related things.
His company has repeatedly worked for the retirement benefits schemes of various organisations including the Parliament of Uganda, Uganda Revenue Authority, Marerere University, NARO, and Centenary bank, among others.
Although QuantEast Advisory offers services exclusively to institutional investors, Ongodia says individuals kept approaching the firm for the services.
“But we kept turning them down because it takes nearly the same time, effort and energy to advise an individual as it does an institution, because an institution is represented by an individual or group of individuals. Yet when you compare the account sizes, it just does not make any economic sense for us,” he says.
When individual people insisted, he stepped back and considered the challenge: how to deliver quality investment advice inexpensively to lots of clients who had various financial goals to meet even with modest savings.
It was from their demands that he has developed an automated individual investment management platform that provides goal-based investing for individuals.
Currently in its final stages, www.myxeno.com is a platform where individuals can access professional advice to help them save and invest for various financial goals.
HOW XENO WORKS
Once you visit www.myxeno.com and get started, there comes questions to answer. For example, you will be asked whether you are an individual or institutional investor. After clicking on your appropriate area, you are then asked to identify your investment goal (e.g. retirement, education, etc.).
“Articulating the investment goal is the first step in investment management,” he expounds.
The platform asks you your time horizon, attitudes towards risk, current financial situation and investment knowledge; all of which help characterize your risk profile. An algorithm in the background takes the responses and automatically computes your risk-tolerance level and then recommends an investment portfolio.
Later, you are given an option to establish a relationship with the company by creating a personal profile and following the instructions. This is where real business starts.
Xeno operates under the core value: ‘We are investment professionals and we are giving everyone access to quality investment advice which was previously available to large institutions that could hire us.’
When a client establishes this relationship and feels ready to invest, he/she can transfer funds to their newly-established investment account using various payments methods including mobile money. The Xeno team of investment managers then invests on the client’s behalf, according to the investment strategy recommended when setting up the account.
The company has a local custodian bank that holds contributions and a record of all the client’s investments. Xeno does not have access to these funds; only the client does. All the company does is direct the investments. The client is able to monitor all the contributions and investment performance in real time through an intuitively- designed dashboard.
HOW CLIENTS INVEST
Xeno is a regulated service with four asset classes where members’ funds can be invest in. These include cash and cash-equivalents such as treasury bills and fixed deposits, treasury bonds, domestic listed equities and regional equities (East Africa stock exchanges).
A client chooses an appropriate investment asset depending on his/her risk-tolerance level. After that, Xeno takes charge of the investment as the client monitors the performance of his/her finances.
“This is the idea I conceived in Uganda, but started working on it while I was in New York in March 2016,” Ongodia says. “We ran a data test here in Uganda and 94 per cent of the respondents said this is what they definitely or probably need.”
For providing the goal-based investment service, Xeno will charge two per cent management fee annually. To illustrate, if you start with Shs 100,000 at the beginning of the year and Xeno invests it to earn 20 per cent return that year, your ending balance is Shs 120,000.
The company will compute the average balance in the account that year to be 110,000 = (100,000+120,000)/2. The total management fee will be Shs 2,200 for that year; which is two per cent of Shs 110,000 as the average balance in your account over the year. This comes to roughly Shs 183 per month.
FAMILY AND EDUCATION
Ongodia was born 36 years ago to Moses Aeko Ongodia, a retired civil servant, and Abeja Ongodia (RIP), a “home maker” of Kosim village in Ngora sub-county, Ngora district.
The firstborn of seven attended Bugonga primary school in Entebbe, St Peter’s College Tororo for his O-level and Busoga College Mwiri for his A-level. He majored in Physics, Economics and Mathematics at A-level.
Asked as to why he is not married yet, he says he has spent much of his time working hard, but “it will be nice to have a wife”.
Ongodia has no regrets in life despite the limp he has due to an injury he picked up during a football match while he was in P3. For now, his aim is to establish something “that will truly change how people plan their financial affairs”.
By the end of 2017, he believes Xeno will be employing at least 11 staff.
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