Why a global perspective is important

Greg Dean's picture

We talk a lot about how Canada is a thin market, especially when you venture out of banks and resources. Asset managers are a great example, as there are really only four of significance that are publicly traded in Canada: CI Financial, AGF Management, Fiera Capital, and IGM Financial (Investors Group/Mackenzie). These businesses are driven by 1) Market performance and 2) Net sales. The table below illustrates the correlation between growth in assets under management (AUM) and share price performance (for the year ending March 31, 2013).

Note: due to a significant acquisition, Fiera's AUM growth is not meaningful for this comparison.

The table also clearly shows that if you didn’t own CI (or Fiera), you didn’t make any money on Canadian asset managers over the past year. (The returns for the 12 months ending March 31 were: CI +24%, FSZ +19%, IGM -2%, AGF.B -28%.) But if you are willing to look outside of Canada, there are literally dozens of asset managers who are relevant globally and have been public for decades. I follow 35 on a daily basis and that group on average was up about 20% over the past year. Across our funds, we own 11 in total but only two of those are Canadian (Fiera and Guardian). A well-run asset management business can make for a very powerful stock, especially when markets are cooperative. With a bullish view on the markets and by not relegating ourselves to the Canadian market, we were able to impact every portfolio over the past year with an asset manager that fit the risk/reward profile of that mandate (small/large cap, U.S., global, income, etc.). We encourage you to look beyond Canada, not just for diversification but also for a bigger universe of compelling risk/reward opportunities.

Comments

Submitted by Bob Crichton on

Are you prohibited from owning CI? If not, it might be a nice gesture to show investors "you eat at your own restaurant."

Greg Dean's picture
Submitted by Greg Dean on

You raise an excellent point. We "eat at our own restaurant" in a very big way! The majority of my net worth is in Cambridge funds and the same is true for Steve and Brandon. In addition, since we have joined CI, a significant portion of our pay has been deferred and invested in the funds. These contributions vest over three years, so we are well aligned with unitholders to say the least.

It’s a great question to ask of any portfolio manager you are considering entrusting with your money or your clients' money -- are they significant investors in their own funds?

We like companies where management owns a significant amount of shares personally and were not given the equity in options, but used their hard-earned money to buy the stake. Examples include Couche-Tard, Tourmaline, Sylogist, Huntingdon, and we could go on. We ask it of the companies we invest in and thus expect clients to ask it of us. We run the funds as if it's our own money because it is our own money.

CI funds are allowed to own shares of CI Financial but the transactions are subject to review by the funds’ Independent Review Committee because of the potential for conflicts of interest. We have not owned CIX in the funds.

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