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Pratte Portfolio Management: reinventing financial strategies on a daily basis

Before launching Pratte Portfolio Management, Philippe and Raymond Pratte were operating an independent practice within a financial institution. Always looking for innovative solutions to improve the services they provided their client base, and considering the lack of latitude specific to their position in a more conventional securities brokerage firm such as this one, the father and son decided to apply for the registration of their own portfolio management firm. “We clearly have a strong entrepreneurial culture and we wanted to do our own thing,” says Philippe Pratte, President, Chief Investment Officer and Portfolio Manager.

With a keen interest in finance from a very young age, Philippe also dedicated a major part of his career to the sports industry. In fact, he notes certain similarities between finance, portfolio management in particular, and sports. “Even after making a bad decision, you have to pick yourself up and keep moving forward,” he explains. “The bell rings every day and you start over, i.e. the engine never stops running and you never know what the day will bring.” With a well established, entirely systematic approach, and a set of active software tools in constant operation, like a metronome marking the beat of the market, the firm assesses probabilities to provide its clients with an absolute return, and financial health.

Turning to local emerging managers for better investments

As a local emerging firm, Pratte Portfolio Management has the flexibility to develop powerful investment strategies which are constantly adapting to market conditions. Also, the proximity factor is beneficial to the company in a context like the current pandemic. “It’s important that we all support each other, whether it’s the neighbourhood grocery store or restaurant we choose to encourage, thinking about the entrepreneurs and the direct positive impact we can have,” Philippe points out. While some large companies were able to stay strong throughout this unprecedented time, many local merchants have faced significant challenges and Pratte Portfolio Management’s president knows the firm has been rather lucky, not having experienced any major setbacks during this global crisis.

Mr. Pratte also suggests that unlike very large portfolio & wealth management firms, emerging managers definitely focus on innovation, which may be profitable for their clients. “In my experience, en emerging manager is always challenging themselves and rethinking their strategy, instead of following the same principles that have fostered their growth to begin with,” Philippe observes. Much like some established mechanism, large companies replace their management teams on an ongoing basis to adopt the same practices, which are increasingly part of their MO. “Every day, I try to be a better manager, to improve my choices for the client and, although our approach is systematic, we review it continuously to determine if anything needs adjustment in order to generate more alpha or value with our portfolios,” he adds.

Current focus and next steps

The year 2020 was an excellent one for Pratte Portfolio Management, so the firm is focussed on the optimal management of an uninterrupted new business influx. Indeed, they must ensure the support team and required resources are available to run all these projects and welcome new clients as efficiently as possible. They make it a priority for everyone to have the same positive experience. “Right now, our challenges have to do with operating our business, as is the case for any high-growth company, whatever the industry,” Philippe mentions.

In addition to portfolio management, the firm’s experts provide investment fund management services. The company therefore aims to enhance its range of funds. “Our flagship product, the Pratte North American Equity Fund, gets very good results, attracting capital, so we want to maintain its performance and launch one or two new products in 2021,” Philippe says. Developing its sales networks, innovating and continuing to provide flawless service for their clients are a few of the other objectives Pratte Portfolio Management has set for the next few years.

As the firm’s president remarks, there are two sides to business development for a company, namely retention and acquisition. “That’s what we at Pratte Portfolio Management call ‘defense and offense’,” Mr. Pratte explains. “We want to remain highly skilled for defense, and keep improving our offense tactics.”

For more information regarding the firm.

Lester Asset Management: Beyond Indices

Lester Asset Management’s team ensures its strategies rank among the best in Canada by deviating from the indices’ usual parameters and thus, outperforming them in terms of returns.

The firm’s two main strategies are specifically designed to “outperform the main indices over the long term and to add value by achieving higher than market returns with lower risk,” mentions the portfolio management firm’s website. That vision was put in place by Lester Asset Management’s President and Chief Executive Officer, Chief Investment Officer and Senior Portfolio Manager, Stephen Takacsy when he joined the firm in 2006 and has been successful ever since.

As of November 2020, the 10-year annualized gross return of their Canadian all-cap equity strategy was 10% compared to the S&P/TSX Composite Total Return of 6%. Also as of November 2020, their Canadian fixed income strategy’s gross annualized 10-year return was 6.1%, while the FTSE Canada Universe Bond Index returned 4.5% over the same period.

President & Chief Executive Officer,
Chief Investment Officer and Lead Portfolio Manager

Mr. Takacsy uses his extensive financial and business valuation experience of more than 30 years to seek out promising, but undervalued securities that are less costly and less risky for his clients’ portfolios. “There are few managers in Canada who have worked in the fields of credit, corporate financing, mergers and acquisitions and have also held the CFO position of a successful publicly-traded company (Malofilm Communications),” he says. Both at work and in his spare time, the CEO is passionate about risk management. “I’m a sailing enthusiast. It’s a sport in which you learn not to be afraid of risks, but rather to manage them meticulously to maximize speed without capsizing and thus, face storms calmly,” he illustrates.

His unique experience is what prompted one of Lester’s founders, his own friend Ken Lester, to recruit him when his father, Murray Lester, passed away. It was a winning gamble for the investment firm, as Mr. Takacsky has been providing solid returns for the past 14 years and while additionally increasing attention from investors.

In addition to placing a high emphasis on risk management by seizing market opportunities, the firm’s team stands out from the indices by carefully looking at diversification as well. Their portfolios, composed of approximately 40 securities are, among other things, fairly defensive and do not favour cyclical industries.

“We are diversified by sector, unlike the indices, which are often highly concentrated in banks and energy stocks,” says Lester’s president. Since joining the firm in 2006, assets under management have grown from approximately $100 million to more than $335,000 million in 2020. The firm’s client base is 85% private wealth and 15% institutional. Today, Ken Lester has retired and handed over the reins of the firm to Stephen Takacsy, who is working with two portfolio managers, four people dedicated to client service and portfolio administration, one staff member responsible for operations, technology, and compliance, as well as having the support of the firm’s Chairman of the Board and veteran economist, J. Anthony Boeckh (founder of BCA Research / The Bank Credit Analyst).

Spreading the Word

“Of course, performance is the crux of the matter in our profession. As a smaller manager, we don’t have access to large sales or distribution forces like banks or mutual funds have. It is therefore important to make our results visible on the databases used by institutional investors and consultants and to be present in the media. This is how we make our added value known to the public,” says Stephen Takacsy.

One of these databases allowed Lester Asset Management to be awarded a Canadian equity mandate for a very prestigious foundation in Western Canada. “This charitable institution and us, we didn’t know each other at all. They selected us as one of the top 12 in the country in terms of 10-year return. It is a remarkable achievement that a boutique in Montreal can get an important mandate from a well-known institution on the other side of the country,” says Takacsy.

The firm has a strong track record of performance. For example, as of October 31, 2020, Lester’s Canadian equity strategy was ranked 3rd out of 101 managers for its 10-year return, 4th out of 133 managers for its 5-year return, and 3rd out of 147 managers for its 1-year return by Global Manager Research.

The Local Hedge

The Montreal firm has also recently been able to count on programs supporting Quebec emerging managers such as the Emerging Managers Board (EMB) and the Quebec Emerging Manager Program (QEMP) to expand its network and raise its profile as a local independent firm.

In 2019, through the QEMP, Lester won a mandate with Innocap to manage a Canadian bond pooled fund for a group of institutional investors. “Their sponsorship program provided us with valuable advice to improve our structure and to be better aligned with the standards sought by institutional investors,” says Mr. Takacsy. He hopes that in the future, more of them will recognize the benefits of investing with local managers who implement winning strategies and who have a competitive advantage over larger institutions because of the flexibility their smaller size gives them.

Find more information on the website.

Lester Asset Management’s member’s file.

Global Alpha Asset Management : Mastering the Art of Small-Cap Selection

The Global Alpha Asset Management team alone has a combined experience of over 60 years in the small-cap sector. It is by focusing exclusively on its expertise and deepening it meticulously that the Quebec-based firm has enjoyed great success, particularly in the North American institutional market.

David Savignac, CFA
Portfolio Manager

From the moment they joined forces to create Global Alpha in 2008, Natcan’s two former colleagues, Robert Beauregard, Chief Investment Officer, and David Savignac, Chief Operating Officer, had a game plan that remains essentially the same to this day: keep their focus on small-cap companies. In other words, its managers are entirely dedicated to what they do best, which is building global and international small-cap equity portfolios. They also called upon Qing Ji, an analyst of the Montreal financial community that they knew well, to join their project as a portfolio manager since they were convinced that her profile was perfectly in line with their vision.

In addition to building on their shared knowledge of small-cap investing, these managers also realized that the same passion was fuelling their career ambitions. “We all had entrepreneurial spirits. I come from a family of entrepreneurs. I’ve been involved, in real estate and the business world in general, including renovation centres. Today, we are eleven employees at Global Alpha and each of us has industry experience. Our background allows us to better connect and dialogue with the leaders of the companies we meet,” explains David Savignac.

Successful Findings

Global Alpha presents itself as an investment firm that conducts independent fundamental research to identify attractive investment opportunities in companies whose growth is unrecognized by the marketplace. “Research and analysis on smaller companies are often limited or not widely communicated, leading to the mispricing of such companies’ securities,” the group says on its website.

Specifically, this market inefficiency creates an opportunity for managers interested in small-caps to uncover companies with unrecognized potential growth for their clients’ portfolios.

To do so, the Global Alpha team conducts diligent and comprehensive research across a broad investment universe that includes all companies with market capitalizations between US$100 million and US$5 billion. The managers take the time to travel to each region and visit companies that present investment opportunities that they believe are attractive.

“That’s what motivates me to do what I do – to look for promising new companies. Meeting entrepreneurs is extremely interesting. Plus, it’s never boring work because you have to constantly learn about companies and stay on top of the latest trends in different sectors. It’s very rewarding!”, shares Mr. Savignac, who has travelled throughout Europe and Asia on numerous occasions in search of rare gems that would contribute to the investment strategies offered by Global Alpha.

A Thematic Approach

Moreover, Global Alpha examines the valuation of a security according to an investment thematic and not simply based on a bottom-up approach. For example, its managers consider a solid company that benefits from positive long-term trends, such as environmental preservation, to be an excellent investment.

David Savignac gives the example of Tomra, a company that Global Alpha held for a long time in its portfolios before selling it because it had become too large to be considered a small-cap. Tomra is an international company of Norwegian origin specialising in machines equipped with sensors to collect and sort waste in order to reduce waste.

“Tomra owns 75% of the reverse vending machines market. These machines, among other things, allow people to recycle aluminum cans, glass and plastic bottles, while receiving change in exchange for their deposits. With 82,000 machines installed around the world, Tomra has collected more than 35 million empty bottles,” he reports.

In addition to having a positive impact on the planet, the company has experienced significant growth during the years that Global Alpha has held its stock. In fiscal year 2017, Tomra reported sales of US$900 million and an EBIDTA of US$177 million. As of December 2019, the company’s annual growth was 10.5% over the previous three years.

Propelled by Its Structure

Global Alpha’s strategy as an emerging investment firm has also been to establish a structure that allows its managers to focus exclusively on building the best global and international small-cap portfolios for their clients.

Global Alpha is, therefore, part of the Connor, Clark & Lunn Financial Group, which supports the firm in non-investment management tasks such as sales, marketing, compliance, and information technology. “We knew from the start that we were going to target the institutional market and that’s why we created this structure which is very appealing to large American clients,” says Savignac.

Global Alpha, which initially won a first institutional mandate of approximately C$7 million, now manages close to C$5 billion and 65% of its assets come from its U.S. clients. It is the programs for emerging U.S. managers that have allowed the firm to take off because it is through one of them that the investment firm was able to acquire its first significant U.S. institutional mandate in 2013. “The performance of our strategies already spoke for itself, but getting such a mandate for a US state showed our seriousness to other potential clients of the same type,” says the portfolio manager of Global Alpha.

The firm strongly believes in the importance of such programs to support emerging managers and is also committed to similar Quebec initiatives such as the Emerging Managers’ Board (EMB) and the Quebec Emerging Manager Program (QEMP).

“There certainly is a strong interest for local investment in Quebec. Many investors are increasingly aware of the importance of encouraging local emerging managers. For example, they understand that in a city like Montreal, entrusting their assets to local firms generates economic benefits throughout the ecosystem since these firms, themselves, hire numerous professionals in their area (translators, lawyers, notaries, etc.).

For more information regarding the firm.

To see the member’s file.

Unearthing Alternative Treasures to Offer Optimal Diversification

Both her strong entrepreneurial drive and her desire to offer investors high-quality alternative products led Geneviève Blouin to launch the portfolio management firm Altervest in 2010.

Indeed, having first worked for major financial institutions in Montreal, including the CDPQ, the president of Altervest explains she realized there was a lack of quality in the asset class that is today at the center of her company. “I noticed there were very few interesting alternative products on the market. I also felt that derivatives were either misused or under-used. “

At that moment, Altervest’s mission and direction became clear to her: be the reference in terms of alternative investments’ integration into portfolios in order to improve their diversification, while applying prudent risk management and succeeding in obtaining maximum returns for investors at the same time.

Geneviève Blouin, CFA,CMT
President and Founder
Private Wealth & High Octane Fund

“As an entrepreneur, I thrive on challenges. What motivates me about being an independent manager is also having the flexibility to find products that are truly adapted to the client’s needs, even if they are complex. ” To illustrate what she considers to be her and her team’s role, Ms. Blouin gives the image of adventurers who explore the jungle inside out in search of unique treasures.

“It’s a long-term project. First, you have to clear the uncleared paths to find numerous managers and then meticulously study their prospectus. This sorting process essentially allows us to find managers who know how to efficiently manage risk. I don’t mind going for funds with lower performance if I see that their managers have preserved capital better than the competition during periods of major market corrections because these funds are the ones that will outperform over the long run.”

She believes that Altervest’s approach to managing its clients’ capital is characterized by innovative, disciplined, and conservative risk management, which is no small feat when it comes to alternative investments.

Winning Strategies During Tumultuous Times

Altervest focuses primarily on private wealth management, but also builds its own strategies through mandates it is entrusted with; these internal strategies helping to balance certain portfolios. Faced with market instability during a global pandemic, Geneviève Blouin considers the rigorous methods employed by her firm to be of the utmost importance. Among other things, she mentions the enviable performance of Altervest’s North American Focused Opportunity strategy. During the third quarter, the portfolio generated a return of 10.8%, well ahead of its benchmark index, composed equally of the S&P/TSX60 and the S&P500, which returned 5.6%.

“The good performance was due in part to an allocation to technology companies that do business online and strong companies that are pandemic-proof, such as Five Below (discount detail), Park Lawn (cemetery), and Check Point (cybersecurity),” says Altervest’s president.

She also indicates that the major market disruptions caused by the international spread of the coronavirus also presented a great opportunity for her team to verify whether external managers to whom they entrusted assets were indeed equipped to confront storms. Ms. Blouin recalls Warren Buffet’s famous quote: “Only when the tide goes out, do you discover who’s been swimming without a bathing suit.” Like the famous American investor, she considers difficult times as useful stress tests and has recently made good use of recent market corrections to separate the wheat from the chaff among her selection of fund managers.

Believe in the Strength of Local Managers

Geneviève Blouin, who is also the founder and Chair of the Board of Directors of the Council of Emerging Managers (EMB), argues that the position of smaller independent managers is enviable compared to that of large institutions when it comes to innovating and designing unique strategies for investors. “We have much more flexibility and fewer restrictions. This allows us to develop our expertise to the full,” says the derivatives specialist. She, herself, does not hesitate to rely on local emerging managers to manage part of her clients’ assets.

Also, Ms. Blouin believes that encouraging the proliferation of local managers in the Canadian and Quebec financial ecosystem is essential to ensure its dynamism and diversification. “This is not to say that small managers are better than large institutions, but rather to recognize their contribution to the evolution of the financial sector, notably through the contribution of new ideas, the creation of new products, and the development of technology. “

Towards a Responsible Future

With a desire to offer innovative products that meet the changing needs of investors, Altervest’s President and her team are currently working on a Canadian ESG Equity strategy that they wish to launch in January 2021. “I am a strong believer in the importance of being socially responsible and in the saying “Buying is Voting”. We are also noticing an increasing concern for the environment among our clients and we want to enable them to integrate their values into their investment strategy,” says Ms. Blouin.

She is convinced that this new product, which she particularly values, would also have a place in the portfolios of institutional investors. In fact, Altervest has already initiated discussions with the Quebec Emerging Managers Program (QEMP) to open up communication channels with them. “Just like the EMB, the QEMP helps us emerging managers carve out a place for ourselves in Quebec’s financial ecosystem because although we offer exceptional and innovative products, the challenge for a growing emerging manager is always to gain visibility,” says Geneviève Blouin.

To know more about Altervest

Altervest member’s file.

Allard, Allard & Associés: Leveraging the Science of Investment for Each Client

Launched in 1995, Allard, Allard & associés is pleased to take part in this series of portfolio managers’ profiles, an initiative from the Emerging Managers Board (EMB). “Promoting local expertise in this manner helps build a strong industry in Montréal and retain great young professionals who have attended our own excellent universities,” comments Caroline Allard, Vice-President at Allard, Allard & associés.

“It’s an amazing idea, and I believe our geographical and philosophical position as Quebecers gives us a greater openness to the world than that of our American neighbours, in addition to the cosmopolitan environment that is Montréal, so it is a location of choice for portfolio management,” adds Alexandre Legault, Vice-President, Allard, Allard & associés. He also points out that as Montréal is one of the cities with the highest rates of Chartered Financial Analysts (CFA) per capita, many of these professionals tend to move to Ontario, the United States or London, to thrive in their field. “Turning to local firms for asset management services is therefore essential to retaining talent, which of course benefits us all.”

CAROLINE ALLARD, CFA (since 2002)
Vice-president
Portfolio Manager

Investment: A Passion That Runs in the Family

Having had much success as a Tax Partner at KPMG, Jean-Pierre Allard decided to retire at the age of 50 to pursue his passion, purchasing securities on the stock markets. He was managing his own investments, and with a Warren Buffet-inspired approach, started doing so for impressed family members and colleagues who quickly requested his services.

Mr. Allard’s son, Louis, then an engineer at Createch, had completed an MBA Finance when his entrepreneurship led him to join his father and start up Allard, Allard & associés. “By word of mouth, satisfied clients shared their positive experience, and today the firm has over half a billion dollars in assets under management,” Mr. Legault recounts. The team consists of four portfolio managers, Ms. Allard, Louis Allard, Andrew Kost and Mr. Legault. In 2002, Caroline Allard joined the firm, with a bachelor’s degree in business administration and her CFA certification to enhance the team’s skill set. With his own CFA designation, an MBA and a passion for finance, Mr. Legault became a member of the firm in 2012.

The Allard family has truly always had a keen interest in investment. Benjamin Graham’s The Intelligent Investor, a reference when it comes to the value-style approach to investment, acted as a catalyst for the founder of Allard, Allard & associés. “When I was very little, my father was constantly looking at financial ratings, he was always talking about it, it was a daily topic at the table for us,” Ms. Allard recalls. “So, much like Obélix, I think Caroline and Louis ‘fell into it’ when they were kids,” Mr. Legault explains. « You know how some families discuss politics, others hockey or religion?,” he asks. “The first times I had lunch with the Allards, the conversation was obviously about firms that had recently announced excellent financial results.”

The Allard, Allard Edge

ALEXANDRE LEGAULT, MBA, CFA (since 2012)
Vice-president
Portfolio Manager

While Allard, Allard & associés has always managed Canadian shares, the 2008 credit crisis provided great opportunities south of the border, so the firm has also been managing global shares for 12 years now. As well, although its client base is still mostly comprised of private organizations, being selected by the Quebec Emerging Manager Program (QEMP) in 2016 served as a seal of approval, allowing the firm to expand in the institutional segment. Innocap and QEMP also helped the firm improve its documenting of procedures, particularly as regards compliance. And, by signing the Principles for Responsible Investment (PRI), Allard, Allard & Associés incorporated environmental, social and governance (ESG) considerations into their securities analysis, which is helpful from a risk management point of view, in addition to addressing the concerns of its clientèle.

This clientèle consisting of private clients, foundations and retirement plans benefits from efficient, tailored, long-term solutions designed with a factual approach based on the financial analysis of companies. “We invest at a good price in profitable, financially healthy companies which generate strong cash flow, and that’s what has driven value for our clients for 25 years now,” says Mr. Legault. “As well, clients may discuss their portfolio with the firm experts and decision makers directly, rather than with representatives,” he explains. “Our outstanding team that combines experience, talent and key professional designations is certainly a major differentiating factor for Allard, Allard & associés,” Ms. Allard notes.

Competing With Major Players

The competition from large banks and insurance companies is getting more intense for Allard, Allard & associés. Because they have a strong sales force and they know how to identify all business opportunities with their clients, these companies effectively leverage asset management services. Investment firms in other provinces are also competitors when it comes to large-scale institutional mandates.

Why do investors often turn to large companies for their asset management needs? “There are fewer independent firms now, and I think investors feel more secure when investing with larger firms,” Mr. Legault explains.

Another source of competition is the choice of certain investors to purchase an index directly from an exchange-traded fund (ETF), small firms thus under pressure to reduce their fees when the scale of their operations does not necessarily allow it.

“The passive and quasi-passive management phenomenon, where many investors purchase everything on the market without really thinking, is a differenciating factor for us, giving us an opportunity to position and promote ourselves as actual asset investors,” says Mr. Legault.

Investing in the Future

Today, with more than $650 million assets under management, its mutual investment funds, a dozen employees and the structure to support it, Allard, Allard & associés can continue its growth while maintaining a flawless service for its existing clientèle. “It’s essential for us to have the means to provide the same first-rate service to our current and new clients, throughout our company’s development,” Ms. Allard states.

With an ambition to become a key element of the portfolio management landscape, the firm plans to go beyond word of mouth, increasing their recognition in the industry. “Over the next few years, we aim to reach a $billion in assets under management,” Mr. Legault adds.

Find more information on the website.

Allard, Allard & associés member’s file.