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Macroeconomics and Diversity in Human Capital at Mount Murray Investment

As part of his extensive experience with various prominent companies, Vincent Dostie served as Vice-President of Investments for a multi-family firm. There, he hired portfolio managers, led business development and oversaw asset allocation for some forty wealthy Québec families. He remained interested in investment analytics and decision-making, so his flagship project was to establish an independent asset management firm. The first few team meetings of this Montreal startup, which was incorporated in 2016, took place on Mount Murray, one of Mount Royal’s three hills.

Vincent founded Mount Murray Investment with two former colleagues from Caisse de dépôt et placement du Québec (CDPQ). “It takes a great deal of courage to start your own business independently, and my previous opportunities working at investment startups were extremely rewarding, helping me in progressively reaching this important decision,” the firm’s CEO and Co-Chief Investment Officer (CIO) mentions. 

Vincent Dostie
CEO and Co-CIO

The intellectual challenge in investment was a key factor for Vincent when choosing his field of expertise. The fast-paced markets, analytical work and limitless research involved, as well as the joy of implementing one’s ideas, are all aspects that prompted him to pursue a career in this industry. “You get hooked once you’ve worked at CDPQ, where you have access to all the resources in the world to stay ahead in the global investor market,” he points out. “You see it when you speak to new graduates, how this line of work actually makes people dream, as you can truly surpass yourself if you’re really well organized and you work efficiently.”

A Higher Viewpoint

While he was working with startups, Vincent thought about investing further in emerging markets, which is still a key strategy for Mount Murray Investment today. “Keith Porter, the company’s Co-CIO, was in charge of a large CDPQ team that was focused on investing in these markets,” Vincent relates. “It’s a rather rare expertise in Montréal and it’s great for investors to be able to seek advice directly from a seasoned local manager, to explain what emerging markets are exactly,” he says. “As well, for an asset manager who invests significant amounts of money for clients, it’s always helpful to get a sense of the character of the people you invest with, and this is easier to do when you’re dealing with a local firm.”

A highly inclusive organizational culture is another one of Mount Murray Investment’s assets. To build a team with a wide range of skills, the firm pays special attention to applicant selection and employees’ engagement in internal discussions. “Everyone has their place, whatever their level of experience, and I would say we have a modern vision when it comes to investment,”  Vincent states.

The firm aims the structured integration of large amounts of data to its macroeconomic analysis, based on a top down approach, in addition to the fundamental research conducted by its team of analysts and managers about portfolio companies. “Emerging markets are seen in many different countries worldwide, and we feel value may be added through a strong macroeconomic structure to help pinpoint certain regions that may be more promising at times,” Mount Murray Investment’s CEO remarks.

Also, as an emerging portfolio management firm, the company naturally has an innovative outlook because it’s currently developing its own methods and processes, as well as its team. “Many studies have shown that emerging portfolio managers generate better returns than those with more established assets,” Vincent reports.

In keeping with a style that is firmly rooted in today’s reality, Mount Murray Investment addresses the new American President’s focus on the climate crisis in the firm’s latest newsletter. “We would like to think 2020 was the year of the ultimate recognition of ESG priorities. This new emphasis will benefit various sectors of our portfolios.”

Peaks in Value for the Client

Along with competitors of the industry, the firm must face the downward pressure on asset management costs. “This is partly caused by passive investments, i.e. Exchange Traded Funds (ETFs),” Vincent observes. Since the company specializes in emerging markets and targets the addition of significant value compared to its core index, assessing risks and adopting a long-term perspective, it can justify its current fees. “In fact, you should ask yourself if during an entire stock market cycle, your clients’ returns minus your expenses are higher than those of the market, because if that’s not the case, they should have of course simply opted for an ETF,” the firm’s CEO concludes.

Acquiring a critical mass of assets under management for cash flow is evidently another one of the challenges faced by new investment firms such as Mount Murray Investment, and this firm places a lot of value on the quest for talent as well. “Because we have a small, specialized team, and each member of this team plays a major role, it is essential we find people with the right, complementary skill sets, and design an excellent onboarding and long-term training program,” Vincent explains. “In terms of raw talent, we are so lucky in Montréal, there are professionals with diverse skills and backgrounds, from good universities, and we’re able to hire people from countries where we invest, which is really interesting.”

One of Mount Murray Investment’s growth objectives is the optimization of its analytical systems in order to track a growing number of data, as efficiently as possible and in real time. The firm also wants to set up international research teams, while maintaining a vibrant central team in Montréal. All this to continue to provide clients with the best returns possible.

Mount Murray Investment’s member’s file.

To know more about the firm.

Evovest: Investing in Smart Asset Management

As a next generation portfolio manager, Evovest has been breaking new ground in asset management services since 2017 with artificial intelligence, deep knowledge and scalable learning techniques.

Combining his interests in math, current events and technology, Carl Dussault founded the firm and acts as CEO. “I think at 16 I already knew that I wanted to be a portfolio manager. I really liked following news about finance and investment,” he relates. Since university, Mr. Dussault has been involved in HEC’s investment fund association, and has always wondered about how we can automate and make processes easier. His drive to systemize portfolio management using machine learning, while taking the human factor into account, is what brought Evovest to life.

Carl Dussault
CEO

Before starting his own business, Mr. Dussault worked at Intact, the insurance company, managing capital and the firm’s retirement fund for its 11,000 employees. He focused on fundamental analysis, discussing with organizations’ decision makers to determine the right investment strategy. He was also in charge of a market-neutral portfolio. This significant experience helped him recognize the importance of accuracy in the investment process, as well as teamwork within a company.

The Next Step

Born into a family of entrepreneurs, and acknowledging the favourable technological circumstances for the success of his venture, he felt it was the right time to launch Evovest. The firm received its portfolio management licence in January 2018. “It gave Evovest a certain credibility because of course, at first, as an independent manager, I had to put extra effort into building my reputation,” Mr. Dussault remembers. His first partner and Evovest’s Head of Science, Jérémie Desgagné-Bouchard, leveraged his experience as an actuary for Intact’s R&D department and at Element AI also, to develop the company’s machine learning capabilities. “He has been quite instrumental to our success,” Mr. Dussault notes. “His technological agility and aspiration to advance machine learning concepts are distinctive features for Evovest.” The firm also raised capital with outside investors, which helped validate its arrival on the market. “That’s when Guillaume Beauregard, COO, joined us, and the operational expertise he developed at PSP Investments is a major asset to us,” Mr. Dussault remarks. With the support of Majestic Asset Management, Evovest introduced its first investment fund in 2019.  

Evovest’s Global Equity strategy was actually recently selected by Quebec’s Emerging Manager Program (QEMP). “After a comprehensive due diligence review, we are very pleased to have received this recognition,” Mr. Dussault comments. Innocap also provided Evovest with constructive feedback, pointing out the firm’s adaptability and recommending changes to its governance structure. Accordingly, Michel Tremblay, Industrielle Alliance’s former CIO, joined Evovest in 2020 as Chairman of the Board of Directors. “Michel truly helps us better define our growth strategy,” Mr. Dussault mentions. Completing the team, Benoit Robert leads business development at Evovest, which benefits from the strong skills Mr. Robert perfected as part of his extensive experience in institutional sales.

A Québec Company Using Cutting-Edge Technology

Carl Dussault believes one of the key advantages of turning to an emerging portfolio manager like Evovest is the uniqueness of its services. “Often, a client has complementary investment needs that may be adequately met by an emerging manager,” Mr. Dussault explains. “As well, many of the assets in company retirement funds are managed abroad, and local managers contribute in Québec’s GDP.”

Furthermore, Evovest’s agility is also related to the firm’s ability to optimize its investment practices with all available data. “At Evovest, data is stored in an architecture that makes it possible to use new machine learning technology to fully leverage this information,” Mr. Dussault relates. The obtained result is based on a dynamic factor exposure in the economic cycle. “The portfolio’s composition is therefore constantly adapting to the latest data, about companies and the economy, as the interaction between these elements allows us to adjust to change very quickly,” Mr. Dussault explains. In 2020, year of an unprecedented crisis for the asset management sector, Evovest was able to significantly exceed its benchmark. The company’s value proposition is also related to the fact that its investment strategy focuses on reducing human biases.    

For Evovest’s CEO, one of the challenges a portfolio manager must face is the alignment of interests, whether the customers are institutional or individual investors. “Our vision is to ensure our own profitability through the added value we offer the client,” Mr. Dussault mentions. “When you look at events such as what is happening with GameStop in the U.S., it’s clear that financial education is required as regards markets, and it’s always important to determine if a transaction is in the interest of the average investor.”

Diversity in Mind

In addition to implementing a neutral equity strategy within one or two years, Evovest plans to include environmental, social and governance (ESG) issues in its process over the next few months. The firm also wants to invest more and more energy into increasing diversity and inclusion. After filling four major positions for portfolio management, scientific leadership, business development and operations management, Evovest intends to focus on a greater diversification of skills and backgrounds within its team.

For more information regarding the firm.

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.