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.

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