Be Boring. Make Money.™
Be Boring. Make Money.™ means ignoring fads and taking a long-term view of investing. It means sticking to a disciplined, bottom-up investment approach no matter the market outlook. And, it means putting the investment odds in our clients' favour by focusing on the things we can control.
In other words, we are benchmark agnostic, think probabilistically, and embrace uncertainty.
We seek business models with sustainable competitive advantages, regardless of industry or economic conditions. We believe that by consistently following our investment philosophy and process we can provide investors with above average, long-term, risk-adjusted returns.
Because we adhere to a single, well-defined investment philosophy and process, our efforts are focused. This shared common language better enables the exchange of information and ideas—this has the potential to enhance decision-making, increase resilience, and reduce risk.
The following three criteria form the foundation of our equity philosophy:
Wealth-Creating Companies
We look for companies that create wealth—companies that earn a return on capital greater than their cost of capital over time by virtue of a sustainable competitive advantage. These types of companies should be worth more every day; they make more efficient use of their capital, whether pursuing reinvestment or paying out distributions to shareholders.
Excellent Management
An excellent management team is an excellent allocator of capital—reinvesting in wealth-creating opportunities while expanding the company’s competitive moat. These teams have consistency in terms of saying what they are going to do, then doing it. They mitigate risk, provide their people with effective leadership, and make appropriate strategic decisions. A great manager will also navigate effectively through challenging times and often provide surprises on the upside.
Discount to Intrinsic Value
Once we have identified a wealth-creating company with excellent management, we seek to identify its intrinsic value, or the price an objective, well-informed person would pay for the company. This can turn a great company into a great investment.
Our discounted cash flow models produce probability distributions—not price targets—via Monte Carlo simulation, where the key drivers of a company’s intrinsic value are stochastic variables. This helps us to understand the range of potential outcomes, the probabilities of these outcomes within a level of confidence, and the margin of safety.
The following four criteria form the foundation of our fixed income philosophy:
Yield Curve Strategy
We position the portfolio along the points on the yield curve which offer the most attractive yields relative to the duration of the security, maintaining a bias for the part of the curve that offers attractive carry characteristics in the context of central bank policy.
Sector Allocation
We typically overweight those sectors that provide attractive yields relative to Government of Canada bonds. That is, we generally emphasize investment-grade corporate, provincial, and municipal bonds.
Security Selection
We actively seek attractively priced securities using in-house, bottom-up credit analysis. Managing credit risk is integral to our style as we seek opportunities to pick up yield through security selection without sacrificing credit quality.
Trading
We monitor bond markets in an effort to identify and exploit mispriced securities. In addition to our own research team, we cultivate strong dealer relationships in order to generate investment ideas and effectively execute on them.
