When your T.E. Wealth consultant recommends you invest with T.E. Investment Counsel (TEIC), he or she is confident that the investment managers who work with TEIC have been chosen with great care and objectivity — that they can deliver solid returns and controlled risk.
Rigorous screening process
Whether your money is managed directly by TEIC-approved managers or through the Prosperity family of pooled funds, TEIC has subjected these investment managers to a rigorous screening process. The performance and investment discipline of these managers have been objectively scrutinized. In cases where there is a corporate relationship between TEIC and a selected manager, TEIC clearly discloses this to the client and the client can decide whether or not to go with that manager.
“TEIC is a manager of managers,” explains June MacKinnon, TEIC’s director of research. “We aim to be completely objective and hold all recommended managers to a high standard.”
Taking the necessary care to select a new manager takes time. Introductory meetings are followed by research, conference calls, further analysis, then, if the manager makes the short list, an on-site meeting. While TEIC is evaluating performance, they are also looking for consistent adherence to a disciplined approach that makes investment success repeatable. Many of the managers have developed proprietary investment programs and processes. A recent addition to the Prosperity U.S. Equity fund, AthenaInvest of Denver, CO., has developed a Behavioural Portfolio Management approach, which determines how to use behavioural factors to build better portfolios.
The multi-manager approach
TEIC favours a multi-manager approach to enhance overall returns and reduce risk. The Prosperity Canadian Equity fund has three managers, for example. Each has a different investment style: Toronto-based Foyston, Gordon & Payne uses a “value” approach, that is, it looks for companies with financial strength and strong track records whose share prices are trading at less than their estimated corporate value. Guardian Capital, on the other hand, looks for companies that are exhibiting strong growth, or have the potential to grow. The third manager, Triasima Inc. from Montreal, combines value and growth in a proprietary process that matches fundamental strength with computer-generated analysis. The result is reduced overlap in stocks, the holdings are diversified, and risk is reduced.
Monitoring our managers
As a manager of managers, TEIC monitors the managers to make sure they live up to the standards that TEIC has set for them. In 2013, after the Prosperity U.S. Equity fund had underperformed for awhile, TEIC undertook a review of the underlying managers. The fund now has four external managers, including AthenaInvest, with each bringing a different style or process to the fund. Performance has begun to improve and risk should abate as a result of the enhanced style diversification.
Economic events can also trigger a review of a fund’s strategy. The low-interest rate environment of the past few years meant some changes for the Prosperity Fixed Income fund. “We became more tactical,” says Steven Belchetz, TEIC’s president and chief investment officer. “We made changes to the managers to add more protection against interest-rate risk.”
“We are always meeting with new managers,” says Ms. MacKinnon, “attending conferences, networking. We find new managers the way investment analysts find new companies. And, if we use a related manager, that will always be disclosed.”
Tessa Wilmott is a Toronto-based editor, writer and researcher specializing in the financial services sector.