Three hall-of-fame investors share the lessons they learned along the way
Denise Paglinawan , Stephanie Hughes
11 min read
Kim Shannon of Sionna Investment Managerstalks stocks and mark
Last month, three legendary Canadian investors were inducted into the Investing Industry Association of Canada's Hall of Fame, which was established in 2013 to honour those who had made significant contributions to the investing community. The Financial Post's Stephanie Hughes and Denise Paglinawan spoke to this year's inductees about their careers and the lessons they learned along the way. These interviews have been edited and condensed for space.
Kim Shannon
Kim Shannon started her investing career in 1983 as an investment manager with Royal & Sun Alliance Company of Canada in 1986. A trailblazer on the Canadian investment scene, she went on to found Sionna Investment Managers in 2002 and built it into one of the largest female-led independent investment firms in the country, with $1.7 billion in assets under management.
How did you catch the investing bug?
KS: It was an accidental career. I grew up on military Air Force bases, I'm an Air Force brat. In university I started running student organizations and really loved that and started to wonder if I could get a job doing what I called "organizing." Then I had an epiphany: I had a conversation with a friend who said, "Kim, what you call 'organizing' is actually business." Once I realized business was about working with people and making things happen, well, that could be endlessly fascinating. So, it was always a series of accidents. I don't think women in particular have — until very recently — been brought up to think of themselves as business people.
What was the best piece of investing advice you've ever received?
KS: Probably the most valuable for me was learning about value investing: the principle that what you pay for an investment has an enormous impact on your long-term returns and if you pay too much, you will never get a decent return. If you buy when it's scary at the bottom and it comes all the way back, then that can create an enormous return for you and your clients.
What was your most successful investment?
KS: I was an analyst hoping desperately to become a portfolio manager, and my boss had resigned and they didn't think that a 33-year old was qualified. We had a position in Magna International which was in a lot of trouble and had fallen to near $2 per share and there was some concern it might go bankrupt. Before they hired a replacement for my boss, Magna had recovered to about $7 a share. And the CEO of the firm came down and said, "Well, I'm so glad we've gone from two to seven, let's get rid of it." I stayed late that night and I wrote a two-page document called "The Case for Magna," explaining that it was definitely not the time to take profits. It's not easy to stand up to the CEO but the vice-president agreed with me and we went over and I stated my case. He said, "Okay, we'll sell half then." When the stock got to $50, he came to see me and he said, "Have you sold half yet?" And I said: "Well, not yet, sir." And he said: "Okay, you can sell based on what you believe from now on." The next week, I got the promotion.
It was an accidental career
Kim Shannon
What has changed the most about the investing business during your career?
KS: When I first started, you would phone up the company and ask for annual reports. Data was hard to come by, and it wasn't available electronically. A key skill in the early 1980s was getting enough quality information to make a better decision. Today, there's so much information. I would consider most of it, to use the industry term, "noise." I think that the biggest difference now is winnowing through the noise to find the key nuggets that you need to make a quality decision.
How has the industry changed for women? Do you think there's enough progress being made?
KS: A study done a couple of years ago found less than 1.5 per cent of assets under management globally are under the purview of women. That's still pretty low, and there are more women in the industry and there are more openings and possibilities for women in the industry, but it has been one of the slower fields.
How is your experience helping you navigate through this current economic environment?
KS: Markets are as much about human irrationality and emotion as they are about fundamentals. The market is a human construct. Money is a human construct. So a piece of us gets embedded in this thing we've constructed. I use history a lot as a guide. In inflationary periods, history tells us Canada stands to outperform and the value investment style tends to outperform. Canada last year did quite well, year-to-date is doing extremely well, and that's somewhat forecastable.
Bob Bertram
When Bob Bertram joined the Ontario Teacher's Pension Plan in 1990 as chief investment officer, the fund's assets stood at just $18 billion — all in government bonds. By 2008, when he retired, that number had grown to $108 billion. In between, he helped develop the strategies and style that become known as the "Canadian model" for pensions, now emulated around the world.
How did you catch the investing bug?
BB: When I was 15 years old, I was in a grade nine English class at Queen Elizabeth High School in Calgary. And the teacher took the whole hour to explain the power of compound interest and the mathematics of pension funds. Most of the kids in the class thought it was totally boring, but I was astounded. I didn't start investing as a career until I was at AGT (Alberta Government Telephones, the precursor to Telus) in 1974. The employee-run pension fund wasn't doing well and someone nominated me to the pension board. I was elected and that's when I really got involved in investing. Then, after a few years, the fund hired me to help manage it.
What was your most successful investment?
BB: People may disagree, but I think at Teachers', the most successful investment that we did was probably Cadillac Fairview. It was successful not because it was the highest rate of return, but we were able to make a very large investment with a very good return on it. When we bought Maple Leaf Sports and Entertainment, for example, the rate of return was much higher, but it was a very small investment. It was less than half a per cent of the fund. Cadillac Fairview at the time was at 10 per cent of the fund, and it gave us a 10 per cent rate of return for a number of years. So, it was both the ability to do a very large-size transaction that gave us a very good rate of return and to diversify the portfolio.
The liquidity crisis was hitting full bloom, and we just couldn't do it. So, it's a big regret
Bob Bertram
What was the one that got away?
BB: In 2007, we had an agreement to buy Bell Canada and we got caught up in a court action over the rights of bondholders. And by the time we settled the call to action, we were in the middle of the financial crisis, and the firms that had agreed to finance the transaction were bankrupt and we couldn't close it. The liquidity crisis was hitting full bloom, and we just couldn't do it. So, it's a big regret.
What was the most valuable investing lesson you learned?
BB: When I was in University I studied people like Joseph Schumpeter, Harry Markowitz and William F. Sharpe. But at that time, you couldn't really use the theory because you had no way of calculating it in a useful time period. If you tried to do a correlation analysis on a portfolio in 1968 by hand, it would take you two months' worth of mathematical calculation. But I knew about portfolio optimization, I knew about durations on fixed income. Then, in 1978, I acquired an IBM laptop desktop and learned how to program optimizations for portfolios and the Macaulay Duration into that PC. It allowed you to do things instantly that would take weeks and months to do before those PCs were invented.
How is your experience helping you navigate today's markets?
BB: I'm taking less risk than I would have in the past with my personal investments, because I'm older. I'm sticking more to volatility, high-dividend stocks. I try not to take the higher risks of growth stocks. I'm not giving advice to other people, I'm just saying this is something that a 78-year-old is doing.
Tom Bradley
Tom Bradley at the Steadyhand Investment Management offices in 2015.
Tom Bradley started his investing career as an equity analyst before joining Phillips, Hager & North, where he went on to become president and CEO. He then co-founded Steadyhand Investment Management, where he is chair and manages the Founders Fund. A keen advocate for investors, he writes a regular column for the Financial Post.
How did you get started in investing?
TB: I did two degrees, an undergrad in marketing at the University of Manitoba and then, after working for a couple of years, an MBA at Ivey. I credit Paul Bishop, a finance prof at Ivey, for really turning me onto finance and making me realize that I was pretty good at it. So that was that was the roots of it. After graduating, I got a job as a stock analyst at Richardson Greenshields in my hometown of Winnipeg, covering conglomerates among other things. That's how I started.
What was the best piece of advice you've ever received?
TB: One of the biggest influences on my career was Bob Hager, a co-founder of Phillips, Hager & North, who has now passed away. He was a brilliant investor, but was also just a good, ethical man. I always remember him saying to me, "If it doesn't make sense for the client, it doesn't make sense." That always stuck with me. I've always been an advocate for the investor and making sure that wherever I was situated, we're doing the right things for clients. And I think that that really came out of my time with Bob.
What about a piece of advice that you wish you had followed, but didn't?
TB: When we started Steadyhand, I canvassed all of my contacts, and I remember Bob Krembil saying, "No matter how good a mousetrap you have, you have to be able to sell it." What he meant was that whatever I do on the investment front, I have to take care of the marketing side, too. I didn't ignore the advice. I just didn't put as much of an emphasis on it as I should have.
There is often a disconnect between what investors say they will do and how they actually use investment products
Tom Bradley
What was your most successful investment?
TB: There have been lots of winners and lots of losers, but the most memorable one for me was when I was a sell-side analyst in the mid 1980s and had a theory on Canadian Pacific Ltd. and recommended it. I don't remember what the other analysts were saying, but I was very aggressive about it. A lot of big institutional clients followed my advice and the stock took off. It was an important thing for building my career. I always recognized that I was extremely lucky because, even if my thesis was right, the stock went up because the market went up. It's not the best investment I've ever made, but it was maybe the most important one.
What about the one that got away?
TB: The big mega-cap tech stocks are obviously fabulous franchises. I didn't have the imagination to see how big and powerful they could become. That was painful, not owning enough of Microsoft, Google in recent years. When it comes to older recommendations that didn't work out, I'd have to think about it. I try to block them out and move on. It's like when a good golfer double bogeys: they go to the next tee and have already forgotten about it.
What has changed the most about the investing business during your career?
TB: I think the markets are much more competitive. What I mean by that is there are so many brilliant minds pursuing the same goal of beating the market by finding a great stock or bond that it's tougher to do. When I started, if you were just a little more thorough doing research and talked to a few more people, you could unearth opportunities that others didn't see. I still believe that's the case in the small cap part of the market, but in the medium to large cap part of the market, it's much tougher to have a unique insight.
How has your experience helped you navigate today's market?
TB: I've spent a lot of time in the last 15 years thinking about what we call investor behaviour. There is often a disconnect between what investors say they will do and how they actually use investment products. They tend to buy when markets or a product is up and close to fully valued, and bail out when prices have dropped, just as opportunities abound. At Steadyhand, we are still trying to find the next great stock and we have a great team to do that. But my partners and I really try to make sure that our clients are making sound investment decisions along the way. Frankly, that's why we've got this quirky name. It's all about providing a steady hand for investors.
