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Invest Well. Live Well: The pursuit of excellence (and new shoes)

A few times a year, we travel to meet investment firms and complete our due diligence process. Recently, I travelled to Toronto, met with representatives of 12 companies and had the opportunity to interview their CEOs or key personnel.
Invest Well Live Well Eric Davis Keith Davis

A few times a year, we travel to meet investment firms and complete our due diligence process. Recently, I travelled to Toronto, met with representatives of 12 companies and had the opportunity to interview their CEOs or key personnel. One of the many things I love about this job is having these one-on-one meetings with successful and prestigious firms because we can look people in the eye, see how they respond to our questions and gauge their genuineness.

It's important for you to know that 100 per cent of the expenses associated with these trips are out of our own pockets. Neither TD nor any other firm covers any associated travel, food or accommodation costs. Furthermore, we are not allowed any incentives to buy or recommend their products. In short, there is no financial gain for us. However, we believe that this thorough research is a critical piece of our process, enabling us to build our top-rated portfolios.

Our screening process can be broken down between five key categories. Here are the highlights:


Those firms with excellent track records tend to have their personal wealth in their strategies and pay the exact same fees as their clients. The most impressive was a firm that had $300 million of their partners' money invested alongside the $3- billion portfolio; the majority of their own money was invested in their own funds. Over the course of my career, I have noticed that behaviour and positive outcomes are more likely when the owners/operators have skin in the game.


One mistake is looking only at average returns, which smooths results. We want to see track records through good and bad markets, as well as compared to benchmarks and peers. Some of the strategies didn’t produce high returns, but had no record of lost money over 10 to 15 years and still provide six to seven per cent net to client results. We like giving away some upside for a more consistent experience.


When we talk price, we mean costs. Most of the firms take around a one per cent management fee. However, the most confident leaders were very different. A couple of firms provided discounts after five to 10 years of loyalty and another one provides a 20 per cent discount once you pass a certain amount. Probably the most impressive was one that only charges a base fee of 0.25 per cent unless they earn over 10 per cent — then they charge the full one per cent


Most of the strategies we monitor are unique, specialized and have limited opportunity. In other words, they are most profitable when they remain nimble and don't get too large. As such, many of them will close (cap) once they reach a certain size. In addition, some firms will limit the redemptions to weekly or monthly so that they can sell in an orderly fashion instead of being reactive. These policies help protect the existing investors.


As with many strong businesses, the people often make the difference. Most of these firms had low employee turnover, long tenured staff and specialized teams. Some provided ownership or profit sharing while others encouraged unique, inclusive office cultures. For example, one firms calls all their employees “partners.”

We take a lot of pride in "kicking the tires" and hunting for our best-in-class investments with fair fees, lower risk and consistent results. Once we add the strategy to our Top Picks List, we take a position ourselves, so we can get familiar with it before placing it in our clients' accounts. At any given time, more than 90 per cemt of our own investible money is in the exact same products as our clients.

Now, while I was in Toronto, I also took some time to appreciate the uniquely interesting things about the city. The multitude of cultures, the wide variety of food choices and the endless shopping options. Along the way, I got inspired to purchase a new pair of work shoes. However, I should have chosen new running shoes as I also re-discovered that Toronto city blocks take much longer to walk than do Kamloops city blocks.

Until next time...Invest Well. Live Well.

(written by Eric Davis)

This document was prepared by Eric Davis, vice-president, portfolio manager and investment advisor, and Keith Davis, investment advisor, for informational purposes only and is subject to change. The contents of this document are not endorsed by TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc.-Member of the Canadian Investor Protection Fund. All insurance products and services are offered by life licensed advisors of TD Waterhouse Insurance Services Inc., a member of TD Bank Group. For more information, call 250-314-5124 or email