In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they’d never buy.
In the general sense, technology always holds the biggest promise but is not limited to any particular sector. Advancements are accelerating in pace and diversity and now include almost every touchpoint in our everyday lives. From the mundane to extraordinary, discovery to application, technology remains a key differentiator and, as it has in the past, will have a profound impact on our future.
As a generalist rather than a specialist, it would follow that for us the general technology sector as a whole offers the most tempting of choices. We tend to invest in more mature technology businesses, but for those who may have greater insight into potential transformational change in any particular field, the choice may be more granular, and may allow them to deliver good returns by investing in earlier stage, more binary opportunities which we would find too risky for CGI’s portfolio.
What’s the Biggest Economic Risk Today?
This largely depends on the timeframe. In the near to medium term, it is likely interest rate policy. We are currently in a period of flux, transitioning from a prolonged, extremely low interest rate environment with a recently elevated inflation rate to a somewhat indeterminable future.
A delicate balancing act is required of Central Banks to stabilise economic activity without catastrophic consequences. In the longer term, the biggest risk to the economy is geopolitical. Along with risks associated with conflict, the use of trade as a political tool has increased substantially. An escalation in either of these issues has been shown to have a greater impact on the supply-demand dynamic as well as on the theoretical efficiency metric as the world has become more integrated over time and would disrupt and bridle economic growth potential.
Describe Your Investment Strategy
Canadian General Investments Limited provides investors with an easy and unique opportunity to obtain a broad exposure to the Canadian equity market and can be viewed as a “proxy” for Canada. The portfolio is actively managed so is different than its benchmark but maintains similarities as to incorporating diversification. Focussed on the long term, we select investments using a combination of top-down and bottom-up strategies.
We are biased to bottom-up because, over time, this has been shown to uncover opportunities that have contributed outperformance. Portfolio turnover is kept extremely low and holdings are held in a moderate range of 50-65 in an effort to beat the market rather than just become the market. We keep cash at minimal levels and are committed to maintain a fully invested positioning in the portfolio.
Which Investor(s) Do You Admire?
There have been many and the number will continue to grow. The best investors observe and learn from various sources in formulating their own perspectives and ideas.
Name Your Favourite ‘Forever Stock’
Forever would depend on one’s definition. We have held a few investments in the fund for over a decade including representation in our world class Canadian banking sector such as Royal Bank of Canada RY and Bank of Montreal BMO and Toronto Dominion Bank TD. In addition, we have others like Franco-Nevada Corporation FNV and Canadian Pacific Kansas City Limited CP. Although there is no current intent for elimination of any of our holdings of this type, I wouldn’t be able to put the “forever” tag on anything as the pace of change in the world continues to accelerate and the ability to adapt remains key.
What Would You Never Invest In?
I would never invest in anything that I can’t formulate a reasonable understanding relative to the investment perspective.
Growth or Value?
There are opportunities in both growth and value but our long-term focus leads us to favour growth in return in respect of both capital and income metrics.
House or Pension?
In Canada, owning a house has not only provided shelter but has also been shown to be a very good investment so the combination probably edges the pension alone.
Crypto: Brilliant or Bad?
The underlying Blockchain technology as a platform is brilliant but the Crypto application at this stage is not at a place where we would consider it a viable investment.
What Can be Done to Improve Diversity in Fund Management?
There are a number of initiatives underway to address diversity in many industries and everyday life, including Fund Management, but it will take time to evolve. It would help to have more industry initiatives to introduce investing ideas and fund management as a career into schools and colleges.
While professional investing is a rewarding and stimulating career, all individuals need to understand how to manage their financial goals and liabilities – in that sense, a good understanding of finance and investment is also an important life skill. Engaging while children are still at school, particularly at compulsory school age, which in Canada is up to 18, would tackle both industry and national needs.
Have you Ever Engaged With a Company and Been Particularly Proud (or Disappointed) of the Outcome?
We tend to be more of a passive investor regarding direct engagement. We take meetings and follow companies through a network of brokerages, analysts and other investors in order to make our initial assessment decision as well as monitoring events and issues that may arise subsequent to making an investment.
It is our belief that we are buying into and aligning ourselves with the skills, expertise and operational capabilities that reside within the companies themselves but also consider and incorporate corporate culture and behaviour so as to ensure high standards are kept in agreement with our principles.
We rarely see benefit in engaging publicly – that tends to encourage emotion which can cloud rational decision making for both companies and investors. It is better to remain rational: if a conflict or issue should arise, we would investigate to see if, when and how it is to be resolved and, if not satisfied, we would prefer to exit the position.
What’s the Best Advice You’ve Ever Been Given?
The best advice given to me comes from childhood Boy Scout days and is the motto “Be Prepared”. Simple but extremely effective and something anyone can apply to almost any life situation including investing – even the best performing stocks can have their negative surprises.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
