The Steadyhand Diaries

Globe Investor Magazine, May 22, 2008

August 31, 2006

Over the last year I've been meeting with managers across Canada, but it's difficult to find folks who run money in line with our philosophy.

So far, the big firms leave me cold. They have great people, but they're too mechanical, too standardized and too focused on the index. Our research shows that the way to beat the index in the long run is to ignore it in the short run. It also shows that funds that concentrate on fewer holdings have a better chance of outperforming.

Now that indexing has matured and many active managers behave like indexers, our approach to investing is unique, even radical. It wouldn't have been, 20-plus years ago, when it was common for managers like PH&N's Art Phillips to pay the index little heed. Our opportunity is to be the anti-index company.

September 8, 2006

I can't believe we just hired a CFO who's six months pregnant. Are we nuts.or incredibly enlightened? Elaine Davison resigned from Qtrade today and starts on Oct. 2. She'll be with us for a couple of months, but we'll go through the start-up without her. Yikes. Scott Ronalds, a favourite of mine from PH&N, will join us the same day-he'll do all our communications.

It's starting to feel like a real company, and Neil is jazzed about Steadyhand. He's moved fast to secure outsource partners-custody, record-keeping and client-relationship management. Now we have to pin down our investment managers and fund design, as well as formalize our marketing strategy.

October 3, 2006

Today, Neil and I went to interview a website design firm called Burnkit in an old warehouse in the Downtown Eastside. We met with a guy named Josh Dunford who looked about 18, with the requisite jeans and sneakers. If we want to push the envelope, I think we've found the right place.

Neil, Scott and I scoped out our brand image a couple of weeks ago at our cabin near Whistler. Neil has built the site architecture. Now we want Burnkit, where it turns out Josh is a co-founder, to make it hum.

Their team came up with three concepts they thought would differentiate Steadyhand and help build awareness, our biggest challenge. We picked the one furthest from the centre line-"Don't Fear the Bear." I don't think there's another investment firm on the planet that would dare put a bear on its website, but it shows that Steadyhand is willing to challenge industry conventions when they don't work for the client.

October 19, 2006

Neil has come up with an interesting approach to pricing. As our clients' assets grow, their management expense ratio will go down. We'll start to taper the fee at $100,000. And instead of making long-term Steadyhand investors pay more, as the cellphone companies do, we'll reward them by further reducing their fees over time. Our standard fees won't be the lowest on the Street, but for larger, long-standing clients, we'll be untouchable.

October 23, 2006

Time to decide on the manager for our equity fund. I'm really comfortable with both Cranston, Gaskin, O'Reilly & Vernon and the other candidate. CGOV is a boutique Toronto firm that manages about $1 billion for wealthy individuals. The other shop would have a more marketable record out of the gate, but I want to avoid a common investor mistake-chasing performance.

Neil says I get more excited when I talk about CGOV. Its portfolio doesn't look like other managers'. It's truly all-cap and is managed on a global basis, which means they take the best stocks Canada has to offer and complement them with select U.S and international ones. And they won't own more than 25 stocks, so they act on their convictions. I love that discipline.

CGOV is a great firm and will be a good partner.

November 23, 2006

The search for a small-cap manager has taken a few twists and turns. I initially favoured a Toronto-based firm that had always been successful in small-cap equities, but I'm not comfortable with its corporate structure. There's no employee ownership, and the place has been losing people and assets.

Wil Wutherich, on the other hand, runs his own firm in Montreal and has lots of skin in the game-all his family's financial assets are in the portfolio. Wutherich & Co. is a small shop-totally unknown and somewhat unconventional. Sounds perfect.

We're going with Wil. His record has suffered lately because he sold his oil stocks too early, but he's made his clients a lot of money since he started in 1999.

In addition to CGOV and Wil, we've selected Vancouver-based Connor, Clark & Lunn to manage our savings and income funds. While we look for a global equity manager, we've started to negotiate fees with the three firms. We have to convince them that their fee should reflect our future status, not our size at start-up. This is when I really know I'm not at a big company any more.