When the lights go out

Globe Investor Magazine, September 18, 2008

Bacchiochi says his firm emphasizes cash-flow management and diversified portfolios. To achieve the latter, Gavin Management favours exchange-traded funds and managed products such as mutual funds and segregated funds, with individual securities usually representing only 5% to 10% of the portfolio. It also invests across industry sectors and uses alternative assets-which don't typically correlate with movements in the equity markets-for additional downside protection.

Over at Blackmont, Conville's approach may be even more conservative. His standard allocation is 60% in fixed income and 40% in globally diversified blue-chip stocks. "It's really about just quietly growing," Conville says. "What we do is not sexy."

While Iginla's portfolio fits the low-risk mould, he says he's proudest of his more aggressive holdings. In particular, he likes the Sprott Hedge Fund II, which has earned an average annual return of 13.2% since its August, 2002, inception; and the Acuity Canadian Small Cap Fund, which has averaged 12.3% since its inception in July, 2005. Iginla also keeps 5% to 10% of his portfolio to manage by himself and experiment with his own investing ideas. He has some real-estate investments, but they're a tiny fraction of the mix.

"When I first got into the league, I definitely was risk-averse. I really couldn't imagine seeing money go down," Iginla says. "But as the years go by.you get more of an understanding that that's all part of it: Do it right and it will work out long term. But I still would say I'm a conservative investor."

The same goes for Iginla's lifestyle, though his penchant for sports cars remains. (He now has two, the Porsche and a 2007 BMW M6, but plans to trade them in for a 2009 Porsche Turbo.) He and Kara have a house in Calgary and a summer home in the Okanagan, a popular vacation region in central British Columbia. Last year, Iginla bought a 12.5% interest in his junior-hockey alma mater, the Kamloops Blazers, as did several other former Kamloops players including NHL stars Mark Recchi, Shane Doan and Darryl Sydor. He also dabbles in the restaurant business: He co-owns a small bar and restaurant with some friends-it long ago paid for itself-and shares a Dairy Queen franchise with family members. That's about it.

"I hope to play until I'm 40 years old or somewhere around there, so hopefully I have 10 more years left," Iginla says. "Then I'll have more time to put into [my investments], and can watch things more closely. But right now, it's more about capital preservation."

That might sound like a dull way to spend your millions, but as Iginla and Modano both know, it's the ticket to financial freedom long after the cheering ends. "Once a guy is making $1 million a year.it's really more a matter of what you don't do," Conville says. "When they're in a mall when they're 60 signing autographs, I want it to be because they want to, not because they have to."

He Shoots, He Scores Low on Financial Savvy

Time and time again, pro hockey players have proven themselves to be clumsy stickhandlers when it comes to managing money.

In 1976, the legendary Bobby Orr hit the jackpot with a $3-million (all figures U.S. currency) contract to defect from the Boston Bruins to the Chicago Blackhawks. But by 1980, the blueliner was near bankruptcy, owing hundreds of thousands in back taxes and legal and accounting fees. This mess led to his acrimonious split from his long-time agent and friend, the notorious Alan Eagleson. Orr's ordeal remains hockey's No. 1 cautionary tale about entrusting your money to the wrong guy.

More recently, New York Islanders great Bryan Trottier filed for bankruptcy in 1994, with assets of $141,000 and a staggering $9.5 million in debts. His undoing was a series of failed real estate investments, in particular a costly ice-rink venture that folded.

Then there's forward Darren McCarty, whose 2006 insolvency saw him report assets of $1.9 million and debts of $6.2 million. McCarty had been earning more than $2 million a year with the Detroit Red Wings, but after he went a year without pay in the 2004-'05 NHL lockout, the team dropped him for salary-cap reasons. He then signed with the Calgary Flames for less than half his previous income. The pay cut-combined with a divorce, casino debts and bad loans to gambling buddies-left McCarty deep in the hole.

But the poster boy for pointlessly wasting a hockey fortune is Orr's ex-teammate Derek Sanderson.

The flamboyant centre was once the highest-paid player in professional sports. For jumping from the Stanley Cup champion Bruins to the Philadelphia Blazers of the upstart World Hockey Association in 1972, Sanderson secured a $2.65-million salary-paid up front. It was an astronomical sum for the time, but not so much that it couldn't be squandered.

Sanderson sat down with financial advisers after landing the contract, but he says they baffled him with investment jargon. "I said, 'Just make sure I don't go broke,'." he recalls. "And never paid attention to it. I gave my lawyer power of attorney. That was my first mistake."

Within a few years, all the money was gone-wasted on drugs, spending sprees, fair-weather friends and silly investments. Sanderson was broke and homeless. But after sobering up in 1980, he became a financial adviser himself. The 62-year-old Sanderson now works with Howland Capital Management in Boston, where he has about 20 NHL clients, including veterans Keith Tkachuk and Glen Wesley.

"Now I have two children and I think, 'God, if I only had the money for them,' Sanderson says. "If I'd just managed it properly, if I hadn't been so foolish-those are the things I try to teach the players." - D.P.