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David LePoidevin has made a career of going against traditional money management.
Consider his decision to pull back on bonds from the 2008-2009 global financial crisis – and move to zero bonds in 2021 when inflation started to pick up. It was an important statement for LePoidevin, a senior portfolio manager and senior investment adviser at Canaccord Genuity Wealth Management in Vancouver, who began his career as a bond trader in the mid-1980s.
While bonds were a “generational opportunity” in the 1980s and 1990s, he says they have become much less attractive over the past 15 years.
“We haven’t liked bonds for a long time,” LePoidevin says, noting that stocks and preferred stocks have outperformed since the global financial crisis.
These types of investment convictions led LePoidevin to move his team to Canaccord Genuity Wealth Management in 2016 after 20 years managing money at two different brokerages owned by Big Six banks. He wanted to use a more independent strategy that deviated from the traditional balanced 60-40 stock-bond portfolio.
“We look for bond-like investments where the risk-return is asymmetric,” he says.
Mr. LePoidevin is recognized as the No.1 advisor to The Globe and Mail and SHOOK Research’s second annual Canada’s Top Wealth Advisors ranking.
Globe Advisor recently spoke to Mr. LePoidevin about his current investment strategy and some of the qualities he believes make a good advisor.
What is your current investment strategy?
Our most interesting trade at the moment is zeroed fixed float preferred shares, which we buy at an average price of about 60 cents on the dollar.
Dividends were reset about three years ago, when interest rates were 0.5 percent. The five-year yield is over 3.5 percent, so the dividend increases are huge. Too few people don’t count, but you can buy something that doesn’t look attractive today, but two years from now you’ll get your return, which might be close to 9 or 10 percent.
What do you think about the recession and how might the market react from here on out?
When you hear the word recession used a lot, the market risk has decreased considerably. That means a lot of it is already baked.
We did an analysis of historical downturns, and a typical market drop is 20-25 percent, which is where we’re at right now. So yes, given the magnitude of rate hikes, there will be a slowdown, but in the US, that slowdown is highly unlikely, like in 2009, which was about 45 percent of the S&P 500. This correction was caused by the subprime mortgage crisis, in which many lenders went bankrupt. So we think the US recession will be mild, but Canada will be punished more because of our exposure to very high leveraged and variable rate debt.
What is your current asset mix?
We have an unusually large number of preferred shares – around 30–40 percent of our client portfolios – due to what we believe to be an excessive opportunity.
We don’t buy bank preferred shares – we’re all non-banks. Banks have a unique risk, which is their contingent capital. So, in the event of a capital shortfall, they are converted into common stock. This is not the case for the companies we own, including BCE Inc. BCE-T, TC Energy Corp. TRP-T and Enbridge Inc. ENB-T We also hold approximately 10% in US dollar cash, with the remainder in blue-chip stocks.
What sectors do you like and dislike in the current market?
Some of the sectors we like are US REITs, Telecoms and Commodities. The gold sector looks exciting and the oil sector has been fantastic. Stocks are still cheap and deals are everywhere.
We avoid Canadian banks but like life insurance companies. Manulife Financial Corp. MFC-T, for example, is currently yielding more than 6 percent and is benefiting enormously from higher interest rates. Life insurance products are very sensitive to interest rates – who buys an annuity today? But it is becoming more attractive. Life insurance is based on long-term interest rates. Utilities are basic consumer needs, and utilities are essential in our opinion.
What is a good counselor like?, In your opinion?
Someone who thinks independently. To me, being a good advisor isn’t just about following bank patterns; they do their own research. In addition, they do for their clients what they do for themselves in their portfolio. It may be slightly different depending on age and risk tolerance.
How do you help clients manage market turmoil?
We do video conference calls that a lot of our customers participate in to get an idea of what we’re thinking and where we’re going.
It helps them with any anxieties they may be feeling. Since we do the trade ourselves, these events allow us to reach many people at once, giving us more time to roll up our sleeves and be in the market.
What is the best compliment you receive from a customer?
Then they say, ‘I’m not worried. I know you’re on top of it. Most of our customers have gone through several billing cycles. More difficult customers are newer customers who have not gone through a down cycle. Those are the more difficult conversations.
This interview has been edited and condensed.
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