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David LePoidevin has made a career of going against the grain of traditional money management.
Consider his decision to withdraw his bonds in the wake of the 2008-09 global financial crisis – and go to zero bonds in 2021 as inflation began to soar. This was an important statement for Mr. LePoidevin, senior portfolio manager and senior investment adviser at The LePoidevin Group with 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’ve been much less attractive over the past 15 years.
“We haven’t liked bonds for a long time,” says LePoidevin, noting that stocks and preferred stocks have performed better since the global financial crisis.
These types of investment beliefs led Mr. LePoidevin to transfer his team to Canaccord Genuity Wealth Management in 2016 after 20 years of managing funds at two brokerage firms owned by different Big Six banks. He wanted to implement a more independent strategy, different from the traditional balanced mix of 60-40 equity and bond portfolios.
“We look for bond-like investments in which there is asymmetric risk-reward,” he says.
Mr. LePoidevin was recognized as the #1 advisor in The Globe and Mail and SHOOK Research, second annual ranking of Canada’s top wealth advisors.
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 investment strategy at the moment?
Our most exciting trade at the moment is the adjusted floating preferred shares, which we are buying at an average price of about 60 cents on the dollar.
Dividends were reset about three years ago when rates were at 0.5%. The five-year is above 3.5%, so the dividend increases are staggering. There aren’t enough people doing the math, but you can buy something that looks unattractive today, but two years from now you’re going to have a return that could approach 9% or 10%.
What do you think of a recession and how the markets might react from here?
When you hear a lot about recession, the market risk has gone down dramatically. This means that a large part is already cooked.
We’ve done an analysis of historic recessions, and the typical market drop is 20% to 25%. 100, which we are already at. So yes, given the magnitude of the interest rate hike, there will be a slowdown, but in the United States it’s very unlikely that this slowdown will be like 2009, which was around 45 % against the S&P 500. This correction was prompted by the subprime mortgage crisis during which many lenders went bankrupt. We therefore believe that the US recession will be moderate, but that Canada will be penalized more due to our exposure to very high debt levels and variable rate debt.
What is your asset mix right now?
We have an unusually high level of preferred shares – at around 30-40% of client portfolios – due to what we consider to be an outsized opportunity.
We don’t buy bank preferred stocks – we’re all non-banks. Banks have a single risk, which is their contingent capital. Thus, in the event of insufficient capital, they are converted into ordinary shares. This is not the case for the companies we own, notably BCE Inc. BCE-T, TC Energy Corp. TRP-T and Enbridge Inc. ENB-T We also hold about 10% cash in US dollars, and the rest is in blue chip stocks.
What sectors do you like and dislike in today’s market?
Some sectors we like include US real estate investment trusts, telecommunications and materials. The gold sector looks exciting and the oil sector has been fantastic. Stocks are still cheap and there are bargains everywhere.
We avoid Canadian banks, but we like life insurers. For example, Manulife Financial Corp. MFC-T currently pays over 6% and will benefit immensely from higher interest rates. Life insurance products are very interest rate sensitive – who is going to buy an annuity today? But it becomes more attractive. Life insurance policies are based on long-term rates. Utilities are consumer staples, and utilities are areas to avoid, in our view.
What makes a good advisor, in your opinion ?
Someone who thinks independently. For me, a good advisor doesn’t just follow bank models; they do their own research. Moreover, they do for their clients what they do for themselves in their wallets. It may be slightly different depending on age and risk tolerance.
How do you help your clients navigate market turbulence?
We hold video conferences, which a high proportion of our clients attend to get a sense of what we’re thinking and where we’re going.
This helps them overcome any anxiety they may be feeling. Because we do our own trading, these events allow us to reach many people at once, giving us more time to roll up our sleeves and be in the markets.
What is the best compliment you receive from a customer?
It’s when they say, ‘I don’t care. I know you are on top. Most of our clients have been through several down cycles. The most difficult customers are newer ones that haven’t gone through a down cycle. These are the most difficult conversations.
This interview has been edited and condensed.
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