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Stephanie Douglas’s main focus at Avenue Investment is helping clients with financial planning and asset allocation.

Galit Rodan/The Globe and Mail

Imagine being 26, not long out of school, with scant knowledge of the investment industry, and landing a job with a boutique portfolio management firm where you'd be working elbow to elbow with three Bay Street veterans.

Intimidating, yes, but you would learn quickly.

That's been the career path of Stephanie Douglas, now 33, who in seven years has worked her way up from associate to portfolio manager at Avenue Investment Management in Toronto.

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The firm has eight people on staff, six of whom are portfolio managers. Avenue has about $350-million in assets under management in two portfolios, one stock and one bond, for its well-heeled "private" clients, who have $750,000 and up in investable assets.

Avenue's founding partners – Paul Harris, Paul Gardner and Bill Harris – struck out on their own in 2003, having in common a stint at TD Asset Management. Matt Manara and Bryden Teich round out the investment team.

"It's great being able to work under them," Ms. Douglas says of the firm's founders. "They have knowledge and experience. I've learned a lot."

After she graduated from the University of Toronto with an honours degree in economics, Ms. Douglas's first job was in the accounting department of a construction company.

"I thought I wanted to be an accountant," she says. "But it wasn't for me. The work was too repetitive." When she saw the job posting at Avenue in 2010, she decided to apply.

"I didn't know much about the industry at the time," she says. Today she loves it. "I never know what my day is going to look like. It's exciting." Despite her demanding job, last year Ms. Douglas found time to marry Matthew Douglas, who works in the aerospace industry.

While Ms. Douglas participates in Avenue's investment meetings, her main focus is on helping clients with financial planning and their asset allocation between stocks and bonds.

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She has the chartered investment manager (CIM) designation and is working toward becoming a certified financial planner (CFP). More clients are asking for help that goes beyond investing to tax, retirement and estate planning, she says.

"It's a growing focus," Ms. Douglas says of financial planning. "Personally, I'm passionate about it. It's like a hobby for me."

In an environment where competition for high-net-worth clients is intense, financial planning is becoming an increasingly important "value added" for investment firms. "Clients like to see if they are on track for retirement, or if they are spending too much and need to save more," she says.

"Helping clients with their wealth is a lot more than picking stocks. It's giving them the peace of mind that they can achieve their goals."

Getting to know the firm's clients is an essential part of the job, Ms. Douglas says. As well as asset allocation, "we make sure they understand what risk is."

Like all portfolio managers, Avenue handles clients' investments on a discretionary basis, which means they buy and sell securities for the portfolios without asking for a client's consent.

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The Avenue portfolios are not funds, Ms. Douglas emphasizes. Clients hold the securities in separately managed accounts.

The goal of the equity portfolio is to outperform the benchmark with as little volatility as possible and to double clients' money in 10 years. While the stock portfolio might lag in roaring bull markets, it can be expected to better withstand bear markets, she adds.

If the funds turn in a negative performance for the year, Avenue will cut its fees in half the following year for clients who have been with the firm for a full calendar year. Fees are typically 1.5 per cent for the stock portfolio and 0.80 per cent for the bond portfolio.

Avenue has done well since it started in November of 2003. The equity portfolio has returned 8.9 per cent a year, gross of fees, since inception (gross of fees means the reported results do not reflect the deduction of management fees). While fees vary depending on asset level and how long the client has been with the firm, the return net-of-fees has averaged 7.1 per cent a year, Ms. Douglas says.

The bond portfolio, made up mostly of corporate debt, has returned 5.7 per cent a year gross of fees and 4.8 per cent net.

Avenue does all its own research and tends to hold its securities for three to five years to keep trading costs to a minimum, Ms. Douglas says.

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All six portfolio managers contribute to the investment side, researching prospective investments and meeting with company management. "You get to meet some very interesting people," she says.

With the passage of time, Ms. Douglas has earned clients' confidence, but it wasn't easy.

"The biggest challenge was when I joined the company very young," Ms. Douglas says.

"I was working for three veteran portfolio managers who were very knowledgeable.

"Being young and not knowing much about the industry, it took me a long time to gain the knowledge to win clients' trust," she says.

"Luckily, they gave me a chance and we have a fantastic relationship."

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Here are equities the Avenue Investment Management team is finding interesting now.

Stocks to watch

Here are equities the Avenue Investment Management team is finding interesting now. (See current stock prices below video.)

Bank of America Corp.: It's a much better bank than it was in 2008, now that it has cut its cost structure and gotten rid of non-core businesses, the Avenue analysts say. It has significant capital and should trade at 1.5 times book value, which would put the share price at $38 (U.S.). It also pays a good dividend of 1.76 per cent. "We think they will continue to increase their dividend and buy back stock."

Blackstone Group LP: Blackstone is one of the world's biggest investment firms, managing large-scale private equity, real estate and credit funds. It would benefit from anticipated large-scale infrastructure spending in the United States. Avenue has added to its position to gain further exposure to the U.S. economy and investment cycle. Blackstone pays out most of its earnings every year in the form of dividends, and it has a yield of roughly 7 per cent and a price/earnings multiple of 11.2 times earnings (at press time). The company has more than $80-billion (U.S.) of investable funds.

Cenovus Energy Inc.: Cenovus is Canada's third-largest energy producer, having been spun out of Encana Corp. in 2009. The company has been penalized for not reducing costs as quickly as its competitors. It recently acquired a ConocoPhillips Canada property, which resulted in a stock overhang. "We believe the valuation is very low and all the bad news is reflected in the stock price," Avenue analysts say. "We think the company is improving and this will soon be reflected in the stock price."

The days of double digit returns are over. Rob Carrick, personal finance columnist, lays out what you can expect given your investment risk profile. The Globe and Mail
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