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David LePoidevin has made a career out of going against the grain of traditional money management.
Consider his decision to pull way back on his bond holdings coming out of the 2008-09 global financial crisis – and go to zero bonds in 2021 as inflation started to surge. It was a major statement for Mr. LePoidevin, senior portfolio manager and senior investment advisor at 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 have been much less attractive over the past 15 years.
“We haven’t liked bonds for a long time,” Mr. LePoidevin says, noting that stocks and preferred shares have been better performers since the global financial crisis.
These types of investment convictions led Mr. LePoidevin to move his team to Canaccord Genuity Wealth Management in 2016 after 20 years of managing money at two different Big Six bank-owned brokerages. He wanted to run a more independent strategy different from the traditional balanced 60-40 stock-bond portfolio mix.
“We look for bond-like investments in which there’s asymmetric risk-reward,” he says.
Mr. LePoidevin has been recognized as the No.1 advisor in 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’s your investing strategy at the moment?
Our most exciting trade right now is the reset, fixed-floating preferred shares, which we’re buying at an average price of about 60 cents on the dollar.
The dividends were reset about three years ago when rates were 0.5 per cent. The five-year is above 3.5 per cent, so the dividend increases are stunning. Not enough people are doing the math, but you can buy something that looks like it’s unattractive today, but in two years, you’re going to have a yield that might be approaching 9 or 10 per cent.
What’s your take on a recession and how markets could react from here?
When you hear the word recession used a lot, the market risk has come down substantially. It means much of it is already baked in.
We did an analysis of historical recessions, and the typical market drop is 20 to 25 per cent, which we’re already at. So, yes, given the magnitude of the interest rate rises, there will be a slowdown, but in the U.S., that slowdown is highly unlikely to be like in 2009, which was about 45 per cent off the S&P 500. That correction was driven by the subprime mortgage crisis in which many lenders went bankrupt. So, we think the U.S. recession will be mild, but Canada will be more penalized because of our exposure to very high-debt levels and floating-rate debt.
What’s your asset mix right now?
We’re unusually high in preferred shares – at about 30 to 40 per cent of client portfolios – because of what we see as an outsized opportunity.
We aren’t buying bank preferred shares – we’re all non-bank. The banks have a unique risk, which is their contingent capital. So, in the event of a capital shortfall, they get converted to common stock. That isn’t the case with companies we own, including BCE Inc. BCE-T, TC Energy Corp. TRP-T and Enbridge Inc. ENB-T We’re also holding about 10 per cent U.S. dollar cash, and the rest is in blue-chip stocks.
What sectors do you like and dislike in the current market?
Some sectors we like include U.S. real estate investment trusts, telecoms, and commodities. The gold sector looks exciting, and the oil sector has been fantastic. The stocks are still cheap, and there are bargains all over the place.
We’re avoiding Canadian banks, but we like life insurers. For instance, Manulife Financial Corp. MFC-T currently yields over 6 per cent and will benefit tremendously from higher interest rates. Life insurance products are very interest-rate sensitive – who’s going to buy an annuity today? But it’s getting 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 view?
Someone who thinks independently. To me, a good advisor is not just following the bank models; they’re doing their own research. Also, they’re doing for their clients what they’re doing for themselves in their portfolios. It may be slightly different depending on age and risk tolerance.
How are you helping clients manage the market turmoil?
We do video conference calls, which a high proportion of our clients attend to get an idea of what we’re thinking and where we’re going.
It helps them with any anxiety they may be feeling. Because we do our own trading, these events allow us to reach out to many people at once, giving us more time to roll up our sleeves and be in the markets.
What’s the best compliment you receive from a client?
It’s when they say, ‘I don’t worry. I know you’re on top of it.’ Most of our clients have been through several down cycles. The harder clients are the newer ones who haven’t been through a down cycle. Those are the more difficult conversations.
This interview has been edited and condensed.
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