For eight years, Paul Musson toiled quietly under the leadership of Jerry Javasky, an award-winning manager who helped found Mackenzie Financial Corp.'s Ivy fund family. Now that his mentor plans to retire next month, Mr. Musson has taken over the Ivy funds, with their $7-billion in assets.
As Mr. Javasky's hand-picked successor, the 47-year-old manager has come a long way from his short stint a decade ago as investment analyst at AIC Ltd., a rival value shop.
Since joining Mackenzie, he has focused on foreign investments, including co-managing the $1.9-billion Ivy Foreign Equity and running the smaller Ivy European Class.
Over the past year, he has become more involved in co-managing the $1.9-billion Ivy Canadian Fund, which has suffered from massive redemptions in recent years. Once a darling of financial advisers, it struggled when commodity stocks were hot, but has weathered the bear market better than many of its peers.
Describe your investment style, and how it differs from that of AIC.
I would term it quality at a reasonable price. There is a common perception out there that Ivy is value [investing]. It is true to the extent that we don't want to overpay for the businesses and that we have a pretty conservative valuation discipline. But when we are looking at a business, we look at the quality of it, and then we look at the price ... AIC has a different style, but there is some overlap. The main difference would be that AIC has a very strong focus on the financial sector.
Even though you are value investor, do you look at the big economic picture?
Traditionally, we have not spent a lot of time on the macro picture. If we have businesses that are less economically sensitive and the No. 1 or No. 2 market share of their respective industries, we felt we didn't have to worry about the big macro themes. Over the last 12 months we have been focusing more on macro just because what is going on is truly historic and affecting everybody.
What is your outlook for the Canadian market?
What we do know is that we are closer to the bottom than we were 12 months ago. We could be at the bottom, or we could have a fair bit further to go. We really don't know. We know that there are risks to the system today that are unlike anything we have ever seen. That is why governments around the world are throwing trillions of dollars to shore it up ... But there is no guarantee these actions will prevent further downside.
Is it hard for active managers to beat the index?
It depends. First of all, the focus of the index is in resources and financials. Those are two areas that we do participate in, but to a much lesser extent than the index. Those two areas from 2003 to 2007 were extremely strong, and due in large part we believe to the excess liquidity floating around in the world.
Yet, Ivy Foreign has outperformed its index over 10 and 15 years. Why?
The main difference is the index - not the funds. It has done better than Ivy Canadian, but not by much over 15 years [6.8 per cent against 5.7 per cent]. Ivy Foreign is benchmarked to the MSCI World Index, which has much less of a focus on financials and resources. It is a bigger universe, and there are more companies to choose from, and we can choose the best of the best.
Ivy Canadian and Ivy Foreign Equity once had high cash positions - in the 20-per-cent range - but have they have fallen to the 5- to 6-per-cent level recently. Why should investors pay fees to be in cash?
We understand that. If we are allowed to have some cash, then we can be more disciplined in allocating that capital. If we have to be 100-per-cent invested, and if we looked at our universe of high-quality businesses and we thought that they were all too expensive or were quite expensive, we would be overpaying it just allows us that discipline to be patient and wait for the right price.
Shoppers Drug Mart
"We think they have a sensible growth strategy, and we think it is a well-run business. It is less economically sensitive. The stock is down, but the earnings are fine."
"We think Tim Hortons has a ways to go in terms of growing the business through new menu items and store expansion."
"In Ivy Canadian, over 40 per cent is in foreign stocks. The stock that stands out there is McDonald's. It is a company with a well-known brand and over 30,000 restaurants, so they have huge purchasing advantage over everybody else. They have not been suffering in this economic downturn."
How Mackenzie's Ivy Funds have fared
|Mackenzie Ivy American Class**||U.S. Equity||3.0|
|Mackenzie Ivy Canadian||Canadian Focused Equity||1954.7||2.35%||-16.0%||-6.2%||-1.1%||2.3%||5.7%|
|Mackenzie Ivy Enterprise||North American Equity||105.6||2.39||-18.0%||-5.9%||-2.0%||2.3%|
|Mackenzie Ivy European Class||European Equity||8.9||2.50||-10.8%||1.3%||1.3%|
|Mackenzie Ivy Foreign Equity||Global Equity||1911.3||2.39||-7.0%||-0.2%||0.1%||2.5%||6.8%|
|Mackenzie Ivy Global Balanced||Global Equity Balanced||155.3||2.37||-3.7%||1.0%||0.6%||0.0%||2.9%|
|Mackenzie Ivy Growth & Income||Canadian Equity Balanced||1861.5||2.08||-11.8%||-3.5%||0.2%||3.2%||6.3%|
|BMO Nesbitt Burns Cdn Small Cap Index||-41.1%||-15.7%||-3.0%||5.2%||4.4%|
|MSCI World ($ Cdn)||-27.3%||-9.4%||-3.5%||-3.3%||3.4%|
|S&P 500 Composite||-40.1%||-13.6%||-6.1%||-4.3%||3.7%|
|S&P/TSX Composite Index||-33.9%||-10.0%||0.4%||2.6%||4.4%|
|S&P/TSX Total Return||-31.8%||-7.6%||2.8%||4.6%||6.5%|
*As of Jan 31, 2009/Assets in $ millions SOURCE: GLOBEFUND
**Launched in December, 2008
© 2007 The Globe and Mail. All rights reserved.
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