Investing In Families

Individual investors don’t want products that track an index; they want to know their money is safe. And Bob Sewell, president and CEO of Bellwether Investment Management, knows that.

Bellwether Investment Management takes a unique approach to investing: it attends to the needs of families, who may have been overlooked or underserved in an industry that focuses on institutions. Below, Bob Sewell explains to Advantage why that’s important.

What was the impetus for Bellwether Investment Management’s founding?
I’d spent a lengthy career working at two large Canadian banks, running their investment-management businesses. In 2009, I decided working in the big banks wasn’t right for me. You’re very much removed from the end client, and because of the size of the business I was running, I couldn’t manage money anymore; all I did was manage people. That was the sounding bell that brought me back to what I love.

Did you see a void in the market you thought you could fill?
Absolutely. The clients we serve are affluent investors, predominately across North America, though we have some international clients. And in my experience, an awful lot of portfolio managers, mutual funds in particular, aren’t managed with the end investor in mind. We wanted to change that.

BELLWETHER
FACTS & FIGURES

1

Fixed-income strategy

2

Core-equity strategies

$1M

Minimum net worth of target client

$130M

Assets under management

30%

Growth of assets under management each year for the past three years

What’s wrong with how most money is managed today?
Most mutual funds today are managed as if the investor is an institution, such as a pension plan. Because of that, the underlying risk tolerance of the investor is ignored; strategies are more focused on tracking to an index. In that context, the portfolio manager starts thinking that if you just lose less than the index, that’s a win. And the focus shifts to managing the portfolio manager’s risk versus the investors’. But our view is that affluent investors don’t want that. They want capital protection and prudent growth.

What’s your approach, then?
We do things differently in regard to how we construct portfolios and select good companies to invest in. For example, our equity philosophy is to seek out companies that increase their dividend regularly—referred to as dividend growth stocks. There’s been a lot of research showing that this characteristic alone tends to fare well in volatile equity markets and protect capital.

How many strategies do you have?
We have two equity strategies: the North American dividend growth strategy, which can potentially invest in any company that trades in North America, and the global tactical ETF [exchange-traded fund] strategy, which uses a combination of exchange-traded funds to provide exposure around the globe. We also manage a North American fixed-income strategy as well.

What challenges have you faced?
The biggest struggle was getting our message out in such a crowded market where there are a lot of advisors chasing the million-dollar-plus investor. We had to find a way to stand apart from the crowd. Our strategies help us do that.

How exactly do you stand apart?
We educate the client. Many investors don’t understand how money gets managed today, by which I mean the institutional mind-set of most managers. We have to explain some of the crazy outcomes that can result from that. If you’re so index-focused that you own stocks not because you believe they’re quality companies but because they’re a big allocation in the index you track, that’s risky. After we help people understand what’s wrong in the industry, we turn to how we’ve addressed it—by going back to what the affluent investor wants, which at its root is capital protection. And there are six elements to managing risk in a portfolio. Most managers will take it only through the first or second step; we go through all six.

LESSONS LEARNED

“You need to have absolute conviction that what you’re doing is the right approach. You have to send a clear message to the market that explains how you’re different—and know that you may have to explain why that’s important. And you have to have patience.”

How long did it take to see success?
In the beginning, I was marketing my pedigree, my experience in the industry, and my credentials. I’m a CFA charterholder, a certified public accountant, and a certified financial professional. So the first couple years were pretty lean, just getting the business up and running. But now we have a track record. Over the past five years, even in years in which markets have been in negative territory, we’ve protected capital and generated reasonable returns. A good example would be 2011; the equity markets were generally in negative territory, and we were up 5 percent.