Portfolio manager Rob Tétrault redefines diversity when it comes to bringing alternative investments into asset mixes. The branch manager, senior portfolio manager and head of Tétrault Wealth Advisory Group at Canaccord Genuity Wealth in Winnipeg has included storage units, farmland and even a professional sports team among his clients’ non-equity holdings.
Tétrault initially became a lawyer, working in insurance litigation and corporate law, then completed a finance MBA and started his wealth-management group in 2010. He’s currently working on a PhD in global finance and leadership.
With holdings of almost $1 billion, his team of 15 works in partnership with other trusted advisors for more specialized family office services.
In an interview with Canadian Family Offices, Tétrault talks about why his “pension style” approach works, how outside-the-box thinking appeals to high-net worth investors and how his firm is positioned for the future.
Why did you go into wealth management?
Whenever you’re talking about investment and retirement planning, there’s a lot of complicated terms, and I think one of my skills is breaking it down and simplifying it for Mr. and Mrs. Everybody. I have the financial and math acumen to build portfolios, but this is another piece of it, advising people.
What does the Tétrault Wealth Advisory Group do?
We have a holistic wealth-management offering, which boils down to an investment-management piece: stock trading, research, analysis, building portfolios, rebalancing. The other piece is retirement and estate planning. We will work with pretty much anyone who has $100,000 or more in investable assets.
I focus more on ultra-high-net-worth clients, but partners on my team will work with young couples, families and retirees. We’re happy to help, because these people need advice, too. And there’s few options if you’re in that sphere, because most other firms will turn you down.
Of our total assets, 50 to 60 per cent might be stocks, there might be some bonds and fixed-income instruments, and we have anywhere from 20 to 30 per cent in alternative assets.
Any holdings to mention there?
We like private real estate, but we’re an investment firm that thinks outside the box for these things. We have owned music royalties, farmland, student housing and storage units. These are all asset classes that most people might not think of at first blush when they think of their portfolio, right?
Indeed, that’s a broad range. Why does this type of investment appeal to people?
Because it’s incredibly stable, it pays monthly income and you don’t have to worry about it dropping by 50 per cent overnight, like the stock market. It’s consistent, it’s got good returns and it’s tax efficient. That means it allows you to defer paying taxes on investment income earned by your non-registered accounts until you access the funds, as opposed to when the income is earned.
It checks a whole bunch of boxes in our philosophy of managing money, which is pension-style investment.
It sounds like you’ve got diversity there.
Yes, and it’s real diversification. You might think you’re diversified because you own different stocks in different countries. Well, what happens when the stock market crashes? All of those stocks – Canadian, U.S., globals – fall. But if you own real assets, with different metrics of valuations, they’re not going to all fall together.
Because alternative assets are not traded publicly, they’re not exposed to investor sentiments like public bonds and equities. They are valued based on investment fundamentals, like cash flow, and generally provide more stable returns and valuations. Stability doesn’t make the investments risk free; it just means the risks are different. We do a lot of upfront due diligence on the funds, managers and investment strategies before we invest in them at all, and we continue to do that on an ongoing basis.
It’s going really well, beyond our wildest dreams. We’ve averaged about 10 per cent annualized returns over the last 15 years in these investments, they’re extremely tax efficient and there’s little volatility.
Are clients pleased?
The client experience is good. Imagine a year where the stock market’s up 30 per cent, and we have a third of the portfolio that only did 10 per cent – our numbers might lag, right? But in years – most years – when the market does 8 or 6 or 4 per cent, or minus 10, minus 20 or minus 30 per cent, clients really love the experience.
Why not put more into alternatives?
We always look at what the biggest money managers are doing and chat with the largest pension endowment funds on the planet. Because we don’t want to be on the bleeding edge here. When they were doing 30 per cent in alternatives, we were doing 15 to 20 per cent. And now they’re doing 50 per cent, we’re at 30 per cent. We’re constantly looking at increasing.
What are the downsides of alternatives?
One is liquidity. You get 30- or 90-day liquidity, it’s not daily liquidity, like the stock market. So we’ll make a liquidity plan for every client, and if they need more, then we’ll have less in alternatives in their portfolio. Also, most of these are real assets, there’s generally rent that you’re collecting or a payment for the use of an asset. So if those all fall out of favour at the same time, it wouldn’t be good.
How do wealthy families feel about alternatives?
They absolutely love them. Our biggest area of growth by far is people with multi-generational wealth. They want to be more tax efficient, and they understand that stocks aren’t the only place to have your money. We also have access to some neat stuff, like we did a private placement deal recently where we bought shares of ownership in a Major League Baseball team.
Why are you unique in this approach?
Most other retail advisers or portfolio managers in this country can’t do the stuff we’re doing, because they’re usually at a firm that doesn’t allow them to think outside the box. I’m at an independent firm with partners that are free thinking, and they realize that the way the largest pension funds on Earth manage money brings a better client experience.
How is it better?
If you have less volatility in your portfolio, more stability, more consistent returns with fewer big dips, that’s what Mr. and Mrs. Everybody want as an investment experience.
How are your clients sitting mentally today after a couple of volatile years?
Our clients have a lot less volatility, because their returns are more streamlined. Most, if anything, are asking me for more alternatives.
How is your firm positioning for the future?
The best that we can do as portfolio managers is focus on the things that we control. And what are those things? Asset allocation, proper financial planning, proper tax advice and making sure we take advantage of inefficiencies in the market.
Responses have been lightly edited for clarity and length.
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