Pierre Bernard is an investment chameleon. He adjusts his style and strategy according to each of the three equity mandates that he manages for Montreal-based Industrial Alliance Fund Management Inc.
He's worked this way ever since he joined the predecessor firm in 1999 as vice-president and took on an existing growth portfolio and created two more -- a "quality" portfolio and one he describes as "defensive." "I realized that after all my years at the Caisse de dépôt [et placement du Québec] and four years at TAL, that the value and growth themes were a joke," says Bernard. "They are used to protect the manager from the firm's investment policy," he says, adding that the last four years have seen a blurring of the style distinctions, which only confuses investors.
Bernard previously worked for BLC-Edmond de Rothschild Asset Management Inc., which was renamed IA Fund Management in January. The name change reflects the acquisition last November of BLC-Edmond de Rothschild by Quebec City-based Industrial Alliance Insurance and Financial Services Inc. Bernard intends to stay on while his team is integrated within the Industrial Alliance organization.
Placing himself somewhere in the middle of the value-growth spectrum, Bernard admits candidly that the growth style has been disappointing. For evidence, he points to the $60.9-millionR Canadian Equity.
"Look at the numbers. It is fourth quartile almost all the way through. But we have not changed our policy in six years," he says. "It's a pure growth fund. If you ask me, 'Is it time to jump into growth?' I am not sure. We don't push people to buy it, but it's there ready to go."
However, Bernard's defensive approach has been rewarded with the $130.2-millionR Dividend, a four-star Morningstar rated fund. It has been a top-quartile performer over five and three years, and second quartile over two years and one year. Turnover has been low to moderate, at 19.5% in 2003, and 40.6% in 2002.
Thirdly, the quality portfolio is represented by the $34.5-millionR Canadian Leaders, which Bernard has managed since its inception in January 2001. It comprises about 35 mid- and large-cap companies that must be industry leaders, have a low-cost structure, demonstrate balance sheet strength and have strong management.
"Our sell discipline is based on quality," says Bernard. "If a company hasn't got it any longer, we get out. We don't care about the valuation."
A three-star Morningstar-rated fund, R Canadian Leaders has been a third-quartile performer for the last three years. It has had low turnover of 21% in 2003 and 22.2% in 2002. In contrast, the growth fund's turnover has been fairly high, at 102.9% in 2003 and 88.9% in 2002.
Bernard spends about 20% of his time looking at macro-economic data. But 80% is spent on company visits and writing up his views on whether to buy or sell. "Sometimes there is a big gap between reality and what the market tells you. I need to put my thoughts into writing."
Typically, he visits about 50 companies a year, but may draft about 100 comments in that time. Companies that are problematic usually require more than one annual visit.
Those that meet the growth, quality or defensive criteria end up in one of the three portfolios. As a rule, Bernard limits holdings in all three funds to about 5% of assets.
The son of a veterinarian, the now 47-year-old Bernard fell into the investment management game by accident. He had planned to follow in his father's footsteps, but realized at University of Sherbrooke that he wasn't suited to the world of science and switched to business.
He graduated in 1982 with a bachelor of business administration and landed a job at the Caisse de dépôt. Starting as a chemicals analyst, he later covered the mining and gold sectors.
After five years of learning the ropes, he switched to portfolio management. In 1994, he was recruited by what is now TAL Global Asset Management Inc. His job was to look after special mandates, manage a small-cap fund for CIBC and co-manage the former Talvest New Economy, then headed by economist Nuala Beck.
After the fund changed its name and strategy in 1998, Bernard parted ways with TAL. He landed on his feet in 1999, when Laurentian Bank offered him an opportunity to run a boutique operation that later became BLC-Edmond de Rothschild.
That's where he decided to implement a management structure that would meet client needs through growth, quality or defensive portfolios. "Not only would I fulfill those needs, but I would be able to show that at least one or two portfolios could do well in a full cycle."
