Gerald (Gerry) Coleman likes to stand apart from the crowd. The head of the five-member Harbour team at CI Mutual Funds Inc. has been a no-show for two consecutive years at the Canadian Investment Awards.
He wasn't on hand when his flagshipCI Harbour Fund was honoured as the analysts' choice Canadian equity fund in 2002, nor when he was named Fund Manager of the Year in 2001. Coleman, 59, has never been one for formalities. The son of a banker, he began his investment career with only a Grade 12 diploma, preferring real-world experience to the pursuit of a university degree. For years now, he has worked out of his home office in suburban Mississauga, just outside Toronto, distancing himself from the buzz of Bay Street.
Coleman regularly talks to company executives and brokerage analysts, or watches them being interviewed on the business TV channel. But he's far less inclined to be at the receiving end of an interview himself. Though small-town friendly by nature, he prefers to let his performance do the talking.
What the numbers will tell you is that Coleman's patient, bottom-up discipline of seeking well established, quality companies with low valuations—combined with his usually substantial cash holdings—have created a relatively safe harbour amid the treacherous shoals of the equity markets.
During its five full calendar years of operation, CI Harbour Fund has had below-average performance only once. Not surprisingly, that was in 1999, when Coleman's aversion to pricey, trendy stocks left him severely underrepresented in the then roaring high-tech sector.
Though CI Harbour Fund lost money for the first calendar year ever in 2002, its slim 0.9% loss was a mere scratch compared with the 12.2% bloodletting for the median Canadian Equity fund.
While ignoring market indexes, Coleman has a self-imposed limit of 20% of his funds' assets in any one industry, and he doesn't like any equity position to exceed 8%.
But much of his ability to preserve capital in down markets has to do with his tendency to hold more than 20% cash in his equity funds, and occasionally a lot more. "Once or twice" in his career as a fund manager, his cash weighting has briefly topped 40%. At last report, CI Harbour Fund was 29% in cash.
An avid reader and diligent researcher who keeps extensive background files on companies, Coleman likes to hold a stock for at least five years once it finally makes his select list of about 40 names. CI Harbour Fund's portfolio turnover rate, excluding its ample cash assets, has ranged between 10% in 1998 and 48% in 2001.
Among the stocks in which he currently has significant holdings these days are banks and resource companies. "It's generally been a mistake to under-rate the banks on a long-term basis," says Coleman, who counts Royal Bank of Canada ( RY/TSX), Bank of Nova Scotia ( BNS/TSX) and Toronto-Dominion Bank ( TD/TSX) among his top 10 holdings.
In the energy sector, where his top holdings include Encana Corp. ( ECA/TSX), Suncor Energy Inc. ( SU/TSX) and Petro-Canada ( PCA/TSX), he favours senior companies with strong balance sheets and long reserve life.
Coleman's conservative style has its roots in the trust industry. His first investment job was with Montreal Trust in 1965, where he remained for 13 years. He joined the securities department in Toronto and worked his way up to become a trader. By age 30 he has risen to become the head of the investment department, but yearned to spend less time managing people, and more time picking stocks. "I wanted a pure money management job," he recalls.
In 1978, he got one, joining the former United Financial Management Ltd. as a mutual fund manager where he later teamed up with a younger colleague, Jerry Javasky. In 1992 "the two Jerrys" jumped ship together to Mackenzie Financial Corp. as the founding managers of the Ivy funds.
In 1997, Javasky stayed with Mackenzie while Coleman joined CI to establish the Harbour funds. Capitalizing on Coleman's track record and his popularity as one of its top draws, CI has been expanding his role over the years. His team now includes portfolio manager Stephen Jenkins and three analysts.
The Harbour group moved into global equities in January 2002 with the launch ofCI Harbour Foreign Equity Sector. Under co-managers Coleman and Jenkins, the fund is managed in a similar fashion to the domestic Harbour funds, paying little heed to geopolitical considerations.
For example, Coleman says CI Harbour Foreign Equity holds French-based industrial and medical gases supplier Air Liquide because he and his team like the company, not because they like France. As for the world's largest equity market, Coleman says: "To me, investing in the U.S. is like investing in the 11th province."
