In an unexpected move, Sentry Investments announced on July 7 it "has decided to end its relationship" with chief investment officer Dennis Mitchell.
Mitchell, a 10-year Sentry veteran who had been CIO since 2012, left a large mark on the firm's investment culture as it grew into one of Canada's largest independent asset managers. In addition to his role as CIO, Mitchell became the chief evangelist for Sentry's conservative, income-oriented style externally, burnishing the $18-billion firm's growth.
The circumstances behind Mitchell's dismissal aren't entirely clear. Sentry president and chief operating officer Phil Yuzpe declined to provide details, citing privacy concerns, though he emphatically stated the departure was unrelated to management duties or compliance matters.
Sentry funds turned in strong returns under Mitchell's tenure, especially its Morningstar Bronze-rated flagship, Sentry Canadian Income. He also recruited young analysts to support the firm's rising asset base and growing fund line-up. While the shop broadened its line-up to include new mandates, it still adhered to its distinct brand of investing.
Mitchell's influence appeared less positive in other respects, though. Rather than policing its growing funds for capacity issues, he advocated an approach where the funds altered their investment approach to accommodate a bigger asset base. That was the case most recently at the $1.5-billion Sentry Small/Mid Cap Income, which has enlarged its U.S. holdings and increased its mid-cap holdings as it has become capacity-constrained. In a meeting with Morningstar analysts, Mitchell noted the fund could further bulk up its mid-cap stake to handle more money, which would mean earlier investors would no longer have the small-cap-oriented portfolio they initially purchased.
Mitchell was hardly alone in shaping Sentry's culture. His replacement as CIO, Sandy McIntyre, has done at least as much to shape Sentry's culture as Mitchell. He was Mitchell's predecessor as CIO from 2008-2012, and served as co-CEO for two years until January 2015.
In the late 2000s, McIntyre played a key role in shifting Sentry away from its strategy of launching trendy closed-end funds of dubious long-term value. While moving the firm in an investor-friendly direction, Sentry still struggled to balance its interests with those of fundholders. To attract advisor-controlled dollars to Sentry Canadian Income, for example, it charged an outsized 1.25% trailing commission (the trailer compensates advisors for advice and service; 1% is the industry standard). Sentry Canadian Income also managed asset growth by expanding its mandate to include larger-cap names and U.S. stocks.
McIntyre also takes control of some of Mitchell's portfolio-management duties. He succeeds Mitchell as lead manager of the firm's global strategies, including Sentry Global Growth and Income, Sentry Global Balanced Income, the relatively new Sentry Global Mid Cap Income, and the global equity sleeve of the four Sentry Personal Pension Portfolios. McIntyre, formerly a co-manager of Sentry Canadian Income, has portfolio manager experience, though not in global equities.
McIntyre had been dialling back his day-to-day responsibilities at the firm. When he stepped down in January as co-CEO he became vice-chairman, a post he still holds. Yuzpe said he expected McIntyre to remain CIO and portfolio manager over the long term.
Mitchell also co-managed Sentry REIT. Michael Missaghie now has solo control over the fund. Missaghie oversaw more of the fund's day-to-day responsibilities and has been a co-manager since 2010, so investors shouldn't expect significant changes.
Investors also shouldn't expect this to affect funds Mitchell didn't manage, such as Sentry Canadian Income. With no change in management, we continue to maintain our Bronze rating.
