Art Of Boring

In this episode of the podcast, credit analyst Curtis Elkington provides a comprehensive overview of the $50 trillion global commercial real estate market. He covers the current headwinds facing various property sectors, such as pandemic-induced challenges in the office sector and touches on the surprising resilience of the retail segment. Elkington sheds light on the complexities of the commercial mortgage-backed securities market and details the credit analysis process his team uses to evaluate potential investments with examples. Key points from this episode: • Over the past four years, commercial real estate as an asset class has faced potentially the most significant of headwinds, most notably the pandemic and the rise in interest rates.  • While the pandemic had a different impact on each property sector within commercial real estate, higher rates had a much more uniform impact across the various industries. • The overall size of the commercial real estate market, which includes multifamily, office, ret

In this episode, Crista Caughlin, lead Portfolio Manager of the Canadian Bond Strategy, and Brian Carney, lead Portfolio Manager of the Global Credit Opportunities Strategy, provide their thoughts on recent economic data releases, a shift in central bank language, and recent market volatility. They delve into new issuance activity in the U.S. and Canada, widening spreads in the investment-grade and high-yield markets, and current portfolio positioning. The conversation concludes with an update on the growth and expansion of Mawer’s fixed income team. Key points from this episode: Central banks have shifted their focus from solely targeting inflation to balancing inflation and growth risks, leading to the start of a global easing cycle.  Recession fears have increased due to weakening economic data, such as falling PMIs, rising unemployment, and weak growth, causing volatility in markets. It remains to be seen if recent volatility is just a pocket or something more material. If growth remains robust, it's lik

In this episode of the podcast, Mark Rutherford, Co-Manager of the Canadian large-cap equity strategy, discusses the current investment landscape in Canada, highlighting the wide dispersion in sector performance and the impact of central bank policies. He delves into the long-term theme of the global energy transition and its far-reaching effects on various market sectors in Canada. Insights into insurance and banking sector performance are provided, as well as examples of specific portfolio holdings within the Canadian equity strategy. Key points from this episode: On the surface, healthy and attractive returns can be found across equity markets in Canada. However, there is quite a bit of dispersion under the surface. Year to date, top-performing sectors include energy and materials – which have been the top performers for a few years now – while telecoms, real estate, and some utility stocks are lagging the market. One longer-term theme that is top of mind, both for Canada and numerous countries around th

In this episode, Portfolio Manager Manar Hassan-Agha discusses how the Global Equity Team navigates an exuberant market environment while staying true to Mawer’s disciplined investment approach. He delves into the potential impacts of emerging trends, namely artificial intelligence (AI), and provides examples of the team’s measured approach to evaluating the hype and sustainability of these trends. He emphasizes the value of temperament, alignment, and identifying mispriced high-quality companies. Key points from this episode: When considering potential errors of omission, it's a delicate balance between learning and improving while also ensuring you're not learning the wrong things. It's a matrix of good-bad decisions and good-bad outcomes. A deep dive on XP A deep dive on Robert Half We tend to overestimate the effects of new technology in the short term but underestimate them in the long run [Roy Amara], which could potentially apply to the current AI hype. The asymmetry today, in our mind, around AI hyp

Portfolio Manager Crista Caughlin discusses the economy and factors that drove markets in the second quarter of 2024. Key points from this episode: Because inflation is easing at a gradual pace, central banks with likely be cutting rates gradually. We are at the end of a global tightening cycle and starting to see countries tweak their policies to better fit their domestic markets, but there is not and likely won’t be, a material divergence in the path forward among central banks. The yield curve has been inverted for almost two years, which is longer than average. However, it's not the longest inversion on record. In the late 80s, the yield curve remained inverted for over two and a half years before a recession. In continuation of the first quarter, equity markets did quite well again, with most reaching new highs during the quarter. The strength was primarily driven by a narrow segment of the market, notably technology. Host: Kevin Minas, CFA, MBA, CAIA, Institutional Portfolio Manager Guest: Crista Cau

In this episode, Portfolio Manager Jeff Mo makes the case for investing in U.S. mid-cap equities, highlighting the country’s strong business environment, large domestic market, and GDP growth. He discusses current market trends, including artificial intelligence, and his team’s risk management evaluation, especially with a pivotal U.S. election looming on the horizon.   Key points from this episode: The U.S. is an attractive market for investing due to its strong rule of law, business environment, and large domestic market. Mid-caps are an investing sweet spot. While smaller companies struggle to gain competitive advantages, mid-caps have similar competitive advantages as large caps but with much more attractive growth profiles. There is one dominant theme right now in the market, which is artificial intelligence and anything related to that, all the way down to companies that are building HVAC systems for data centers. With risks like elections, the team goes through the portfolio company by company to eval

In this episode, Portfolio Manager Jeff Mo discusses common behavioral biases that can hinder clear sell decisions, and the tools, such as checklists and trigger points, that can help slow down emotional thinking. He provides examples of companies that he and his team properly exited based on changing fundamentals as well as those they may have held onto for a bit too long, proving the power of the endowment bias. Key points from this episode: Mawer’s sell discipline mirrors the inverse of its buy criteria: wealth creation, management quality, and discount to intrinsic value. The endowment bias makes it difficult to sell stocks you already own; try to always consider your holdings, and don't get married to them. Valuation is not the most important plank of Mawer’s sell discipline framework. Wealth creation and excellent management teams come first. While some believe the worst sell misses are the ones that have gone down considerably, Jeff believes the worst ones are actually the ones that go nowhere. It is

In this episode, we explore the growing electricity demands of data centers stemming from artificial intelligence (AI) with Chris Silvestre, Analyst on the U.S. Equity Team. He shares insights from a recent research trip visiting data centers in Northern Virginia—the data center capital of the world—and discusses challenges around meeting demands given constraints of land availability, energy generation and transmission, and the significantly increased power demands required to develop large language models.   Key points from this episode:   • Electricity demand in the U.S. has been relatively flat for a decade but is expected to increase 25% by 2050 due to electrification, ESG goals, and data center expansion to meet AI demand. • For the same footprint and the same data center, you need 10 times more power for AI workloads than you did for the old-style data centers. • Data centers cluster organically in hubs, such as Northern Virginia, to minimize data transfer costs, but this clustering strains power infra

Portfolio Manager Karan Phadke discusses his views on the global markets and the performance of the global small-cap portfolio. He illustrates how businesses are adapting to and utilizing artificial intelligence (AI), highlighting the difference between the value-added reseller and IT consultant business models. Two portfolio holdings, CBIZ and Convatec, are discussed to demonstrate the team's focus on well-run, resilient companies that are trading at reasonable valuations. Key points from this episode: The U.S. remains a strong outperformer, while Europe continues to see more sluggish growth. Current portfolio strengths include resilient U.S. companies, particularly in the professional employer organization (PEO) space with companies that provide outsourced HR functions. AI is impacting businesses in three main areas: hardware, software, and services. The team focuses on services, which is comprised of companies that help their clients acquire and integrate the hardware and software to use AI effectively.

In this episode, Portfolio Manager Colin Wong shares strategic insights on disruptive technologies and recent adjustments in the U.S. equity portfolio. Colin discusses how his team navigates market exuberance, consensus risks, and economic ebbs and flows with a focus on resilient returns. Through compelling examples, Colin provides actionable insights on benefitting from innovation without betting the farm on a single theme. Key points from this episode: The three main sources of stock market return are earnings per share growth, multiple expansion, and dividends. Similar to the Internet in the late 90s/early 2000s, artificial intelligence (AI) has the potential to transform almost every industry and sector. However, some companies are currently only using AI for various smaller tasks, such as answering simple customer queries, while others have fully embedded AI into their products. The U.S. equity team invests in companies with profitable existing businesses that are also investing in the future, namely A

Portfolio Manager Wen Cheong debunks the perceived challenges of investing in the emerging market space, highlighting his team’s concentrated approach and candour. He details how his focus on best-in-class management and passion for identifying attractive valuations has powered returns.   Key points from this episode:   • Small-cap companies are a pond with fewer rocks; opportunities can be found in steady, established businesses with competitive advantages. • The slump in semiconductor demand in 2023 was primarily driven by a normalization in post-pandemic demand and macro challenges leading to an inventory de-stocking cycle. • The EM team makes decisions for the portfolio entirely on a bottom-up basis with a slight macro overlay. • Even in areas with geopolitical uncertainty, opportunities can be found in well-run, high-quality companies with attractive valuations. • The emerging markets space remains full of diverse opportunities for those willing to do the deep dive.   Host: Rob Campbell, CFA, Institution

Building on his conversation in Episode 153, Portfolio Manager Samir Taghiyev takes a deep dive into the mental models and frameworks that Mawer uses to evaluate company management teams, particularly within the small-cap space. Using both personal and financial examples, he illustrates the benefit of exploration and exploitation, striking a balance between focus and curiosity, and identifying opportunities on the S curve of the corporate lifecycle. Key points from this episode: Company management can be evaluated by determining if they are growing revenues while controlling costs and risks. This can be combined with other frameworks to create a comprehensive picture. The exploration vs. exploitation framework can be used to evaluate how well management balances focus with curiosity. There are four phases in the S curve of the corporate lifecycle—startup, growth, maturity, and decline. Mawer focuses on companies in the middle two phases, with Trisura and TerraVest provided as examples. Incrementalism is ver

Portfolio Manager Samir Taghiyev discusses the current landscape of the Canadian small-cap space through the lens of the “Mr. Market” narrative and crowd-driven sentiments. Using Converge Technology Solutions as an example, Taghiyev sheds light on his team’s due diligence process and how they find opportunities by tuning out the noise. Key points from this episode: The mood of the markets can change very quickly, highlighting the importance of due diligence Investors should be aware of market narratives but not get caught up in them Diligence on business, management, and valuation is key to finding opportunities created by delayed market reactions Small caps may see more exaggerated dynamics due to retail investor involvement Host: Kevin Minas, CFA, Institutional Portfolio Manager Guest: Samir Taghiyev, CFA, Portfolio Manager For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/moody-mr-market-finding-opportunities-in-the-canadian-small-cap-space-amid-changing-market

As markets continue on a dynamic trend, fixed income portfolio manager Crista Caughlin discusses the economy and factors that drove markets in the first quarter of 2024. In addition, the reemergence of a more typical correlation pattern between stocks and bonds, getting central banks off the sidelines, and the concern that markets may be being too complacent. Key points from this episode: Global growth improving, inflation moderating, and earnings relatively strong In Canada, growth has improved although consumption remains weak when compared to the U.S. Moving with caution: strong data has begun to cause central banks to be cautious around timing of interest rate cuts—they want to be confident higher inflation is in the rear view mirror Strong equity markets—a continuation of the 2023 technology-focused businesses doing particularly well, especially if they have a tie in to AI or semiconductors Too much complacency? We may not have seen the full impact of higher interest rates, and you can see that in some

Portfolio Manager Manar Hassan-Agha discusses the importance of position sizing in investing and how factors like behavioural biases, market structures, and optimal betting strategies under the Kelly Criterion can impact returns at varying position weights. The conversation explores limitations in precisely calculating probabilities and edges for stock investments and how frameworks and checklists can be used dynamically to thoughtfully consider odds, edges, and optimal sizing for investment decisions. This discussion highlights the various personas or strategies that investors can adopt in dealing with both the winners and losers in their portfolios. Many of the concepts discussed in this episode are the research and works of others. Manar talks through how we think about applying their lessons dynamically and from a first-principles basis to the day-to-day management of portfolios at Mawer. Key points from this episode: Lessen the emotional impact of a large loss on a single position with position sizing

Portfolio Manager Peter Lampert breaks down the decision to re-open the strategy to new institutional investors and the key inputs that determine the strategy’s capacity. In addition, “a tale of two acquisitions”: one head scratching, the other improving the investment thesis of the holding. Key Points From This Episode: Breaking down the decision to re-open the strategy to new institutional investors How the team determines the strategy’s capacity A puzzling acquisition by KDDI and a potential value creating acquisition by Novo Nordisk Evaluating the implications of rising interest rates on real estate investments The balance needed to sift through the hype around AI while still being open to opportunities Host: Rob Campbell, CFA, Institutional Portfolio Manager Guest: Peter Lampert, CFA, Mawer Portfolio Manager For more details and full transcript visit: [episode link] This episode is available for download anywhere you get your podcasts. -- Founded in 1974, Mawer is a privately owned independent inves

In this episode, host Rob Campbell and 11 colleagues on the research team engage in a comprehensive post-mortem analysis, sharing candid reflections on their decision-making processes over the past year. This episode underscores the significance of learning from both successes and mistakes, highlighting the value of vulnerability and introspection within the investment team at Mawer. A Few Highlights: •  Investing before comfort in competitive markets is necessary for returns •   Less complexity in investment strategies often results in more alpha •  Significant market changes can take longer to affect companies than expected •  Large acquisitions are risky; patience in evaluation is key •  Leaning harder on inductive evidence and numbers for decision-making •  Understanding the importance of parent companies in investment decisions •  Finding a balance in analysis depth to retain key insights without becoming lost in the details Host: Rob Campbell, CFA, Institutional Portfolio Manager Guests: Christian Dec

In this episode, newly appointed Fixed Income Portfolio Manager at Mawer, Brian Carney, shares his insights on global credit strategies. With over 30 years of experience in the investment industry, Brian discusses his career journey, the evolution of credit markets, and his perspectives on current market dynamics. He highlights Mawer's approach to managing credit risks and opportunities, detailing the new Global Credit Opportunity Strategy at Mawer.     Key Points From This Episode:   Brian Carney's extensive background in finance and credit markets   The evolution and current state of global credit markets   Introduction of Mawer's Global Credit Opportunity Strategy   Approaches to managing risks and capitalizing on opportunities in credit   Insights on fixed income strategies and market dislocations   Mawer's unique position and strategies in the investment landscape   Links: Mawer Investment Management

In this episode, Manar Hassan-Agha, co-manager of the Global Equity Strategy, joins host Rob Campbell to discuss applying the 'Moneyball' process in evaluating past investment decisions. They unpack the lessons learned from this approach, emphasizing long-term thinking in investment strategies. The conversation highlights critical insights from the Moneyball statistics, the importance of decision quality over short-term results, and the value of inactivity in investment management.     Key Points From This Episode:   'Moneyball' approach to evaluating investment decisions in global equity   Importance of long-term thinking in investment decisions   Understanding decision quality beyond immediate results   The role of inactivity and patience in successful investing   Insights from specific case studies, including Couche-tard and Wolters Kluwer   Reflections on past investment choices and their long-term impacts   Discussion on asset intensity in portfolio risk management     Links: Mawer Investment Management

In this episode, Kevin Minas sits down with Crista Caughlin, Lead Portfolio Manager at Mawer, focusing on the key economic developments of Q4, including growth levels, inflation trends, and the resilience of financial markets. They speak on the nuances of the Canadian bond strategy and the impact of these economic factors on portfolio management.   Key Points From This Episode:   Volatility in Q4 with notable declines in interest rates and inflation   Marginal changes in growth, with a slight downturn in Q4   Economic resilience despite rapid interest rate increases in 2022-2023   Inflation trends: a reversal in Q4, with rates moving lower than in previous quarters   Equity markets showing solid returns, led by large-cap tech companies   Fixed income market volatility and changes in central bank policies   Anticipated re-emergence of traditional correlations between bonds and equities   Adjustments in asset allocation within Mawer's balanced portfolios   Links: Mawer Investment Management