Water, Towels, and Investment Management
by Jamie Hyndman, Mawer Investment Management
Spring Break this year saw my family and I return to a resort in Puerto Vallarta that we had visited two years ago. There was much we liked about this place – nicely appointed rooms, a sprawling pool area, and a terrific beach. But like most places in the developing world, things had changed. The resort had become much bigger. It made me wonder, “Was bigger going to be better?”
My previous experiences at the resort had been excellent. One particularly delightful experience happened when I was exercising on a stationary bike in their gym. Just when I was becoming very hot and thirsty, a wonderful thing happened. A staff member came over to me carrying a tray that held a pitcher of ice water, a glass, and a cold towelette. It was pure bliss.
Fast forward two years and I was at the same resort, in the same gym, riding the same bike, yet this time there was no offering of ice water or towelette – just one very hot, cranky and disappointed customer. The resort had become too big and dropped this “expensive” customer service gesture. What a shame.
Like my resort experience, growth can also create challenges in investment management. In fact, it can be the outright downfall of a firm. Because while it is tempting to continue to accept new assets to increase firm profitability, the truth is that there is a limit to what an investment manager can successfully manage in each particular asset class. Managing too much money can lead to a portfolio that has too many companies in it (known as "deworsification"), looks too similar to the index, or takes too long to execute buy and sell transactions. Any of these things can lead to deteriorating performance and nullify the very reason the investor signed up with the firm in the first place.
At Mawer, we have seen solid growth in assets over the years, but are keenly aware of its potential pitfalls. As such, we have taken the necessary steps to be able to continue to deliver excellent long‐term investment returns and very personalized service to our valued clients. To this end we have closed off asset classes, we have invested in new technology, and we have broadened our team at all levels. And unlike many other Canadian-based investment managers, we are not just focused on the relatively small Canadian equity markets. We also successfully manage U.S., International, and global equity portfolios as well as Canadian bonds – and these markets are sufficiently large so as to be able to manage sizable assets.
All that said, does anyone have a recommendation for a good Mexican resort next year?
Jamie Hyndman, Mawer Investment Management
