August 17, 2017


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Weathering a changing landscape

Some strategies never go out of style, financial gurus say

Hey there, time traveller!
This article was published 17/1/2014 (1307 days ago), so information in it may no longer be current.

Larry Sarbit and Guy Bieber are not exactly big fish in a small pond so much as small fish in a large investment ocean that have managed to survive and thrive over more than three decades.

Although well-known names in the city's investment community, even to the occasional Winnipeg consumer of investment news the names ring a bell -- and not because one of them shares a surname with Canada's l'enfant terrible of pop music.

Larry Sarbit has built a reputation as a prudent money manager, earning the trust of investment advisory firms.


Larry Sarbit has built a reputation as a prudent money manager, earning the trust of investment advisory firms.

Both have traced very different careers over the last 30 years, yet their ability to successfully endure in an increasingly consolidated, complex and globalized industry is representative of the province's investment community overall, defined by a no-frills, can-do approach that is conservative, forward-looking and profitable.

Both recently sat down with the Free Press to discuss the evolution of the investment industry over the last few decades in Manitoba and what it means for investors.

At one time, Bieber headed up one of the largest independent investment firms in Manitoba, launching Bieber Securities in 1995 after his previous employer, Burns Fry -- the largest independent firm in Canada -- was snapped up by BMO.

Even then, the industry's landscape had been shifting from the investor-stock broker relationship that was commonplace when both Bieber and Sarbit first started out in the 1980s, to an adviser-client relationship ushered in by the rise in popularity of mutual funds.

During the 1990s, more people were investing in the stock market via mutual funds, and they were relying more on their portfolios than ever before to bankroll eventual retirement, as good pension plans disappeared from the private sector. Seeing a multibillion-dollar opportunity, the investment industry stepped in to help investors in need of advice, offering services such as retirement planning -- building wealth -- for the boomers, the largest and most lucrative market segment.

Yet the investment business itself was becoming increasingly complex. Running an independent, small firm was becoming more challenging.

Costs were rising while facing stiffer competition from much bigger fish. By the late 2000s, the writing was on the wall for Bieber's small but successful firm, and in 2008 it was sold to National Bank Financial.

"We realized that 'if you can't beat 'em, join 'em,' " Bieber says.

Darrell Gebhardt, who helped build Bieber Securities, says consolidation within the investment industry was inevitable. It was simply too costly for small firms to compete with multibillion-dollar banks.

Even accidentally running afoul of compliance rules -- maintaining adequate capital, filing the required documents, etc. -- could land a small firm in trouble, facing substantial penalties that could shut its doors for good.

"Today, you need scale," says Gebhardt, vice-president of Gebhardt Bieber Advisory Group, now under the banner of National Bank Financial Management.

Although consolidation might appear to be a negative turn of events for local investors, both Bieber and Gebhardt contend it has been beneficial.

"It's actually best for the client," Gebhardt says. "The reality is that you have to be able to drive down costs and keep it economical for clients, but you still want entrepreneurial thinking, developing solutions that are focused on the client."

Both Bieber and Gebhardt argue the arrangement with National Bank offers the best of both worlds. The bank's culture encourages a hands-off approach, allowing local advisers to help local clients. (Bieber and Gebhardt aren't the only former owners of independent advisory firms at National Bank's Winnipeg offices. They share space with Charlie Spiring and Dennis Stewner, former co-founders of Wellington West Capital, bought by National Bank in 2012.)

Although the industry has changed, so have the services clients require.

"It's fair to assume we're going through a stage where we're not trying to create wealth for clients anymore," Bieber says. "It's the capital-preservation era."

In this ultra-low interest rate environment, earning a return to fund retirement without the risk of running out of money is a fundamental need for boomers. They need to invest more in the stock market than past generations of retirees, but they also can't afford to lose a lot of money, Bieber says.

More than ever, they require a fine balance of risk and return, something Sarbit has been providing investors for much of his 20-plus-year career managing funds.

"He's the Warren Buffett of Canada," Gebhardt says, adding he and Bieber have a long-standing investment relationship with Sarbit.

While loath to be compared with one of the greatest value investors of all time, the Winnipeg native does indeed bear a few similarities to the Oracle of Omaha.

For one, Sarbit and Buffett share the same investment philosophy: finding good businesses at bargain prices. Like Buffett, only on a smaller scale, Sarbit has been very successful using this strategy. When he started his current partnership with IA Clarington in 2009, running Sarbit US Equity Fund, he had about $80 million under management. Today, he manages more than $1.6 billion, as well as providing private investment advisory services.

Long before, however, Sarbit had built a reputation as a prudent money manager, earning the trust of investment advisory firms, including Bieber Securities.

"We hitched our wagon to him because he had a philosophy that resonated with the independent firms: a lot of a little," Bieber says. "He builds big positions in a limited number of securities to generate above-average returns."

They also liked that he is steadfast in his approach.

"If he has cash kicking around and doesn't like the market, he won't invest," he says. "He has his own set of drums."

In part, his ability to avoid the herd mentality of the street is a matter of geography -- another similarity to Buffett. What Omaha is to Buffett; Winnipeg is to Sarbit.

"I've always been a staunch Winnipegger," says the former money manager for Investors Group and AIC.

"We have a little slower pace here and I think that's good for thinking -- and thinking is a good thing when investing, even though there seems to not be a lot of it going on."

Despite job offers on Bay Street and Wall Street, Sarbit has mostly stuck close to home -- an edge in his opinion.

He says one of history's greatest investors, John Templeton, once said he always invested better in the Bahamas than in New York.

"Well, he chose the Bahamas and I chose Winnipeg," says the chief investment officer with Sarbit Advisory Services, based in Osborne Village.

Fortuitously, the city is a good place for a bargain-hunting stock picker.

"The history of this city is that it's a wholesale city," Sarbit says. "We're bargain hunters."

It's a mentality that works exceptionally well when applied to investing, he adds. While the fund has not outperformed the S&P 500 during the recent bull market in the U.S, beating the benchmark every year is of little importance to Sarbit and those who invest with him.

"We may be trailing the index in the short term, but we own much higher quality companies that are more resistant to downturns in the economy."

It's the long view that counts, he adds.

"In my 25 years of managing money, I have doubled the S&P index's returns."

So while the industry might be ever-changing, strategies that provide long-term profitability never go out of style.


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