Eighteen years ago, June Ntazinda was on maternity leave from her job as a capital markets specialist with the Sumitomo Bank Ltd. in Toronto, for which she developed strategies to manage interest rate and exchange rate risk. To keep busy, Ntazinda was completing her chartered financial analyst designation and providing some investment advice to a friend who had just inherited money.

That’s when the light went on. Ntazinda realized she would rather help people develop investment strategies than sit at a trading desk. And that realization set her on a path that ultimately has put her in charge of an advisory firm that has more than $4.5 billion in assets under management today.

After switching her focus, Ntazinda gained experience in private banking and investment counselling for 10 years before joining Ernst & Young LLP as a partner in charge of its investment-advisory arm in Toronto. Ntazinda and a group of private investors bought that practice in 2005, renaming it I3 Advisors Inc. “I liked the concept of being an investment advisor to clients, of developing a deeper relationship and sitting on the same side of the table,” says Ntazinda, now president of I3 Advisors. “I wanted to help dispel some of the smoke and mirrors.”

After doubling I3’s AUM to $3.6 billion from $1.8 billion over a five-year period, Ntazinda began looking for a strategy to increase the firm’s capabilities in global alternative strategies. A partner arrived in the form of U.S.-based global financial services giant Bank of New York Mellon Corp. , whose wealth-management division acquired I3 last June. BNY Mellon’s wealth-management arm is among the top 10 U.S. wealth-management firms, with US$157 billion in private-client AUM. Ntazinda has stayed on as I3’s president, and AUM has continued to mushroom.

The three Is in I3 Advisors stand for “information, innovation and independence.” The firm is paid only by its clients, and has no compensation arrangements with any product advisors or proprietary products. I3’s role is to develop and execute an investment strategy for both ultra-high net-worth and institutional clients. The process includes seeking and selecting the world’s best managers in each asset class for client portfolios. “It would be difficult for individuals working on their own to sort through, and do all the analytical work of combining the right managers,” Ntazinda says. “It takes manpower, time, intellectual thinking and calculations. Our business concept is simple but it’s hard to do well.”

I3 has a database of about 20,000 asset managers with expertise in fixed-income, Canadian and global equities, and alternative investments such as hedge funds. In choosing asset managers, Ntazinda looks for top-quartile results but also does qualitative research on the track records of both the people responsible for those returns and the team that supports them. Currently, there are about 120 managers she likes; of those, I3 is using 60.@page_break@“For every 200 managers out there, there is only one worth paying for,” Ntazinda says. “We may look at a shop with 20 investment strategies, but there’s only one manager we like. We hire managers for what they do best.”

Protecting clients’ money

Ntazinda’s clients have investible assets ranging from $10 million to $400 million; 70% of her clients are families and 30% are institutional accounts such as pension funds. Typically, the families also have assets in private equity, real estate and businesses, and Ntazinda will develop a strategy that fits with these other assets. “Our clients have already demonstrated they can make money,” she says, “and we help them take care of the money they have already made.”

Once the asset mix is determined and the appropriate team of complementary managers is selected, I3 then provides the client with quarterly reports on the performance of the individual asset managers as well as the overall portfolio. Clients receive continuing advice on strategy, and managers are monitored to ensure they haven’t lost their touch or changed firms. Each client typically has four to 10 asset managers working on different parts of the portfolio.

“We have always thought globally in designing portfolios,” Ntazinda says. “If the client is a Canadian entrepreneur with a business tied to Canada, he or she is not diversified if all his or her money is in Canadian equities and bonds. Canadian markets have done well during the past 10 years, but you can’t count on what happened yesterday and must look forward. Much of the growth is now coming from emerging markets.”

I3 charges a management fee on top of the management fee charged by the outside asset managers. For example, on a $50-million portfolio, I3’s fee would typically be about 20 basis points. The individual asset managers also charge a management fee, which averages 1% of assets, depending on the asset mix. However, Ntazinda is often able to negotiate with the external managers to lower their portion of the fees, which offsets the overall cost to the client. Says Ntazinda: “We are able to reduce the manager’s costs and effort on the business-development and client-servicing side, so some will negotiate lower fees with us.”

Ntazinda likes to meet with clients face-to-face on a quarterly basis. Client turnover has been low, and fewer than 1% of her clients have left each year for the past eight years.

Ntazinda, who lives in the Beaches area of Toronto with her husband Franco and two children, is a passionate sailor. She took a year off between high school and university to race in Australia, and she and a friend won the Australian Open National Championship in their class. IE