From the vantage point of David Goodman, president and CEO of Toronto-based DundeeWealth Inc.since this past June, the company is on a roll. The recent sale of struggling Dundee Bank of Canada to the Bank of Nova Scotia along with 18% of DundeeWealth’s stock, followed immediately by an unwanted takeover bid from rival fund company CI Financial Income Fund, have failed to slow DundeeWealth’s high-speed momentum.
Goodman is excited by the success of the company’s strategies to improve investment performance, build brand awareness and gain market share. Rather than being a seller, he wants to see the company’s value continue to grow.
“There is enormous opportunity for growth,” says Goodman, 44, a lawyer who once thrived on courtroom trials. “We have a culture that is fiercely independent and entrepreneurial. We strive to marry the positive culture of family ownership with the entrepreneurial spirit of individuals. People can come into this organization and reach new heights of achievement.”
DundeeWealth is 63%-controlled by Dundee Corp. , which, in turn, is 80%-owned by David’s father, the tenacious 70-year-old company founder Ned Goodman. David says his father has no plans to retire and will be involved with the business “forever.”
Dundee Corp. has recently been adding to its stash of DundeeWealth shares and strengthening its already tight grip. As CI recently found out, if the Goodmans have no wish to succumb to a takeover, a bid is unlikely to succeed. Furthermore, DundeeWealth’s deal with Scotiabank gives the bank right of first refusal if majority shareholder Dundee Corp. should decide to sell its chunk of DundeeWealth stock, a serious impediment to any potential buyer.
“We didn’t embark on that journey; we responded,” says Goodman of CI’s unsolicited takeover and DundeeWealth’s decision to form an independent committee of the board to consider the offer with the help of professional advisors. “We conducted a fair process and it’s over. We’re continuing to pursue our vision, which is to build an internationally recognized symbol of Canadian excellence in the wealth-management business.”
While business can be exciting and rewarding, it can also be unpredictable and strenuous. Goodman, a father of four, finds balance in his hobby as a stand-up comic. He was named runner-up in a competition called Toronto’s Funniest Person with a Day Job and has performed across the continent at such venues as Yuk Yuk’s, Gotham Comedy Club, New York Improv and L.A. Improv.
“Performing stand-up comedy is always terrifying. But the act of overcoming that fear is exhilarating,” says Goodman, who draws on family life for much of his material. “There’s a lot of pressure in business and comedy is a great creative outlet. It’s a hobby I can do when the kids are asleep — and that’s better than spending five hours golfing when they’re awake.”
Goodman says the backbone of Dundee-Wealth has always been investment management. The roots of the company can be traced back more than 50 years when Ned Goodman and some of his university buddies from Montreal started an investment club. Goodman and his older brother, Jonathan, learned to invest when they were kids. In university, they helped their fellow students play the stock market. When David joined the company in 1994 at 30 years of age, he was naturally drawn to the investment side and took on the management of a couple of funds employing a value style of stock picking. Jonathan, who until five years ago worked in various roles within the company, now heads up a mining operation.
In 1998, Goodman embarked on the expansion of the investment team as CEO of the asset-management arm, Goodman & Co. Investment Counsel Ltd. The injection of new talent marked the beginning of a performance turnaround at the company’s Dynamic family of retail mutual funds, as well as the introduction of other DundeeWealth investment products, such as flow-through shares, private pools, alternative investment products, portfolio solutions and closed-end funds.
The addition of managers with a penchant for growth investing, including vice president and chief investment strategist Rohit Segal and vice president Noah Blackstein, combined with the hiring of other managers, created a stable of talent with expertise in a variety of areas, including core equity as well as specialized niches such as real estate, precious metals, resources and income trusts.
@page_break@The past five years have seen average annual growth of DundeeWealth’s managed assets of almost 25% a year, to about $25 billion. While the latest figures from the Investment Funds Institute of Canada show that most of Canada’s major independent fund companies suffered net redemptions in January, DundeeWealth’s Dynamic mutual funds sailed through RRSP season in positive territory, with net sales of $21 million. Dynamic’s net sales for 2007 of $3 billion set a record high for the company and topped all independent fund managers in Canada.
Soaring sales are closely related to impressive performance. Morningstar Canada Inc. research shows Dynamic funds in the lead for 17 consecutive months in terms of having more funds with Morningstar’s top five-star rating than any other fund company. In January, Dynamic had 13 five-star funds (not counting various versions of the same fund mandate), followed by RBC Asset Management Inc. in second place with nine, TD Asset Management Inc. with seven, and Acuity Funds Ltd. and CI each with five.
“Dynamic funds are benefiting from strong investment expertise in a wide range of categories, not just on the domestic side but global and North American, as well,” says Rudy Luukko, investment funds editor at Morningstar Canada in Toronto. “They currently have more than twice as many top-ranked funds as their closest competitor among the independent fund companies that sell through the advisor community.”
A Morningstar research report written by analyst Chris Blumas says that DundeeWealth’s distribution business is less attractive than the lucrative investment-management business, given the high costs associated with developing a national distribution network. He calls the dealer business a “loss leader” that helps DundeeWealth gather investment assets through the advice channel. While the energy-consuming task of making Dundee Bank a viable operation is over, a hangover remains with the $340 million in asset-backed commercial paper purchased by DundeeWealth to shore up the bank’s reserves last August. The paper remains illiquid and vulnerable to further write downs.
Over the years, DundeeWealth’s growth has been partially fuelled by acquisitions, including Deacon Capital Corp. Infinity Funds Management Inc., Strategic Nova Inc. and Cartier Partners Group Ltd. Goodman says more acquisitions could occur, most likely on the investment-management side.
Even without acquisitions, Goodman expects the business to grow as a result of market growth. Over the long term, he calculates that markets could deliver growth of 6% to 8% a year. By throwing in some “ingenuity, creativity and investment-management expertise,” he says, DundeeWealth could achieve annual growth of 10%.
“If you add an acquisition, we could do even better, and funds with performance-based fees could potentially contribute more, as well,” he says. “We also have 1,800 advisors across the country who should be able to grow their books at similar rates. In addition to our domestic business, we are working on developing an international presence, which could lead to gathering meaningful assets outside of Canada without employing significant resources.”
By Goodman’s reckoning, if the company grows by 10% a year during the 21 years between now and his 65th birthday, current financial assets of $25 billion could double every seven years or another three times, multiplying to $200 billion.
“If we grow by more than 10% a year, that’s great,” he says. “If less, it won’t be tragic. A lot of variables could come into play, but it’s a worthy objective.” IE
Leader of the pack
David Goodman of DundeeWealth is aiming for more of the same: strong growth
- By: Jade Hemeon
- March 3, 2008 March 3, 2008
- 15:49