David Goodman, happily back in the fold of Toronto-based Dundee Corp. and newly appointed as president and CEO, is plunging back into the wealth-management business. But he has added a new twist to his dive.
Goodman, in executing his ambitions to build Dundee into an integrated and diversified financial services firm, is focusing closely on investment management. But he isn’t interested in creating another giant mutual fund company along the lines of the firm’s previous successful venture in building Dynamic Mutual Funds. Instead, Goodman says, the strategy is to create “alternative” investment products, emphasizing hard assets such as real estate, agriculture and natural resources.
“Our view of the world is that we believe in tangible, hard assets,” Goodman says, “investments that represent things you can see and feel.”
Dundee founder Ned Goodman, 76, has relinquished the president and CEO reins to his 50-year old son David, and remains chairman of the board as well as president of the company’s newly created Dundee Merchant Bank. That subsidiary already has more than $600 million of invested capital focusing on real estate, precious metals, oil and gas and agriculture.
In addition, Dundee also plans to build on its capital markets and financial advisory services, carried out through Dundee Capital Markets and Dundee Goodman Private Wealth, divisions of another subsidiary, Dundee Securities Ltd.
Jonathan Goodman, brother of David, recently resigned his position as head of Dundee Capital Markets, a position he assumed in 2013 and has also left the board of Dundee. In a short statement, he said he fully supported management on its new initiatives and was leaving to “pursue opportunities outside the company.” Jonathan has been phasing out his Dundee responsibilities for a while, and earlier this year had resigned as deputy chairman and chief operating officer of Dundee.
“My dad and I are good partners,” says David Goodman. “We’re trying to recreate the magic of putting all the pieces together and building a company.”
He’s referring to building a hugely successful enterprise through 61%-owned DundeeWealth Inc., including its crown jewel, the Dynamic Mutual Fund division. DundeeWealth was sold to the Bank of Nova Scotia in 2011, resulting in a juicy payday of more than $1 billion for Dundee, which is more than 20% owned by the Goodman family.
David Goodman, formerly president and CEO of DundeeWealth, went to Scotiabank to head up the newly combined investment team. He left last year, after spending a couple of years overseeing a smooth transition of the assets and investment managers. Until recently, he was waiting out the expiry of a three-year non-compete agreement.
“Many things are similar to where we were as an organization in the early 1990s, and our vision of the future is similar to our recollection of the past,” he says. “At that time, a lot of investors had money in [guaranteed investment certificates] and under their mattresses, and the mutual fund industry grew as this money found its way into professionally managed fixed-income and equity fund portfolios.”
This time around, Goodman believes, the opportunity lies in helping investors diversify beyond basic balanced portfolios of stocks and bonds and into products specializing in alternative assets that are not directly correlated to stock market indices. The plan is to build an income stream from a management fee structure that includes a performance-related component and could deliver an extra spark to revenue growth if asset selection is superior.
Meanwhile, the base of regular fee income generated by managed investment products would provide a stable underpinning for the company and make up for any gaps in the more sporadic merchant-banking income. Merchant banking typically sees its payoff when investments are sold, refinanced or taken public.
“Dundee has a fair mount of expertise within the company, and we have already been making significant investments in resources, real estate and agriculture,” Goodman says. “Now, with the non-compete restrictions off, we can manage investors’ assets alongside ours.”
Dan Hallett, vice president and principal with HighView Financial Group in Oakville, Ont., says the Goodman family has demonstrated remarkable skill in building and growing a diversified financial business.
“Clearly, they know the business well,” Hallett says, “and I don’t doubt they will have a measure of success. It appears they are aiming to be more of a boutique than a large supermarket. In some ways, it’s a rebuild. But it will allow a different focus.”
Although it’s too early to talk specifically about product features, Goodman describes the firm’s strategy as a “barbell” approach that will feature low-fee exchange-traded funds at one end and higher-fee portfolios at the other end. Dundee will steer clear, he adds, of the mutual fund business in the middle of the road.
Clients will include institutional, high net-worth and retail. “At this stage,” Goodman explains, “we think the opportunities are better outside mutual funds, at either end of the barbell. [The mutual funds space] is a competitive environment, a regulatory environment – and large scale is required to compete. We think the mutual fund business is better left in the hands of the banks, and we see better opportunities to build and create a different kind of business.”
Goodman sees his purpose as helping investors navigate the confusing array of choices in the investment universe and avoiding “significant wealth destruction” during any future financial meltdowns. He believes that excessive money printing and other stimulative monetary policies employed by governments around the globe may ultimately create unintended consequences, such as inflation and currency devaluation. Dundee, he adds, will concentrate on tangible investments that will do well under these conditions.
“We take a long-term view, and seek assets that are trading at a discount to their true value,” he says. “Equities market performance has been remarkable, but it’s difficult to predict. We are not making calls on the stock market or inflation; but, for the best investible outcome, you must buy things that represent good value and be patient. We invest with generational thoughts as opposed to quarterly thoughts.”
Goodman is looking to expand the firm’s investment team and create a culture built on entrepreneurship. That means giving people authority, responsibility and the opportunity to make a difference, he says: “Being able to make decisions and being recognized for those decisions is crucial for a culture. Talented people have a choice of starting their own business or working for an organization, and we want to attract the best people. With us, there is the upside that they can share in creating something special without the significant downside risks of being on their own. We have the infrastructure, the track record, the desire, capital and, ultimately, the culture. “
Expansion through acquisition of other firms also is a possibility, Goodman says. He doesn’t offer any five- or 10-year targets for asset growth, but notes that past predictions for Dynamic’s growth grossly underestimated its potential.
“It’s a good time for our strategy,” says Goodman, “and there’s a lot of work to do.”
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