Maintaining a unique, consistent approach to investing and a focus on creating a multi-generational practice are two key reasons why Montreal-based Pembroke Management Ltd. has followed a steady path of strong growth during its 46 years in the investment business.
“Our consistent focus on small- to mid-cap growth stock investing in Canada and the U.S. sets us apart,” says Ian Aitken, managing partner and portfolio manager with Pembroke. “We focus on doing a limited number of things well for a limited number of clients. Many investment firms that have been around for decades end up losing their focus.”
The employee-owned firm consists of 11 portfolio managers and eight licensed advisors, who manage approximately $3.5 billion in assets under management (AUM) for both retail and institutional clients; $1.75 billion of that is retail.
Launched in 1968 as an institutional money manager, Pembroke opened its doors to retail investors in 1988 with the launch of Pembroke Private Wealth Management Ltd. (PPWM). With offices in Toronto and Montreal, PPWM manages 1,650 client relationships that consist of high net-worth individuals, families and foundations.
Pembroke’s investment style has remained unchanged over the years. The firm’s portfolio managers focus on small- and mid-sized companies with market capitalization of $200 million-$2 billion for Canadian companies, and $300 million-$4 billion for U.S. companies.
If companies start to grow beyond the $5 billion-$10 billion mark – depending upon the region – then Pembroke’s portfolio managers look to sell, says Jeff Tory, chairman of PPWM and partner and portfolio manager with Pembroke.
“Our objective will never be to grow to $25 [billion] or $40 billion in assets,” Tory says. “We are not interested in being the biggest asset manager in the world. We are more interested in the per share advancement of the [investment] fund than assets.”
Tory, the brother of John Tory, Toronto’s mayor elect mayor, has been in the investment business for 32 years. Along with his team, Jeff Tory meets with more than 150 management teams at small to mid-sized companies each year.
Pembroke invests in companies in which the management groups often are significant owners themselves. Although Pembroke’s philosophy can include larger companies that still are on a growth trajectory, Tory says, new ideas usually come from smaller companies.
PPWM clients have access to six mutual fund portfolios and a variety of pooled funds, which provide exposure to Canadian, U.S. and international equities, as well as fixed-income securities.
The North American funds are managed in-house, while Pembroke’s international equity and fixed-income funds are managed by Chicago-based William Blair and Co. LLC and Richmond Hill, Ont.-based Canso Investment Counsel Ltd., respectively.
For Pembroke to keep AUM at a level needed to specialize in small and mid-sized companies, it no longer accepts new institutional accounts.
“Our recent decision to stop taking new institutional assets is a good example of us putting the long-term interest of our clients ahead of our short-term interests,” says Aitken, who also is president and CEO of PPWM. “Many firms pay lip service to the long-term alignment of interests. For us, it’s a core value.”
Thinking long term means preparing for the next generation of partners, and Tory knows that this doesn’t happen overnight: “It takes five to seven years to train and mentor an individual to become a portfolio manager. Most money-management firms don’t train, but we have had great success bringing in younger people and helping them grow over longer periods of time.”
All of Pembroke’s partners – including the two remaining co-founders, Ian Soutar and Scott Taylor – are engaged in mentoring any new hires or summer interns that join the company.
Soutar and Taylor both remain as advisors to the firm despite being in their 70s. As for Aitken and Tory, they both joined the firm full-time in 1987; both look back to their days as summer student interns in the industry as a time in which they were able to gain valuable experience.
Aitken landed his first internship at Pembroke in 1982, while Tory spent two summers with Wood Gundy Inc. in Toronto.
“I was lucky that I was able to spend two summers within the brokerage industry, and it really helped qualify what I wanted to do,” Tory says. “It whetted my appetite for the investment industry.”
Pembroke continues to have a multi-generational team; in fact, Tory recently hired two young analysts to join the team last year.
Tory, in addition to mentoring new hires, also is a guest lecturer at both Concordia University and McGill University in Montreal about investing in growth stocks. And he works closely with the students registered in those institutions’ money-management courses.
“We see students who are actually running real money with supervision as part of their educational program,” Tory says. “These kids come out of these programs with a great understanding of winning and losing.”
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