CIBC Capital Markets

CIBC Perspective - A market retrospective and career reflection with Ian de Verteuil

Episode Summary

Roman Dubczak sits down with Ian de Verteuil to reflect on Ian’s remarkable 37-year career in the financial industry. Over the last 23 years of active research coverage, Ian earned 24 Brendan Wood International TopGun Analyst Designations across 5 different sectors, Consumer Products, Insurance, Banks, Quantitative Analysis and in Portfolio Strategy. In this insightful conversation, Ian shares his experiences navigating major market events, including the financial crisis, and discusses the evolution of investment strategies over the decades. The discussion also covers the unique strengths of the Canadian financial sector, the importance of long-term investing, and Ian’s advice for the next generation of finance professionals.

Episode Transcription

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Hello, everyone. I'm Roman Dubczak, Deputy Chair at CIBC Capital Markets. Today, I'm pleased to be joined by my colleague and friend Ian de Verteuil, Head of Portfolio Strategy at CIBC. It's a very special webcast today because after 37 years in the industry, Ian's coming upon his retirement soon. And I'm pleased to have the opportunity to talk with him today about his career in the markets, spent over the time in this very, very dynamic industry. in the markets, spent over the time in this very, very dynamic industry. 

Ian started his career as a Fundamental Analyst with the Canadian broker dealer Burns Fry in 1987, and for much of the next 30 plus years was a top ranked analyst as measured by various external rating services including Brenden Wood, Greenwich and StarMine. Over that period, he was a top ranked analyst in multiple sectors, including banking, insurance, consumer products and special situations. Seems like the world is one big special situation, isn't it, Ian? 

And most recently in a Bendan Woods survey, he was ranked as the best Equity Strategist in Canada. Very fitting topper to a very illustrious career. Ian also had spent some time at CPP Investment Board, as the head of fundamental research, which was a pioneering position at the time, where he was responsible for developing its fundamental research capability and integration with the quantitative processes at CPP. Further, he spent two years as Global Head of Research at a Canadian competitor of ours, Bank of Montreal, managing 70 plus fundamental and quantitative analysts and its economics department with professionals located in Canada, the US and globally. Ian joined us at CIBC Capital Markets in 2014, and I remember our first lunch Ian, and it was very memorable. And the restaurant's not there, but you still are here, so thanks for that. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Yeah, I remember, It was on Wellington. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

On Wellington Street. In addition to his involvement in various stock selection, pension and asset management committees here at CIBC, Ian's focused on thematic research and made a real difference. He's responsible for research into a variety of topics, including macro, fundamental, quantitative, ESG, and ETFs. Ian has a BSc in chemistry from McGill University and MBA from University of Western Ontario. He's originally from Trinidad and Tobago and moved to Canada in 1987. So Ian, with that... 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Oh my word! I don’t know... I have to retire now! 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

No, there's a there's enough there. But, my friend, you know, we've both been in this industry for, a long period of time and just reflecting back on three decades, one might argue that all the exciting stuff happened kind of, from there on in, all the exciting stuff happened kind of, from there on in, although it was pretty exciting before then. Otherwise we wouldn't have gone into this industry. What do you think was the biggest event in the last 37 years? 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Without a shadow of a doubt, the financial crisis. I remember, I was a bank analyst at the time, and I bumped into a CEO of a large, one of the large Canadian banks, and I asked him what was going on, and he said he didn't know. Yeah. He will remain nameless. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

It’s okay, I had a similar experience. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

So, it was, an environment that was incredibly unusual. The entire unwinding of structured credit in a very short period of time obviously driven by the housing crisis, you know, nefarious actions in the US housing market. But I think it ran through the entire the entire system, and very few individuals got ahead of it. I would say, but that, to me was the only time in my 37 years where you just didn't have a clue. You just stood there like, like deer in the headlights because you just didn't know what the economy would look like, what the banking system would look like, going forward. 

So, I think we came very close, and I think in hindsight, the central bankers did an outstanding job. Regulators all came together and if you want to be hopeful on the world today, you would say, in times of crisis, you know, things do, you would say, in times of crisis, things do settle down and people do make, do make the right decisions. One of the great analogies I see is that, after we've exhausted every other alternative, we do the right thing. And I think, at the end of the day, unwinding the credit environment in the US was important. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. And, you know, on a on the flip side of that, you in particular, but we in this industry are in the business of looking into the future and, making prognostications about where things may be heading. If I may, what was the one big call you ever made or thought would happen that actually never did for some reason?

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

I would have thought that the investing process, we would have matured. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

And it feels as if we have regressed. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Most of the money that is made, is made by owning high quality businesses over long periods of time and allowing them to compound. And, our business has, has, is in a lot of ways, And, our business has, has, is in a lot of ways, the duration has gotten shorter and shorter all the time. And whether it's, you know, the stuff we see on social media how, you know, everything has become a snippet. So, I would have thought we would have I guess, naive to think we would get smarter. But we do seem to have shortened duration on the investing time horizon, which I think is quite unfortunate when you think about the money that could have been made by owning, simply owning ten great Canadian stocks and keeping them in their portfolio over time, you know, still to this day, when you speak to individual, investors and they'll say, should I buy this bank stock or that bank stock? Because, you know, I want to trade this one for that one. The first question I say is, what's your average cost base on this security? And it's mind boggling the number of times it's a single digit number. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

You know, these things are trading at hundreds of dollars. You know, you sort of go it is that, I would have thought, more and more people would have said I need to create portfolios that the, you know, the Warren Buffett buy businesses where there's a protective moat. I want to just own these things over long periods of time and allow them to compound. I dare say, I haven't done that on enough occasions, or else, it maybe I would have retired five years ago. That to me, I would have thought, we would have learned those lessons and, I think too few of us and I think too few of our, investors in Canada have learned that.

Roman Dubczak

Deputy Chair, CIBC Capital Markets

So, Ian and you spent a big chunk of your career in the financials space and in over short periods of time, it looks boring. Over long periods of time,. it's actually pretty exciting space. Where do you think we are now? And I'm going to ask a Canadian specific question because, you know, the Canadian financial sector once again seems very solid, vis-a-vis others. How do you think Canada is positioned in the financial space versus the rest of the world? 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

I think, you know, it's not a popular thing to, you know, when talking to consumers, everyone's got a terrible story on, on a retailer or a bank or a telecom, everybody's got, a bad story, but I would broadly say banks, but I would say in a lot of other sectors, we have, country of 30 plus million people strung out broadly along a straight line. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

We have a belief that we need, which I totally agree with as Canadians, that we need, that all Canadians need access to a variety of essential services. And whether you're living in one province or another, a little bit further away from that, from the border, you know, wherever you are, you have a right to those services, and that can only be provided efficiently where there is some kind of, dare I say, “oligopoly”. Scale businesses that are able to provide product in that particular way. You know, we can, open up some of these systems, some of our industries and say, let all every other competitor come in, in one form or fashion. But at the end of the day, that may not serve Canadians well. If you think through the financial crisis, in the financial crisis, I'm going to tell you what Canada did to protect its banks. And the answer is, virtually nothing. The only thing they did were, they bought mortgages, which the government of Canada was already insuring. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Right. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

That is an indication. So, our trade off on having a limited number of institutions is we're trading off hyper, competitiveness for, I think, stability over the long-term. And I think that served Canada well. It served Canada well in the banking system. I do fear that occasionally populism and political, short termism causes decisions where it's, you know, fun to say, “I'd really like it if I were to, put pressure on banks or grocers or telecoms or rails to take down their profitability.” But at the end of the day, the first line of defence in a difficult environment for a banking system is high core profitability. What we've had is, every challenge that's come at us, we have dealt with it. Losses have been incurred. Whether it is, subprime, whether it be, housing issues, whether it be oil prices collapsing, or airline industry collapsing. Earnings fall to the banking system, but they earn through it, and then we come out the other side, high call levels of profitability are something that work particularly well. Not only does it benefit us, I think in aggregate as an economy, as a nation. But I would also say, let's not forget, the Canadian banks pay about a quarter of all dividends paid to Canadians. All Canadians. It is a stunning metric. Whether it is within your pension plans, whether it's in your RRSPs, whether the direct ownership of securities, these securities are the underpinning of the retirement of numerous Canadians. of the retirement of numerous Canadians. So, I think there is a lot for us to do there. Does not mean we shouldn't find ways to open up the system, make it more competitive, provide all those types of things. But not at the expense of a healthy banking system that can withstand challenges. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Excellent. Well, thank you for that and glad we were able to have that... 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

And it's not because I'm working at CIBC, I believe that, that's been, a reality. It has been an incredible asset for our system. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. There's a quote you've used and I've cited in the past that, is it, “one of the Seven Wonders of the world”, or “one of God's gifts to commerce is”..? 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Yes, “one of God's gifts to Canadian investors is, Canadian bank stocks”. They trade in the yield of 3 or 4%. Compound at... I was doing some work, early on in my office. They have compounded a 13% over the course of the past 30 years. And it pretty much is whether it's 30 years, 20 years, 15. Really, yes, you got a year or two of bad results, but if you, you know, you put those stocks on autopilot early on in your career, it's mind boggling what it, what it does for your wealth. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

It's amazing. Okay, well, one last question. And, you know, you've been in the business for a long time. You started as a really young man, as it turns out, in the business, how would you guide a young person graduating, or looking to get into this business? I suspect what I was going to say, “What we tell our kids?” But you and I are closer to, “What do we tell our grandkids”, in this case. But, you know, what kind of advice would you give them? 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

So, I don’t have grandkids, and I resent that statement Roman. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

It’s aspirational. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

That’s aspirational! Exactly, yeah... So, a couple of things I would, but I would say it, Any of the successes I have had, it is by associating with, with excellent people, you know, you can't, what's that saying? “You can't, soar with the Eagles, if you hang around with turkeys.” 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Right. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

You need to find individuals, quality individuals that you can work with, and not be too fussed on, ‘Oh, I've got to take a step backwards to do that.’ In my career, I have restarted 3 or 4 times. And whenever you restart, you change a role. You really go back to ground zero. But if you look around and you're like, “These are good people I can work with here and I can learn from them”, I think that, to me, is the issue When I started, being able to whip around a financial statement was kind of good enough. Show up on time with a good attitude and know how to work financial statements, the sky's the limit on what it is. I do think today you do need, far more understanding of technology. For me, I won't hire someone unless they can code today. And it's not that I'm going to have them doing, heavy Python coding. It is that discipline and the ability to understand, you know, how to work with large amounts of data quickly because I think many of the roles that, I was successful at that helped me early in my career. Those things are done by machines, by AI much quicker and much better than, than I would do them. So, it's the ability to harness that. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Yeah. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

I would say, so to me, I think, two things. I do think you need a fair amount of, of understanding of technology, whether that's AI, whether that's coding, whether that's data management, those types of things. I think that's one issue. And then the second is, find good people that you can work with and hitch a wagon to them and go with that. I had a remarkable fortune on, on working with some, individuals over the years and certainly with individuals like yourself and, and others like that, where you go like, like yourself and, and others like that, where you go like, “I want to be in meetings with these individuals. I want to hear what they have to say. I want to interact”. And so, because so much of it is relationship driven. And I think if you find those people, the fact that the comp isn't exactly what you want at a particular point in time, that you maybe have to take a step back, do it. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

Feeling's mutual, my friend. Thank you for that. Thanks for those comments. It's been a pleasure. It's not our last, last time getting together, but, I really hope you have a terrific and enjoyable retirement. 

Ian de Verteuil

Managing Director and Head of Portfolio Strategy, CIBC Capital Markets

Thank you very much. 

Roman Dubczak

Deputy Chair, CIBC Capital Markets

And, make sure it's a retirement Ian, please. Thank you. And I want to thank everybody who joined today. You know, careers are made by, you know, great results, but also, hanging around with great people. And Ian's one of those great people. Thanks for joining us. I look forward to seeing you again soon. 

 

CIBC PERSPECTIVES:

A market retrospective and career reflection with Ian de Verteuil

 

Hosted by:

Roman Dubczak, Deputy Chair, CIBC Capital Markets

 

With:

Ian de Verteuil, Managing Director and Head of Portfolio Strategy, CIBC Capital Markets