01.06.2015
By Terry Flanagan

Canadians Seek Wider Investment Choices

Canadian investors deserve a wider range of choices when seeking investment advice, according to a leading Canadian investment expert.

“In the last ten years, the banks have gotten stronger,” Som Seif, CEO and founder of Purpose Investments, a Toronto-based investment management company with about $1 billion in assets under management, told Markets Media. “Distribution is very aligned with the manufacturing part of the market, with the banks the largest manufacturers of product. Independent investment managers have been, for the most part, getting hurt because of that. It is definitely a challenge and one where the makeup of the model of the market, which is compensation structures and the regulatory environment have made it difficult for them to compete.”

Purpose Investments was founded on the principle of making high-quality investment options accessible to everyday Canadians, or “the democratization of the investment industry.” Seif does not believe financial companies should charge high fees just because they can, but should instead be focused on giving all Canadians access to a range of investment strategies that have previously been out of their reach.

Prior to launching Purpose Investments, Seif was president and CEO of Claymore, which over its seven years of operation grew to $8 billion in assets and established itself as a Canadian leader in bringing exchange-traded funds to investors through its family of 34 ETFs across broad asset classes. Claymore was sold to BlackRock in 2012. Prior to Claymore, Seif was an investment banker at RBC Capital Markets, where helped to develop the structured products group.

“I started Claymore when I was 28-years-old and sold it when I was 35, and along the way grew it to one of the fastest growing firms in Canada,” he said. “I’m a guy that believes that you can do some really neat things if you put your head to it.”

Seif is a big believer in the ETF delivery model as a way for people to access investment strategies. Most ETFs are passively-managed, but there is a growing trend toward actively-managed ETFs, he noted.

Investor habits, a focus on lower fees, and the movement toward indexing in general favor the ETF model. “ETFs are going to be an extremely important part of the market and continue to grow,” Seif said. “The advisors themselves are restructuring towards more discretionary portfolio management as opposed to just stock picking. All these things are driving the ETF industry.”

The Canadian economy is a biased toward a few key sectors, specifically energy and financial services. “For the most part, it’s a really great economic environment,” said Seif. “It’s a little under undiversified economically.”

Canadian investors tend to have a home bias when choosing investments, but because the Canadian economy is highly concentrated, this can create diversification issues.

“In Canada, the challenge is that our market represents about 4% of the global market cap of all global markets,” Seif said. “If you have a home bias in Canada, which, of course people do, it absolutely will mean that your portfolio is undiversified. It’s a challenge that we have to get over.”

Purpose Investments has been “pushing individuals to think beyond the Canadian marketplace,” Seif said. “We think that the US market and international markets represent really interesting opportunities for Canadian investors. There’s always a concern with currencies, especially the volatility of the Canadian dollar. People are very afraid to invest sometimes in other jurisdictions.”

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