“I remember the bombs dropping frequently when I was a kid. We had to run for cover. Sometimes we hid in the basement of the school where I once spent the night because it was safer than at home. »
Born in Beirut, Nadim Rizk grew up in Lebanon where he witnessed the atrocities of war.
“I saw bodies shattered by the bombs. It’s unfortunate, but it puts things into perspective. It gives you a love of life and a different perception of someone who had an “easy” life. That’s not criticism, that’s reality,” he said.
This star investor maintains that overcoming adversity during his childhood made him a better manager. “When the markets move, it’s not the end of the world,” he says.
The 48-year-old now father of three left Lebanon for Montreal in the 1990s to study at McGill University.
After a first job in CN’s investment division, he then worked at Montrusco before moving to Fiera Capital during the financial crisis in March 2009, just when the stock market was bottoming out.
He left Fiera two years ago to found PineStone Asset Management. In 12 years at Fiera, the assets under management he was responsible for grew from $300 million to $60 billion.
“We’ve been very successful in securing management mandates, but most of the asset growth has come from the returns generated. Two-thirds of the value created comes from returns,” he says.
The 10-year annualized return of its US equity investment strategy is 19%, which compares to 15.5% for the S index
What is particularly interesting is that the performance is generated with a very traditional management style of long-term purchase (buy and hold) à la Warren Buffett.
Nadim Rizk says he is still fully invested in the market, but with few stocks, between 20 and 30, which are usually kept for 10 to 20 years.
His philosophy is to identify and invest in companies that he considers to be of high quality – multinationals – in terms of governance, ethics and transparency. He says he maintains regular discussions with the leaders of each of the companies in the portfolio. It is essential, in his view, that the members of the board of directors of these companies are irreproachable. “No Mickey Mouse, no questionable compensation policy or multiple voting share structure,” he says.
There is nothing very “sexy” about the securities held in the portfolio today. These include Moody’s (bought in 2001), Diageo, TJX (Winners, Marshalls, Home Sense, etc.), Taiwan Semiconductors (TSMC), Graco (bought in 2004), Home Depot, Lowe’s, Mastercard (bought in 2009), Nike (bought in 2004), Air Liquide (bought in 2019), ASML (bought this year), Adobe (bought in 2022), Microsoft (bought in 2019), LVMH and others.
He and his team (there are around thirty employees at PineStone) therefore spend most of their time producing analysis and research. “Everything is done in-house: 50% of our research is done on titles we already own to make sure we are up to date. The rest is done on ideas that seem interesting to us. We know few companies in the whole market, but the ones we know, we know them very well”, explains Nadim Rizk.
Last year, PineStone bought shares of Adobe after selling the stock of U.S. Bancorp following the surge in banking stocks propelled by the first interest rate hikes in early 2022.
“We wanted to buy Adobe before that, but we found the title too expensive. When technology stocks started to fall with the rate hikes, we had the opportunity to “exchange” U.S. Bancorp for Adobe and thus buy the stock of a fairly dominant company in its sector at a better price. »
He maintains that he has not yet made a single change so far this year in his American strategy. “In the global fund, we do on average one or two changes a year because the pool of titles is larger. »
If he says that his best move in his career was to come to study and live in Montreal, he believes that his best move on the stock market is to have massively bought the action of Mastercard in 2009 during the financial crisis. “It was quite a home run,” he said.
On the other hand, he claims to have made several bad moves, but never a major disaster. “That’s what helps our performance as well. »
To illustrate a failed investment, he cites the purchase of shares in Li-Ning, a company competing with Nike in China that takes its name from a former Asian Olympic athlete. “The business grew to a certain size, but distribution, inventory and pricing were not managed effectively while we were shareholders,” he says.
“You shouldn’t be embarrassed to say that we did bad things. Investing is taking a chance on a business without knowing the future. The important thing is to minimize the losses when a bad move occurs and to maximize the gains with the good moves. »
Adjusting the weighting of securities over time is an important tactical element that should not be overlooked. “I call it dating,” he said. We date, we move together, we get married, and then we have children together. A security must be studied, purchased and held for several years to get to know it better and develop a strong conviction. »
Bay Street received shock waves two years ago when Fiera Capital announced the departure of its star manager Nadim Rizk. He was head of the Global Equities team at Fiera Capital. “I wanted to be an entrepreneur. I wanted to prove that I was capable of going into business. He maintains that he is still very close to the big boss of Fiera, Jean-Guy Desjardins. “I had that in me and as an entrepreneur himself, Jean-Guy understands that. He knew it, and the understanding we had was that I would never leave and let him down overnight. Nadim Rizk therefore left, signing an agreement making Fiera one of his customers at PineStone. “We did it in the friendliest way possible. You can’t make omelettes without breaking eggs, but the goal is to be in business together for a long time,” says Nadim Rizk.
Fiera is by far PineStone’s largest client providing approximately $50 of the firm’s $60 billion in assets under management (other PineStone clients include National Bank Investments, pension funds, foundations, high net worth families, etc.) .), The agreement allows Fiera clients to continue to benefit from Nadim Rizk’s investment management services and notably prevents PineStone from soliciting Fiera clients to transfer assets outside of the strategies contemplated by the agreement. Nadim Rizk had responsibility for around a third of assets under management at Fiera before his departure in 2021.
