MONEY MANAGER SPOTLIGHT: Vito Maida
There are more than 5,000 stocks on the Toronto and New York stock exchanges. Vito Maida has scoured them for the past three years. So far, he's bought just eight. Maida uses the bottom-up approach, analyzing individual companies rather than entire industries, markets or the economy. "The bottom-up process confirms that we can't find anything to buy," he says. "The top down--the aggregate market statistics--confirm that. Any way you look at it, markets are expensive."
Most people don't pay professional money managers not to invest their savings. Yet that's what Maida has done since he founded Patient Capital Management Inc. in March, 2000. He's kept roughly three-quarters of his clients' money in cash, which earns little or no return. Even so, Maida has handily beat the major market indexes. Much more importantly to him, he hasn't lost money. "The money manager's first and primary obligation is as a fiduciary to his unitholders," he says.
That rigid discipline was imbued in Maida at the giant Ontario Municipal Employees Retirement System pension fund, and then at Hamblin Watsa Investment Counsel, run by media-shy Toronto value investor Prem Watsa. In 1995, Trimark Investment Management hired Maida, then 35, to oversee the more than $4 billion in its Canadian equity mutual funds. The timing couldn't have been worse. It was the height of the tech and telecom mania, and other funds left him in the dust. In 1999, Trimark brass told him they "needed to make a change."
"In retrospect, difficult situations, as people say, often provide opportunity and turning points," Maida says haltingly. "Although, at the time, quite honestly, it was difficult to see that." Still, he has warm recollections of colleagues at Trimark. Soon after he left, the resource stocks and the blue chips in the funds' portfolios soared, and tech and telecom crashed. His extreme caution has also paid off in the bear market that followed. But Maida warns that "this outperformance is not something sustainable," particularly if markets take off.
Maida founded Patient Capital with two friends, marketing specialist Gary Sharpe and administrative specialist Domenic Rinaldi. They're still the only employees, and the firm has just $150 million under management--some institutional clients, plus individuals with a minimum of $250,000 to invest. Keeping things small is partly deliberate. Maida doesn't want to compromise: "You can have those values in a large organization, but it's harder to ensure that everybody follows them."
Pay has been limited so far. "Let me put it this way: There's been a high opportunity cost," says Maida with a laugh. Yet he also doesn't want to waste clients' money on elaborate surroundings. The firm moved offices recently, and the only decoration in its lobby is a painting by Sharpe's wife. In Maida's office, there's only his CFA designation leaning against a wall and a copy of Jack Welch's autobiography, Straight from the Gut, on a shelf. Where does he see himself in 10 years? "Right here." You wonder if he'll have decorated the place by then, or found any more stocks that he likes.
Patient Capital Management, Annual Compounded Returns (to June 30)
................................1-year......2-year......3-year
Taxable portfolio..............4.1..........5.2..........5.7
Non-taxable portfolio.........8.0..........9.5.........11.3
S&P/TSX Composite........-0.3.........-3.2........-10.4