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Izet Elmazi, Senior Portfolio Manager, shares his view on the importance and benefit of incorporating advanced technologies into the investment management process. Please click on the image below to be directed to the article:
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
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Why is dividend growth right for my portfolio?
We believe a track record of dividend increases is an excellent indicator of financial health, growth prospects and commitment to shareholders. Companies that are able to grow dividends at high rates organically are generally adept capital allocators with attractive growth opportunities. They generate more free cash flow and typically have safer balance sheets than their peers. In our view, these companies weather down markets better, either by declining less and/or recovering faster. As a result they protect investors’ capital. We believe dividend growth stocks perform better across full market cycles and therefore should be a core part of any portfolios as their rising income streams protect wealth during inflationary periods and become more valuable during periods of deflation.
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Why is your dividend yield below the benchmark yield?
Not all dividend strategies are the same. Most dividend funds focus on delivering a higher than market yield but at Bristol Gate, we are focused on high dividend growth. Companies offering a high yield are generally not able to grow their dividends as quickly because they are paying out a substantial portion of their free cash flow, leaving little for reinvestment to drive further growth. Since inception, the Bristol Gate US Equity Strategy has generated a dividend yield of approximately 1.5%, while its portfolio companies have delivered around 20% dividend growth on average annually. This compares to the 2% dividend yield and 6% dividend growth of the S&P 500 over the same time period. Although the current yield of our US Equity Strategy is lower than the market’s in the near term, in the longer term the high growing income and increasing yield on cost results in a very attractive income stream over time.
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I understand that Bristol Gate uses a model to identify stocks for the portfolio. Are you a quantitative strategy?
We are not a quantitative strategy. At Bristol Gate, we believe a combination of artificial and human intelligence working together has the most promise. The idea of predicting dividend growth has been central to our investment process since the beginning and our prediction model has evolved over time as tools and quality data have become broadly available with declines in the cost of computing and storage. Our machine learning based model’s dividend predictions are the first step in our “man and machine” approach. Although our machine learning model’s back test produces attractive absolute returns, it is not a risk managed portfolio. The model’s value comes in providing an idea list of the best dividend growers over the coming 12-months which our portfolio managers perform deep fundamental analysis to build our portfolio of 22 (US portfolio) or 25 (Canadian portfolio). The model also enforces our sell-discipline. This systematic process promotes discipline and helps eliminate human biases.
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How does your strategy perform in a rising interest rate environment?
Companies whose dividends grow at very high rates tend to outperform in periods when interest rates are increasing because their growing income stream provides a degree of protection against a higher discount rate. Conversely, high dividend yielding stocks historically underperform when interest rates rise because their relatively stable income streams become less valuable when discounted at higher rates. In addition, higher dividend growth stocks generally have healthier balance sheets that carry less debt than their mature, higher yielding peers offering another layer of protection against higher rates as they are not saddled with increased debt servicing costs.
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Does a singular focus on the best dividend growers ever distract you from finding the best performing stocks?
At Bristol Gate, we do not believe in a Baskin Robins approach to investment management. We have one flavour, dividend growth, and our goal is to be the best in the world at it. Although we may miss a few attractive investments because of our focus or there may be periods when our particular style is out of favour, over time we believe it provides us the best opportunity to consistently meet our investors’ goals. By only focusing on companies with at least a three-year history of paying dividends we avoid many of the high momentum, high expectation stocks where we believe most of the risk of overpaying for growth resides. We use high dividend growth as a tool to identify strong performing companies – a litmus test for quality.
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Why do you not have holdings in all the sectors?
Our sector mix is a function of our investment process, not a market call. Our strategies, focused on high sustainable dividend growth, are typically underweight certain sectors. We are generally underweight utilities, real estate, telecom and staples because they are higher yielding as opposed to higher growth. We also tend to not own commodity companies due to their unpredictable nature, poor quality or reliance on capital markets to fund their business models. We believe sectors tell us very little about diversification and think that adequate diversification can be achieved with concentrated portfolios if numerous risk factors are considered as part of the portfolio construction process. By searching for the very best dividend growers, we build portfolios that look very different from the benchmark or a broad market index fund– in fact, they complement them.
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Why is your portfolio 22 holdings (US) and 25 holdings (Canada)?
At Bristol Gate we are systematic and evidence-based. We believe in the scientific approach to help inform our decisions. Based on analysis geared at identifying the number of holdings that achieved adequate diversification but gave us the best opportunity to outperform the benchmark we determined that between 20-30 securities was the right number. Beyond that, adding additional stocks did not decrease risk and did nothing to help our returns. The strict number of holdings also introduces a discipline in the process that forces us to only include our best ideas in the portfolio. If one name enters, another leaves. It is another way that we help reduce bias.
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What is Productive Capital Analysis™?
Productive Capital Analysis is the trademarked fundamental analysis process followed by Bristol Gate. It assesses whether the model’s predicted dividend growth is attainable and sustainable through a thoughtful examination of a company’s source and use of cash. Among other things, market structure, competitive dynamics, growth opportunities, pricing power, margins and the company’s record of successful capital allocation are evaluated. This rigorous analysis provides comfort of the risks underwritten and whether the company can deliver the predicted level of dividend growth.
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How do you fit into a portfolio?
We believe we should be a core part of any portfolio. Due to the concentrated and unique makeup of our portfolios, we complement many popular strategies. When analyzed in a broader portfolio context, we believe our concentrated high active share portfolio is additive to the mix, either increasing returns, reducing risk or sometimes doing both. We have done this by participating when markets are rising, capturing most of that upside, but protecting capital much better when markets are falling.
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How are you different from other Dividend Managers?
Our unique investment process combines data science and fundamental analysis in a repeatable process. Our use of machine learning to identify a focus list of the fastest dividend growers in the coming 12 months is unlike any other manger we are aware of. Amongst our dividend oriented peers, very few, if any, are using technology in the way we are and we have yet to find one that has delivered the level of dividend growth that we have been able to – over 20% annually in the US and 12% annually in Canada since inception. By comparison, the Dividend Aristocrats, the most famous dividend growth product which tracks the 50 companies in the S&P 500 that have increased their dividends for the last 25 years, has delivered dividend growth of around 8.7% annuallyi since 2005. We have historically had limited portfolio overlap with the Dividend Aristocrats and the same can be said of the rest of our dividend peers. Most dividend strategies are backwards looking, offering higher yield and lower dividend growth. We are forward looking with much higher dividend growth.
For more information, please contact one of our Relationship Managers:
Jamie Houston: Jamie.Houston@bristolgate.com
Clara Bor: Clara.Bor@bristolgate.com
Cole Heideman: Cole.Heideman@bristolgate.com
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
TORONTO, September 20, 2019 /CNW/ – Bristol Gate Capital Partners Inc. (“Bristol Gate” or the “firm”), a leader in dividend growth investing, announced certain upcoming changes in respect of its officers. Bristol Gate is the manager of Bristol Gate Concentrated Canadian Equity ETF (TSX: BGC) and Bristol Gate Concentrated US Equity ETF (TSX: BGU/BGU.U) (the ETFs).
Bristol Gate is pleased to provide details about Peter Simmie’s retirement from the role of Chief Investment Officer, which is planned for the end of this year.
Commenting on the transition, CEO Richard Hamm said, “Over the last 13 years with Bristol Gate, Peter has shared his in-depth knowledge and expertise, which has led to the development of our systematic and disciplined investment process that is carried out by a team of highly talented professionals. We are extremely grateful for Peter’s contributions to the firm’s growth and success over this time.”
Peter will remain a shareholder and Director of the firm and assume the role of Vice Chair.
Transition details
Izet Elmazi, Senior Portfolio Manager, will be named Chief Investment Officer and assume responsibility for chairing the firm’s investment committee upon Peter’s retirement from the role. He will become lead portfolio manager on our US and Canadian equities team effective January 1, 2020. Izet is an 11-year veteran of the portfolio management industry and has been with Bristol Gate since May 2018. Izet is a CFA charter-holder, holds the CPA, CA qualification and is a graduate of the University of Toronto.
Achilleas Taxildaris, Portfolio Manager, will join the investment committee. Achilleas is a CFA charter-holder and earned his MBA from the Ivey Business School at Western University. He joined Bristol Gate in February 2017, having ten years industry experience, including two years with Linghor & Partner in Germany where he began his career as an equity analyst.
Poorya Ferdowsi, PhD., will be promoted to Chief Data Scientist, and will oversee the firm’s analytical research responsibilities. The research team will continue reporting to the CIO.
Since Bristol Gate’s inception, it has focused on developing an investment process that is continuously improved, documented and systematically managed by a team of dedicated professionals. Underlying this operating premise is a core belief in the scientific approach to investment management and that using data science in conjunction with fundamental analysis significantly improves investment outcomes. Pending CIO Izet Elmazi stated, “I was attracted to the unique process, impressive team and enviable track record Bristol Gate built under Peter’s guidance. The investment team is excited to build on the foundation he helped lay while safeguarding the firm’s core principles of continuous improvement and evidence-based decision making.”
About Bristol Gate
Bristol Gate Capital Partners is an independent, employee owned investment management company managing over $1.2 billion for institutional and individual clients in Canada and the United States. The firm uses predictive machine learning in combination with fundamental analysis to identify high quality companies that have the capacity and willingness to significantly increase their dividend in the year ahead. Its flagship US dividend growth strategy was recently assigned Morningstar’s top five star rating for its 10-year performance.
Before investing, investors should carefully read the prospectus and ETF facts and carefully consider the investment objectives, risks, charges and expenses of the ETFs. For this and more complete information about the ETFs call 416-921-7076 or visit www.bristolgate.com for the prospectus and ETF facts. Copies of the prospectus and ETF facts are also available on www.sedar.com.
For more information, please contact:
Michael Capombassis
President
416-921-7076 x 248
mike.capombassis@bristolgate.com
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
There has been a growing trend over the last decade to passive investing. With their low cost, transparency and instant diversification they are a one-stop solution. Even the great Warren Buffet has suggested: “The goal of the non-professional should not be to pick winners but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.”
At Bristol Gate, we are also believers in passive investing, but it should be done so with caution and is best when combined with quality, high active share active management.
The Unintended Consequences of Passive Investing
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You are not as diversified as you think
Passive index ETFs broadly buy the entire market. However, not all markets are created equally and depending on which passive strategy you buy you are actually making unintended bets. As an example, the S&P500 Low Volatility index is generally over 20% invested in Utilities and the S&P 500 itself has generally had over 20% exposure to Technology. The result is that even though you believe you are diversified, you are really reliant on the performance of these dominant sectors and sensitive to the risks of them as well.
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All the upside, but all the downside
Passive investing gives you perfect market exposure. This works when markets are going up because you get almost all of the upside however, when markets turn you accept all of the downside as well. There is no protection in a passive portfolio.
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Tough to beat the market, when you are buying it
If you are buying perfect market exposure, then there is no way that you will be able to outperform the market. In order to beat the market, your portfolio must be different from the market and either outperform on the upside, downside or both.
Working together for better outcomes
The combination of active management and passive investing is a powerful concept. The balance of both approaches can help achieve the goals of outperforming the market while keeping costs down.
The key when blending active and passive is having an active manager that looks different than the market. Otherwise there will be too much duplication over the passive index. This can be measured by whether a portfolio has a high active share.
Often active portfolios will be tilted to certain factors (ex. Momentum, Value, Low Volatility) which by including over with a passive portfolio will tilt your portfolio that way as well. In the case of Bristol Gate, we tend to tilt towards quality because the type of companies that can grow their dividends at upward of 15% will have strong balance sheets and capital allocation discipline.
Key Concept: Active Share
The percentage of fund holdings that is different from the benchmark holdings. A fund that has no holdings in common with the benchmark will have an Active Share of 100%, and a fund that has exactly the same holdings as the benchmark considered will have an Active Share of 0%.
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
President, Michael Capombassis, was featured on Fox Business with Stuart Varney on Varney & Co. in August 2019. Michael discusses our success as well as a few individual names that have been included in our US Equity Portfolio.
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
Written by Richard Hamm, Chief Executive Officer, Bristol Gate Capital Partners Inc.
Once the stuff of science fiction, the impact artificial intelligence (AI) is having on our everyday lives is real, powerful and growing by the minute. In the financial services sector technology is increasingly being leveraged to optimize workflow and analyze large sets of data for their own business purposes. But in an industry, where barriers to change are supported by regulators and legacy systems rife with inefficiencies, the use of real AI technology is gaining ground in making changes for the clients as well.
AI technology will be just as disruptive a force in the investment industry as it has been to the hotel and taxi businesses. Personal investing will benefit from the many systems that are being created to develop custom investment solutions at a fraction of the costs currently charged. From managed financial planning programs to investment selection and asset management tools that are better suited for each individual, AI will improve upon human only solutions. The obvious impact on all aspects of the business will result in lower or more appropriate fees and greater transparency. In short, anyone who does not grasp the impact of AI will have on business revenues and client satisfaction stands to be left behind. From the client’s perspective machine learning and artificial intelligence will pave the way for a greater democratization of institutional quality products and services and their availability to the public. Hopefully this will lead to better investment returns and to significant social benefits, including lowering the government’s support for retirees as a result.
At Bristol Gate, machine learning and neural linguistic programming allow us to effectively generate ideas for our portfolios rather than chasing around external sources. In addition, it gives us better insights into risk analysis and the factors to consider in managing risk. We believe that together these are very important parts of the equation and contribute significantly to our abilities to both grow and protect our client’s wealth by ultimately building a better portfolio. It also allows us to standardize product management and improve on both existing and potential new products by using concepts that can be tested and proven with evidence as opposed to having a human bias or by being influenced by behaviour that is based on people’s own feelings.
Finally, machine learning enables our firm to cut costs, which allows us to be leaders in competitive fees. We know from first-hand experience it makes us better and more effective at idea management, asset allocation processes, portfolio construction and optimization of the portfolios that are built.
However, even with its unprecedented influence on our portfolio management abilities, we believe the investment portfolios selected by AI-driven technology still require the assurance of a human being to manage the process. Like most people today we would hesitate to ride in the back of autonomous vehicle and let the car drive wherever it wanted; rather, we still prefer our hands on the steering wheel just in case. This reliance on human intelligence makes sense since our own AI, our brain, is still the one who generates the questions the machine answers.
Popularity of ideas invariably leads to people jumping on the band wagon. It is no different with AI as many of today’s investment managers will tell you they have adopted AI as part of their process. We think these statements are broadly exaggerated and strongly suggest you look under the hood to see what’s there.
When you are evaluating an investment manager and trying to separate the authentic from the counterfeit ask three questions: are the data sets they talk about relevant in solving the investment question they are intended for; how developed and skilled are the “data scientists “ that work for them and finally are they using “machine learning “ as a term interchangeable with traditional quantitative methods.
Since its inception 10 years ago, Bristol Gate has been at the forefront in using data analytics in its investment strategy. This investment boutique knows how to navigate and deliver results in the digital age giving it a competitive advantage which has attracted the attention of the financial institutions on Bay Street, Wall Street and internationally.
Please click here to view the article.
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof. These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
Bristol Gate President, Mike Capombassis, was featured on BTV at the Inside ETFs conference in Montreal. Mike discussed the growth of the firm and how Bristol Gate brings together Data Science and Fundamental Analysis to be the most efficient active investors.
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
In an interview on Money Life with host Chuck Jaffe, Izet Elmazi, Senior Portfolio Manager, speaks about our unique approach and how utilizing AI makes us more efficient investors.
Please click here to listen to the full interview.
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
By: Joel Schlesinger
INVESTMENT industry veteran Peter Simmie has long been on the hunt for what makes a company a good investment.
But after 35 years, he’s largely given up on finding them.
That is, without the help of a robot.
OK, it’s not quite a “robot.”
Rather, it’s advanced hardware married with even more advanced software to produce an artificial intelligence-driven investment process to find stocks with the best chances of future high-dividend growth.
“In our business, you’re trying to get rid of personal preferences and judgment,” says Simmie, chief investment officer with Bristol Gate Capital Partners in Toronto, one of the pioneers in the industry when it comes to implementing artificial intelligence (AI).
And using a computer program that can pore over vast amounts of information much faster than a team of analysts could, which then also comes up with near-flawless analysis, does just that: it takes the human-error factor out of investing.
“I’m not sure AI, in the way we’re using it, could do anything that we couldn’t do ourselves intellectually, but it does it a whole lot faster and with much more consistency,” he says.
AI, machine learning and data analytics are the buzzwords when talking about tech today. Indeed, they represent significant innovations in computing that have truly become game-changers for just about everything — from how we drive to how we bank to our health care.
But Simmie says the investment world has been lagging behind when it comes to implementing AI and related technologies.
“A lot of the people in the investment management business have been trained to be in the investment management business.”
In other words, they’re often steeped in the orthodoxies of investing. But they’re not computer geeks. And while AI has been slowly adopted by financial institutions for other reasons, like risk analysis of loans, using a computer brain to pick investments hasn’t been a priority.
But that’s changing fast, driven by firms like Bristol Gate, says Simmie, an alumnus of the University of Winnipeg. In fact, nobody paid much attention to the company and its strategy of successfully finding stocks with high-dividend growth until it started using AI to do it.
“It’s such a hot topic that we now get asked to make presentations in the States.”
That’s hardly surprising to longtime investment industry insider John Guttormson, who has worked with some of Canada’s largest firms on implementing innovation.
“The traditional active management participants in the industry are in a bit of a tizzy,” the Winnipeg-based investment product consultant says.
Another industry innovation, exchange-traded funds (ETFs) that generally track and mirror a benchmark index, like the S&P 500, charge extremely low management fees relative to mutual funds and even personalized portfolio management.
“It’s always been so difficult to outperform the benchmark, and it used to be if you got a benchmark rate of return, clients were happy,” he says.
Now everyone can buy the benchmark performance for pennies on the dollar paid to have a professional struggle year in and year out to do the same — thanks to ETFs.
Guttormson says AI is the industry’s “white hat to the rescue” in this respect.
AI allows investment managers to do what they do, but presumably much better, he says. And what is it investment managers aim to do? Why, that’s to outperform their benchmarks. (Otherwise, why do you pay them extra money, right?) With AI, the theory is that they should. And Simmie says Bristol Gate’s AI-driven portfolio has done just that.
Central to AI’s promise — what makes it stand out from past computerdriven strategies — is its ability to “get smarter over time.”
Like us, it learns as it goes… only faster and with fewer errors.
This is potentially good news for investors of all kinds — though for now AI is most likely to benefit very wealthy and large investors like pension plans.
Yet AI will reshape how we all invest, Guttormson says.
“There is a professor at Stanford who says that AI is the new electricity, and we all know how pervasive electricity is,” he adds, referring to Andrew Ng, the chief scientist at Baidu Research, one of the world’s leading R&D firms in AI, and who also teaches at Stanford University in California.
Already, the intrepid little investor can access AI technology to boostreturns — presumably — in his or her portfolio.
Case in point is Canadian ETF provider Horizons, which has offered its MIND Active AI Global Equity ETF — one of the world’s first AI-run funds — since late 2017.
Anyone with an online brokerage account can buy and sell it.
“The idea of a product like MIND is it’s learning to learn as it goes along,” says Hans Albrecht, vice-president with Horizons ETF.
“With these products, it’s quant, turbocharged.”
Albrecht is referencing quantitative analysis, which has been around for a few decades, and involves using advanced mathematics to create computer algorithms to find needles in haystacks of data. But the old (non-AI) quant programs are limited. They do the same thing over and over, whereas AI learns from success and, more importantly, mistakes to get better as time passes.
So it should come as no big surprise that MIND’s performance since inception is hardly earth-moving. If you had invested $10,000 at its founding, you’d still have $10,000 today.
That uninspiring performance is to be expected.
MIND is powered by a “neural network” built by a Korean company. And the best way to think of it is like a child learning rapidly over a short time.
So the theory goes: MIND’s software should get better at picking outperforming markets around the globe over time.
Whether that proves true or not, expect more products like MIND to come in the near future.
Albrecht argues AI is reshaping the industry just like other innovations have in recent years (i.e. the internet and smartphones).
“Fifteen years ago, it was like, ‘The internet is really cool,’” but not essential like it is today, he says. Google, Facebook and Amazon were not yet market drivers (and, today, big investors in AI).
Apple was just developing the iPhone when few people could have predicted that in a few short years, “everybody would have a powerful computer in their pocket.”
Thanks to these technological advances, we’ve seen an explosion in data and its sharing.
In fact, 90 per cent of the world’s data in all of human history has been created in the past couple of years, Albrecht adds.
“That has changed everything.”
So given the promise of AI, just imagine what the world — and your investment portfolio — might look like 15 years from now.
Link: CLICK HERE
Important Disclosures
There is a risk of loss inherent in any investment; past performance is not indicative of future results. Prospective and existing investors in Bristol Gate’s pooled funds or ETF funds should refer to the fund’s offering documents which outline the risk factors associated with a decision to invest. Separately managed account clients should refer to disclosure documents provided which outline risks of investing. Pursuant to SEC regulations, a description of risks associated with Bristol Gate’s strategies is also contained in Bristol Gate’s Form ADV Part 2A located at www.bristolgate.com/regulatory-documents.
This piece is presented for illustrative and discussion purposes only. It should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this piece suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. A full list of security holdings is available upon request. For more information contact Bristol Gate Capital Partners Inc. directly. The information contained in this piece is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the piece and is subject to change without notice. Every effort has been made to ensure accuracy in this piece at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at bristolgate.com.
A Note About Forward-Looking Statements
This report may contain forward-looking statements including, but not limited to, statements about the Bristol Gate strategies, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events and conditions or include words such as “may”, “could”, “would”, “should”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate” and similar forward-looking expressions or negative versions thereof.
These forward-looking statements are subject to various risks, uncertainties and assumptions about the investment strategies, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. Readers are cautioned not to place undue reliance on forward-looking statements and consider the above-mentioned factors and other factors carefully before making any investment decisions. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith. Forward-looking statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in any forward-looking statements. Bristol Gate Capital Partners Inc. has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation.
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