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The Best in the Business: Leo de Bever

AIMCo’s chief executive shares his thoughts on what’s ahead for investors in 2014

Feb 1, 2014

Leo de Bever might be the best money manager in Canada. His record at AIMCo speaks for itself, as he’s consistently delivered above-trend, market-beating returns by investing in everything from publicly traded companies to private infrastructure projects. But rather than putting those talents to work on behalf of an investment bank or a private firm, he’s delivering his returns to hundreds of thousands of Albertans through 28 different provincial pension, endowment and government funds. Talk about a public servant.

That’s why, whenever we get a chance to pick his brain on the subject of making money, we take it. And so, we caught up with de Bever in the lobby of the Hyatt in Calgary in late November and asked him what he thought lay in store for investors in 2014. Here’s some of what he had to say.

“I guess we all agree you shouldn’t be in bonds. OK?”

“One of my big concerns as a society for Canada, and the U.S. a little bit less so, is whether we’re still hungry to improve our standard of living. Are we willing to work hard, to make some sacrifices, to get there?”

“The equities have run since 2009, so you might expect some correction at some point. But still, on a longer term horizon, I’d rather be in stocks.”

“That’s the one thing about 2014: the economy will probably do better than 2013, but equity markets may not. Twenty-six per cent is pretty aggressive, and you can’t sustain that for many years in a row – although there have been cases like that if you go back over history. And if it does, it will be because of the psychology that says, ‘I’ve waited this long; I know bonds are not the place to be; real estate is relatively highly valued; maybe I should put more money into stocks.’ That could become a self-fulfilling prophecy.”

“I don’t think equities are cheap. But the question is, ‘What is, relatively speaking, better?’”

“I’m not sure interest rates are going to rise very dramatically, and if they do it’s because there’s a lot of inflation. Eventually, I think there is going to be some, but in that environment equities will do better.”

“Markets are driven by psychology, and the part of the psychology I don’t like is that central banks are trying to manipulate us into believing certain things. By keeping interest rates low, you could argue they’re escalating the price of any asset, but you have to put your money somewhere.”

“We’re saying that small-caps still look relatively good – the reason is, in part, because large caps have more foreign exposure and currency appreciation. We talk about Canada and the U.S. dollar, but the U.S. dollar has also appreciated quite a bit [relative to other currencies] and large caps will feel a little bit of that because their profits are coming back to a currency that’s much higher in value.”

“Now, some people will want to go into emerging markets because they’re underpriced, and to some degree that’s true. But if interest rates go up, emerging markets will get hit disproportionately hard.”

“Some people have said this feels like 1999, but I’m not sure the risk is that big – particularly if you spread it out a bit.”

“I keep on saying, if you have a one-year horizon I’m not sure I can help you. If you have a five- or 10-year horizon – particularly if you’re young and don’t have to worry about short-term setbacks – equities are a good place to be.”

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