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“Trying to outperform constantly, especially on a monthly or yearly basis, leads to frequent rotation and high turnover. It’s not tax-efficient, and it rarely results in consistent outperformance”

Manar Hassan-Agha, Mawer Investment Management

“We’re boring because we focus on companies that create wealth steadily over time”

Jeff Mo, Mawer Investment Management

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Chasing fads is tricky. Be balanced. Be boring

Avoid the noise – Mawer Investment Management on how a disciplined approach helps prevent costly mistakes and keeps investor returns on track

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Manar Hassan-Agha

Mawer Investment Management

Jeff Mo

Mawer Investment Management

Industry experts

IF YOU’RE new to investing – like an alien landing on Earth for the first time – it’s easy to be dazzled by the bright lights of bull markets. Imagine arriving on our planet when times are good, watching locals bask in the warm sun, harvesting fruits from abundant mango trees. At first glance, building shelters and gathering firewood for the dark, cold night ahead might seem unnecessary. Why prepare for trouble when everything seems so perfect? But seasoned investors know better. They’ve weathered market storms before, understanding that the sun sets as reliably as it rises. That’s why they collect their firewood, build their shelters, and stick to their disciplined investment processes. Mawer Investment Management, celebrating its 50th anniversary this year, has spent decades perfecting this approach. They’ve learned that markets cycle through bright days and dark nights, sometimes swinging wildly between euphoria and despair. The firm’s philosophy – “Be Boring. Make Money.™” – may sound unconventional in a world addicted to the thrill of quick riches, but it’s an ethos that has proven resilient across market cycles. It’s built on the belief that staying steady and grounded is far more valuable than chasing the latest fad. Recently, Manar Hassan-Agha and Jeff Mo joined Wealth Professional to discuss Mawer Investment Management’s investment strategy: “Be Boring. Make Money.” Hassan-Agha is a portfolio manager for the Manulife Global Equity Class, and Mo is a portfolio manager for the Manulife US Mid-Cap Equity Fund, which are sub-advised by Mawer. They emphasize the firm’s disciplined focus on consistency and the avoidance of hype – traits that have shaped its investment strategy over the past five decades. Mawer is proud of the success of its funds; it will be celebrating Manulife Global Equity Class’ 15-year anniversary on November 2, 2024, and Manulife US Mid-Cap Equity Fund’s three-year anniversary on March 22, 2025.

Effective portfolio management involves balancing the need for growth with the imperative to manage risk. An example of sustainable growth is FTI Consulting, a firm that has consistently expanded its business while maintaining a solid financial foundation. Mo discusses how FTI played a key role during high-profile bankruptcy cases like Hertz. “FTI has done a great job of using its brand to attract top talent, allowing it to continue compounding its business,” he explains. Over the past decade, the company has shown annual growth in the mid to high single digits. This growth is a direct result of FTI’s strategic reinvestment in its business, maintaining a high return on invested capital.

Throughout its history, Mawer has seen many “new normals” come and go. Take the late 1990s, for instance, when tech stocks fuelled a market frenzy that had many investors convinced the old rules no longer applied. Nortel, once a tech giant and a dominant force on the Toronto Stock Exchange, represented nearly 40 percent of the index at its peak. But even amid the hype, Mawer didn’t take the bait. The firm never found Nortel trading at a value that justified its price, despite its apparent wealth-creating potential at the time. When the bubble burst, as bubbles inevitably do, many portfolios were shaken. Mawer, however, emerged with its firewood intact. That discipline continues to define Mawer’s approach today. As Mo puts it, “We’re boring because we focus on companies that create wealth steadily over time.” Perhaps the most compelling argument for Mawer’s “boring” approach lies in the power of compounding. By focusing on high-quality companies with sustainable business models, Mawer aims to deliver risk-adjusted returns over time. Hassan- Agha explains that the firm’s real value creation comes from managing “downside capture” –protecting portfolios during market downturns.

A unified investment philosophy and process enables more effective portfolio management by sharing insights across strategies. Mo and Hassan-Agha describe how this interconnected approach allows for efficient allocation of resources and knowledge. “When the US mid-cap strategy initially found FTI Consulting, it was later incorporated into the global equity strategy because the analysis was consistent across both,” Mo explains. This seamless integration reflects a broader principle of avoiding silos within investment teams, ensuring that a common knowledge base supports decision-making. Another example is in the industrial space, where a manufacturer of interconnect products and sensors serves as a core holding across multiple strategies. These connectors, which are used in data centres and other mission-critical applications, benefit from strong demand due to technological fads and the expansion of cloud infrastructure. Hassan-Agha points out, “The company’s products are low cost but critical, and they are often specified within a given process, which makes the relationship with customers very sticky.”

Adopting a long-term focus in investing often requires prioritizing stability over short-term gains and understanding the cyclical nature of markets. This long-term mindset extends to the types of companies chosen. For instance, Mo explains how smaller and mid-sized companies, particularly in the US, can offer attractive opportunities. “Mid caps often dominate their niche but have more room for growth compared to larger companies,” he says. The balance lies in targeting firms that are still in the

earlier stages of their life cycle, with proven competitive advantages that can support compounding growth. The idea of wealth creation through compounding resonates throughout Mawer’s investment approach. Companies with sustainable competitive advantages are better able to reinvest profits, thus accelerating their growth. “Compounding tends to work better with the law of smaller numbers,” Mo notes, meaning that smaller firms can often achieve higher growth rates than their larger counterparts, offering more potential for long-term value.

It is this consistency that turns what some might perceive as “boring” into a powerful strategy for sustainable wealth creation. While the bright lights of market fads may capture attention, it is the steady hand that often finds the most success when the excitement fades.

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Manar Hassan-Agha, CFA is a portfolio manager at Mawer Investment Management, which he joined in 2021, and is co-manager of Manulife Global Equity Class and Manulife Global Equity Private Pool. Prior to joining Mawer, Mr. Hassan-Agha worked as an investment associate at Fulcrum Capital Partners, a Canadian middle-market private equity firm, involved in the evaluation and execution of potential investment opportunities and the monitoring of existing portfolio company investments. Previously, he worked in the M&A Transaction Advisory practice at KPMG, where he assisted in financial due diligence, valuation, and merger-and-acquisition advisory engagements for financial and strategic clients.

Mawer Investment Management

Manar Hassan-Agha

Jeff Mo is a portfolio manager at Mawer Investment Management, which he joined in 2008. He is the manager of Manulife US Mid-Cap Equity Fund and Manulife US Dollar US Mid-Cap Equity Fund. In December of 2014, Mr. Mo won the prestigious Domestic Equity Fund Manager of the Year award at the 20th annual Morningstar Awards. Mr. Mo received his bachelor of business administration (honours) from the Richard Ivey School of Business and also attended the School of Economics and Management, Tsinghua University, in Beijing, China. He is a chartered financial analyst charter holder and a member of the CFA Society Calgary.

Mawer Investment Management

Jeff Mo

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Bank Australia

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Bank Australia

Fernando Lemos

Beyond Bank

Darren McLeod

In Partnership with

Fighting for the customer

The customer owned a bank saw a huge boost after the Hayne Royal Commission. One year on and their market share is growing as customer continue to see their value.

Read on

Darren McLeod

Beyond Bank

Fernando Lemos

Bank Australia

Industry experts

Beyond Bank

Darren McLeod

Bank Australia

Fernando Lemos

Avoiding the allure of market hype

Published November 4, 2024

Mawer looks for companies that can generate a return on capital greater than their cost of capital over time by virtue of a sustainable competitive advantage.

Mawer adheres to a single, well-defined investment philosophy across the firm – their efforts are focused. This shared common language better enables the exchange of information and ideas, enhancing decision-making, increasing resilience, and reducing risk. Mawer has three pillars to their investment philosophy.

Mawer looks for company leaders who effectively allocate capital while expanding their competitive advantage and have a track record of doing what they say they’re going to do.

Excellent management teams

Mawer wants quality companies whose stocks are priced below their intrinsic value – what an objective, well-informed person would pay for them.

Discount to intrinsic value

research and screen

Idea generation

Mawer’s investment process uncovers companies that can generate consistent returns and have historically protected on the downside.

Investment process

look at return trends, valuation, and competitive advantages

Preliminary evaluation

examine historical data, review analyst reports, interview management, build financial models, and write report

Intensive analysis

apply risk controls, including position and industry limits

Portfolio construction

Integrating network effects across investment strategies

Mawer’s strategy aims to capture a significant portion of the market’s upside while minimizing losses in downturns. This allows portfolios to compound wealth off a higher base, rather than being subjected to the full impact of market volatility. “If you’re down 50 percent, you need to be up 100 percent just to break even,” Hassan-Agha notes. Mawer’s investment strategy rests on a foundation of bottom-up analysis, a process that starts with evaluating individual companies rather than making broad sector or macroeconomic bets. Hassan-Agha elaborates, “We focus on three core attributes: good business, good management, and a good price. Our goal is to find companies with durable competitive advantages that can withstand market pressures. This is not about fad-chasing; it's about finding businesses that can deliver value across cycles.” Process discipline is another essential aspect of Mawer’s approach. The firm’s proprietary research platform, known as M42, serves as an extensive knowledge base, with over 350,000 notes on more than 10,000 companies, helping analysts and portfolio managers make informed decisions based on accumulated insights.

Positioning for the long term

Investing based on fads and themes can produce dramatic results during specific market cycles, but it often comes at the cost of increased volatility and potential long-term underperformance. “We tend to underperform in markets dominated by themes like AI or marijuana stocks in Canada, or even Bitcoin,” Mo acknowledges. However, the decision to avoid chasing fads is intentional, as the focus remains on sustainable growth rather than chasing short-lived gains. Hassan-Agha adds, “Trying to outperform constantly, especially on a monthly or yearly basis, leads to frequent rotation and high turnover. It’s not tax-efficient, and it rarely results in consistent outperformance.” Instead of frequently shifting strategies, the approach emphasizes staying disciplined and focusing on outperformance over time. Hassan-Agha explains, “The risk of constantly changing investment styles is that it can leave clients underperforming in both up and down markets. We believe in sticking to a strategy that targets quality companies and sustainable returns.” This strategy, which may appear unexciting in the short run, aligns with the natural cycles of markets and the economic realities that cause companies and sectors to rise and fall. Mo illustrates this by pointing out the historical turnover among the largest companies. “The top 10 firms by market capitalization change every decade,” he notes. “Since 1950, about 50 percent of those companies have churned in each decade.” Companies that seem unshakable today may struggle to sustain growth in the future because, as Hassan- Agha puts it, “trees don’t grow to the sky.” It is challenging to maintain high growth rates when companies become massive, highlighting the importance of being selective and disciplined in the search for sustainable investment opportunities.

Navigating theme-driven markets

Important disclosure: Manulife Funds and Manulife Corporate Classes are managed by Manulife Investment Management Limited. Manulife Investment Management is a trade name of Manulife Investment Management Limited. Mawer Investment Management Limited (“Mawer”) is responsible for effecting solicitation in North America to promote the portfolio management services of Mawer Investment Management Limited. Unless otherwise noted, the opinions expressed are those of the Mawer Investment Management professionals and not necessarily those of Manulife, are as of the post date, and are subject to change based on market and other conditions. The information concerning financial market fads is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. All overviews and commentary are intended to be general in nature and for current interest. Consult with an investment professional regarding your specific investment situation. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the fund facts as well as the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in share/unit value and reinvestment of all dividends/distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. Manulife, Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it and by its affiliates under license.

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