NBI's Terry Dimock: Governance in Portfolio Management Through Several Angles

What this episode covers

Terry Dimock, Chief Risk & Execution Officer, at National Bank Investments is our guest. In this episode, Terry takes us on a journey through NBI's OP4+ Open Architecture Investment process and framework, shedding light on the importance of creating value, the prioritization of organization, people, and process, and the meticulous monitoring of portfolios. Terry shares valuable insights into the selection of portfolio managers, the logic of integrating ESG factors, and the challenges and opportunities in the ever-changing investment landscape. We explore the inner workings of NBI's investment management process and discover how they navigate the complexities of the market to deliver exceptional results for their investors. Timestamped Highlights: [00:00:00] Opening remarks and introduction to Terry Dimock, a luminary in investment management. [00:04:37] In 2012, National Bank sold its asset manager and adopted an open architecture approach to build solutions using the best portfolio managers in the world. They created OP4+, an acronym that defines what they look for in a portfolio manager, with "O" standing for organization. [00:07:00] Where does value come from? How value is created, and the importance of people and process. Terry explains the pillars of OP4+ and monitoring portfolio positions. The goal is to ensure that the process is followed and glitches are avoided. [00:10:03] How are NBI's sub-advisor portfolio managers evaluated? Terry emphasizes the importance of portfolio manager selection, and the under-recognition of the risk involved is discussed. We discuss his team's role at National Bank Investments in reducing advisor and client burden in evaluating managers. [00:13:13] The CIO office uses teamwork to identify asset classes and portfolio needs. They may add or change managers to diversify portfolios. NBI's Open Architecture allows flexibility in adding a multitude of asset classes and managers. [00:16:21] We seek the best portfolio managers with a long track record, particularly in less liquid investments. Fees in these categories can be high, but we value diversification, careful selection, and scale. [00:19:28] Quarterly performance attribution calls are held with all portfolio managers to assess performance and confirm adherence to OP4+ process. Bi-weekly check-ins and yearly on-site visits ensure trust and accuracy in information provided. [00:24:29] Investors should consider environmental risks and the management of companies they invest in. For example, PG&E faced lawsuits and bankruptcy due to poor management after 2019 forest fires. Analysts reduced positions in companies with high risk and poor governance. It is important to analyze potential risks and ensure investment aligns with environmental objectives to avoid negative outcomes. Considering and factoring in ESG concerns was a logical decision. [00:28:10] Terry emphasizes the need for a transition to renewable energy, ensuring job security and sustainable business practices, despite political opposition. [00:29:56] Investors should use ESG to make credible and accountable decisions. Becoming a signatory of the UN principles for responsible investment demonstrates seriousness. Proof points about using ESG factors are necessary. [00:33:57] We assess performance criteria and compare active managers to ETFs to ensure value for end-investors. Focus on process, not short-term metrics. [00:36:25] Gaps in portfolio, lack of diversity, and changes can unearth reasons to lose confidence in a portfolio manager's inclusion in NBI's program. [00:41:11] AI, like ChatGPT, will enhance analysis and automation, allowing focus on critical tasks. Progress in technology has consistently improved efficiency. Younger generations adapt quickly. [00:43:22] Terry closes the conversation noting that NBI is constantly working at improving qualitative and quantitative aspects of the OP4+ process, focused on finding the right information and metrics for future success. ======================= Where to find Terry Dimock ======================= Terry Dimock on Linkedin National Bank Investments     Copyright © AdvisorAnalyst.com