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About this podcast

David Richardson sits down with Irene Fernando and Sarah Neilson, portfolio managers on RBC GAM’s North American Equities team. Sarah and Irene have worked together for over a decade and share a common investment philosophy based on detailed scenario analysis. They also incorporate environmental, social and governance (ESG) analysis during this process seeking to deliver consistent, risk-adjusted results.


Hello, and welcome to Personally Invested. I’m your host, Dave Richardson. Today we sit down with a dynamic duo, a pair that really are quintessential members of a team. And as we’ve seen the investment management business evolve over the last couple of decades, it’s moved away from being a business of a single star manager who takes all the questions, takes all the spotlight, and it’s evolved much more into team management where people bring their diverse skill sets and background to the table to add more value for investors. And again, our guests today I think are a quintessential team. Today I’m speaking with Irene Fernando, who is an Analyst and Portfolio Manager with the RBC Global Asset Management North American Equity Team. Sarah Neilson is also a member of this team, and she is also an Analyst and Portfolio Manager. We get into their approach to investment management, their interesting backgrounds, and then we also talk about ESG, which is becoming a much more central part of the way investment managers look and evaluate businesses. We also talk about their unique position as perhaps the only all-female investment management team on Bay Street. I think you’ll love the conversation.

So, Irene, Sarah, welcome to Personally Invested. Great to finally get you here.

We’ve been trying to get you on the Personally Invested podcast for quite some time. And now that Sarah is a complete celebrity—we’ll get into that in a moment—it’s even more important to have you here. But as we were talking, and something that—and this is why it’s great to have these conversations that I didn’t even realize, and we’ll get into this maybe a little bit later on—but you’re likely the only all-female portfolio management team on Bay Street. And for those non-Canadian listeners, Bay Street is sort of Wall Street in Canada, and so that’s what we refer to it as here. But let me start. So everyone will recognize Sarah. You can’t—on a podcast, you can’t see her, although we will put her picture up with the taping. But you can’t walk around in the underground in any city in Canada, ride an elevator without seeing Sarah’s picture. And that campaign that’s being run, what’s the basis of that?

Yeah. That’s to talk about our leadership efforts that we’ve got going on in our team on environmental, social, and governance integration, so ESG for short. It’s a very popular buzz word that we’re hearing. But, you know, we’ve worked really hard in RBC GAM as well as on our team to make sure we’re integrating ESG. And so this is to tell the world with my face in the—that we have done a good job, and I think we’re continuing on that.

So I got my autograph. I’ve got my autograph for my mom, our audio technician; Sarah’s signing everything. And if you send us a nice note, we’ll get you a photo with an autograph on it. But we’ll get back to the ESG because I think that’s fundamental, a fundamental part of your philosophy around managing money. It’s very important to you. It’s important to the firm that you work for as well. But we always like to start, because it is called Personally Invested, and get to know you a little bit better. Because I think one of the things that’s very interesting for people who invest with you is knowing a little bit about your background. And you’ve both got very interesting backgrounds. So what I like is, I did my undergrad at the University of Toronto; so that’s Irene. I did my master’s degree at Queen’s; that’s Sarah. So they’ve got great educational backgrounds. So, but I think people would be more interested, Sarah, in knowing about your overnight work at Tim Horton’s. We get very Canadian on this podcast.

Yeah. So I went to Queen’s, as Dave said, studied mechanical engineering, and in the summers I worked nights at Tim Horton’s to make ends meet. So that was a good learning opportunity to know where I wanted to move away from and expand.

And you reset their whole donut-dipping—

I was a very—

—engineering process as part of your background?

Yeah, right. I was a very efficient donut icer at night, as well as cleaning and drive-through. Anyway, I have bigger skill sets than Tim Horton’s. But yeah, so I studied mechanical engineering at Queen’s. After that, I went and worked in the automotive sector, actually building and designing automotive plastic parts in North Toronto. Did that for about four years and—

And it’s not as uncommon as people think for people to have engineering backgrounds, science backgrounds in the world of portfolio management today. In fact, it’s almost part of the orientation of portfolio management, is towards that skill set that comes from those disciplines.

Mm-hmm. Yeah. No. For sure. Yeah. The math background, the technology basis, and some of the problem-solving and detail-oriented nature of some of the engineering skill sets lend themselves very well to portfolio management. And, you know, then I went on after being an engineer and learning a lot, but also deciding that I wanted to do more. I did an MBA, and from there I decided, wow, I think this finance thing is really interesting, and much more interesting than building car parts. And I was lucky enough, and I do think it’s luck that I landed in the Generalist Program here at RBC, and worked for doing—

And the Generalist Program, because I think, Irene, you were part of that as well.



What’s the essence of that program?

Yeah. It’s a rotational program. Wealth Management is the one I was at. The bank has many different programs that allow new entrants to rotate around into various parts of the business, learn about different aspects of the business. So, for example, I worked in a strategy role with the management at Dominion Securities as my first role, which was excellent since I knew little to nothing about how this business works. So—


—very quickly was immersed in learning. Then I worked on the Portfolio Advisory Desk at Dominion Securities with a great team there, and then was lucky enough to work in asset management with Brad Willock, one of our other big U.S. portfolio managers.

Oh, yeah. Fantastic.

And that really sparked this love of asset management and that fundamental analysis piece that fit so well with my background. And so, yeah, and then, Generalists who come into these roles, they can do a variety of rotations, and it’s a really great learning opportunity for new hires.

Yeah. And just additional background because I’m familiar with this program, I would never have made it into the program myself because literally thousands of people apply and, you know, a couple of people are selected every year. So it’s a very prestigious program. It really speaks to your skill set coming in and then gives you the different exposures, which again, is really important in portfolio management to have that sort of broad view of the world and an understanding of the way not just a specific area of the economy works and markets work, but everything and how it all fits together globally.

Yeah. And it’s an interesting thing about our team. We have a large team of analysts and portfolio managers on the North American Equity Team, and most of our analysts came through that Generalist Program. So we are all coming from that similar background of learning a lot about the bank before we landed in our seats.

And Irene was also one of those special talents. Although no ad campaign for you.

Working on it.

We’ll see at some point. But your background’s more straight commerce.


But what drove your interest in getting into the asset management business?

I guess, as everybody’s story, you know, when you’re young, you can’t even think what you will be.


I think the same happened to me. I guess my beginnings are similar to Sarah’s, coming from a smaller town, but all the way back in Ukraine, looking for a better future in Canada. So I immigrated here 20 years ago, trying to, you know, set up a better life, find better opportunities for myself, and realize my potential; which was pretty difficult back in Ukraine at that time. And it’s funny what happened last year is that, because I’ve been here over 20 years, I—for the first time, I start noticing that I stop saying “back home.”


Because home is here, home is in kind of Toronto, St. Lawrence Market area. So when I say home, I no longer think about home as Ukraine, my apartment where I grew up. So once I was here, as you mentioned, I decided to go to U of T and just take a general business degree, without really no agenda of where it would go, and I tried to explore different things. And sometime during second year, I met a person who was working at RBC DS and I was very, very persuasive and got a summer job, and that’s how it all started. So I did two or three summers at RBC DS and that’s where I learned about the investment management business, and I got exposure to great advisors in our main branch. And from that, I decided to go into investment banking because—mainly because it gives you this solid base of being able to analyze companies quickly. It is hard work; I’m not going to lie. So I was happy to be done with it and I was lucky enough to be accepted in the Wealth Management Generalist Program, where I landed up with Doug and Stu on my second rotation and I’ve been there since.


So that’s—that’s my story.

Yeah. So Doug and Stu lead the—the North American Equity Team at RBC Global Asset Management. So that’s the two of you as individuals and how you got into the firm. But you’ve worked together for nearly 10 years, or a little—

Over. Over 10 years now. Yeah.

—over 10 years. And so how did this dream team come together?

Again, somewhat by chance. But Irene was sort of the inaugural analyst for Stu and Doug, and I joined shortly after, and we have been paired together ever since. She covered financials, I covered energy; these are the two bigger sectors in the Canadian market. So that was great. We could both learn from each other but not overlap too much in what we were working on, which allowed us both to expand. And we’ve been working together as portfolio managers now for over five years, and built a very trusting, collaborative, and mostly honest relationship with each other, which I think has benefitted us both. And we can tell each other when we make mistakes, in a nice way, in a way that we both come into work each day I think wanting to do better for the clients and wanting to do better with the portfolio, so.

Yeah. I think from our perspective is having each other and having the ability to bounce off idea off each other, do just a simple sanity check, say, does this even make sense? And so I think that is a very, very valuable attribute of having a partnership. Not every partnership works, but ours does, and it—yeah, I think it benefits both of us and all of our clients in a way that we approach the business and the way that we do the sanity checks and the way that we—sometimes, you know, if it’s a hard time, we just go for a walk outside. Even that, not going for a walk alone, even that helps.

Well, you know, and it’s funny because I think a lot of listeners, and there’s sometimes a perception, and I think it’s a very old perception, that the investment management business is about that individual star manager that you see on TV giving stock picks and saying, oh, this is what I think. But really, this teaming approach, I’m sure you would agree is a much more effective way of managing money because it does bring those different ideas together—



—bouncing ideas, challenging each other.

Oh, totally.

And you’re completely on side with the idea of working as a team between the two of you—


—but as a broader team with Stu and Doug.

Yes. Oh, for sure. Yeah.

It works if you have—if you firmly believe in the goal and you’re going to the same objective, I think then it works. Especially if you establish a relationship with trust, then you come to work and you help each other, and this just makes for an easier day. And sometimes our jobs can be pretty tough and it’s really, really beneficial for both of us.

And as well, we hang out outside of work, too, which is—maybe it’s a lot of each other but we actually like each other quite a bit.

So she’s made some donuts for you? I’m a little disappointed. I like donuts quite a bit and—

I should have brought some.

—I don’t believe—I know, you should’ve—you should’ve brought some here. So let’s talk about the overall investment philosophy that—that you use in the sectors that—and areas that you cover as part of the broader team. What would you say, as a pair, is the core of the way you think about investing money for Canadians?

Yes. So I think the philosophy was originally started and slowly developed by a pair, Doug and Stu. And since we were their first analysts, we were part of actually building out this philosophy. It was us that trying to figure out what’s the best way to present something that we called a scenario analysis. And what it is, is our attempt at figuring out what could happen in the future versus what will happen in the future. We’re trying to figure out different scenarios in which companies can find themselves, and how will they react, how will their business weather in a specific situation, and what will the outcome be. So this is kind of at the core at what we do. We’re not trying to predict one single stock price in a year from now, because I think you will be invariably wrong. And so keeping an open mind and understanding what is embedded in a stock price at any point in time is probably the most critical thing that we do. Because this way, we can assess what we believe is possible versus what the market is pricing in, and that’s where you find these arbitrage opportunities. So that’s kind of the base, the philosophy of how we do things. And then, the way we go forward, we just build on top of it. And I just wanted to reiterate that this is a very, very repetitive process. A process of going back, asking yourself the same question, asking yourself different questions, trying to figure out which way I can look at the stock that’s different that I didn’t think about yet. And having, you know, a big analyst team that does that day in day out, and I just feel like we have this platform of knowledge where you can just dip in and get the information you need, and rerun it, rethink it. And that’s kind of how we go about the business.

So do you believe that disciplined, repeatable process—


—you said that it’s over and over again—

Over again.

—that same discipline. Does that lead to more consistent results for investors that are placing their trust in you?

Yes. I firmly believe so, that continuous like recalibration of the same idea and the same process builds into repetitive formula. We know—we have seen multiple situations where stocks have worked; we have seen multiple situations where they didn’t. So identifying it, learning from the past, and trying to apply it to the future, it’s very, very helpful. And we think about the future, like simple things, like examples like what will happen if Canadian consumer is weak? What will happen to consumer stocks? Like broad issues and how they impact specific stocks at [a] specific level.

Yeah. And the way I think about that—and Irene’s right, Stu and Doug have taught us often not to get stuck on one-point prediction.


Don’t try to make, okay, I think this stock will do X in a certain time, because you start to filter information that you hear to back up that prediction, which is a dangerous game to play.


So the scenario analysis method, the way that we’ve all embraced that, it allows us to take in new information every day and apply it to how we think about the company. And if we learn something meaningful, then we apply it, look how it sits within that scenario analysis framework. And if we change our mind, that’s fine.

We have come in every day and we can change our mind about how we think of something, because we think of how things could change and where the company sits on that wide spectrum of where things can go right and wrong.

And so that’s interesting around process and, again, the consistency of the process.


How it can be repeated, and that delivers more consistent results—


—which is ultimately what I’m sure, as an investment manager, you want to deliver for investors.


But something, as you said, a buzz word, which may be one way of describing it. But more of something that, well, really, all global investors are getting more interested in—


—is this idea of ESG—environment, social, governance—responsible investing. And we joked about the ad campaign, but the reason why you’re featured—


—is that you really believe in this.


And you believe this is another way that you can add value as an investment manager.

For sure.

So we’ve had Melanie Adams on the podcast and Stu as well. But from your perspective, why do you think this is such an important thing for you as an investment manager to be looking at?

Yeah. And I, you know, I shouldn’t have called it a buzz word because we don’t consider it a trend or a buzz word. It’s—


—integral into our process. Incorporating the consideration of these nonfinancial factors—


—into how we think about that scenario analysis of the future of the companies, it fits right in—in the framework that Irene described. So you’re thinking about things like, are the—you know, for environmental, social, and governance, there’s lots of different factors that impact a company. And I’ll give some examples just so people understand where we come from on each of those, so. Environmental, it could be very topical; carbon exposure, climate change exposure, or water usage. Even land use—are you using land close to some other important areas? Has the company thought about the risks, regulatory changes that could impact the sustainability of their business model? So these are things that we have to ask ourselves and then we spend a lot of time asking the companies. Social, you know, that covers a wide variety of things, but employee safety is one key metric that we think about, especially in the energy sector that I spend a lot of time on. Are they keeping employees safe? Are they wanting to come back to work? Is there a risk that we’re seeing a higher turnover in a company and what that could impact on their sales, their margins, things like that, or their community impact. And then governance; that’s where we spend a lot of time thinking about is a company actually making decisions that are positive for the future of their shareholders and their stakeholders? Do they have the right management team, the right board? Is it diverse? A lot of studies have shown that diverse boards and management teams actually produce better results, so we at RBC GAM are really advancing that conversation.

Yeah. And what’s really interesting, because RBC just released a poll on responsible investing.


Which again is part of the campaign that you’re featured in.


And a couple of the numbers that I found particularly interesting was, I think a lot of investors think sometimes of ESG and being aware of those factors in an investment, that it’s somehow a trade-off. But actually, Canadian investors have come to realize that it’s not. You can sort of have your cake and eat it, too, around ESG factors; that you can invest in companies that are good at those things, without sacrificing returns. And then particularly for younger investors, so millennials—


—who get a lot of airtime, that this is kind of table stakes for them.


That’s that expectation. It kind of makes sense, too, because consumers are driving—you know, they don’t want to work with companies that are terrible to the environment, don’t treat their employees very well—


—and don’t have a whole lot of integrity in the way that they run their business, so—

Well, and in the long—

—it just makes sense.

Yeah. And in the long run, those businesses tend not to perform well. There will be short-term divergences, but over the long term businesses that are thinking about their impacts on society, customers, environment, and governance, and well-governed, thinking about risk management within their business, they will outperform, we believe. And the way we think about ESG and each analyst on our team spends time thinking about the risk to the companies that they are analyzing, and coming up with what they think is—are relevant factors for those companies and how that could impact the scenario analysis. In the long term, is this business something that investors will pay a premium for? Or maybe they won’t; they’ll pay a discount because they’re doing something wrong. We need to think that and challenge that. As well as we’ve also come up with many different themes that we’re digging into, and I love to dig into things. I have a real obsession with details, so I—you know, the themes around climate change and some of the carbon concerns that are happening, the more companies that are signing up to promise to be carbon-neutral or even carbon-negative, these are going to present risks to companies on how they get to that place.


And then maybe opportunities. Maybe there’s investment opportunities for us in thinking about how that capital gets allocated. So there’s a lot of new themes emerging that we’re learning through our integration of ESG that I think will help the client in the long term.

Yeah. I would like to add that, if let’s say we look back 5, 10 years ago, and we see the attitude towards ESG from companies, it has really changed and changed very dramatically. And it’s not only about, you know, environment, it’s not only about social; it’s just how the way the companies structure themselves to truly serve, not only their shareholders, but their employees and their customers. So it’s almost a change in the way that companies think about their own philosophy and how, why are they here for? It’s not only for business, it’s not only for profit, but it’s now, I think, a push in the last 10 years to really change the perspective of the boards and the management of how to structure the business around serving multiple stakeholders in a society, and not only their shareholders.

Yeah. And ultimately, and I think we’re seeing that’s without sacrificing—



Profits. Exactly.

—profitability or long-term performance. In fact, it makes it more reliable and sustainable over time.



So let’s—just while we—because you’re working on the North American Equity Team, and a particular focus in Canada. But one of the things that we’ve talked about on this podcast, because most people who listen to it are Canadian investors, the importance of investing outside of Canada. And so your background is focusing, as you said, on financials, yours on energy, and that is one of the limitations of the Canadian market in some way. Where do you see, from your perspective, sitting as North American managers, the importance for Canadian investors, and really all investors, to think beyond their own borders from an investment perspective?

Yes. So I think we’re all human beings and we all have our own home bias; home is the best, right? Like we like what we know, we feel comfortable. But I think, you know, multiple studies have shown that having global portfolios that reflect and diversify many, many risks are very beneficial longer term. So Sarah and I both are part of Investment Policy Committee at RBC Asset Management, and we are part of the discussion where we determine the allocation across different geographies to make sure that retirement portfolios of Canadians are prepared for, you know, global economy, global reach. And it’s been interesting couple of years since we started on Investment Policy Committee, and even opened up my own eyes; my portfolio got more global than it was before.

Yes. Yes.


And, yeah, I think it is very important to diversify, and I think RBC offers great products that allow investors to reach that diversification.

Yeah. So let’s just finish up on a topic that’s near and dear to my heart, because I’ve got two young daughters. My 13-year-old, coincidentally named Sarah as well—

Great name.

—is very interested in mathematics, and I can see her following the same kind of direction that you both followed in your careers. And she’s going to enter a world, if she wants to get into portfolio management, that’s quite a bit different than the world that—that you entered even—


—you know, 15 years ago. We were—again, we were joking around before we started taping. I’ve sat down with many teams, investment teams, and it’s more often than not two guys. If it’s not that, it’s a man and a woman. But as we highlighted, you’re maybe the only team of investment managers in, you know, in a major investment firm, two women. And it’s just diversity—not—well, you focus on that in responsible investing—


—diversity of boards and companies. But diversity in the team that you’re working on, the broader team and then just the two of you working together, why do you think it’s so important? And how do you think it adds value for the people who invest with you?

Yeah. I think that diversity of thought, background, approach that comes from being two females. But even if I think about our North American Equity Team, it’s got a nice balance of females and males and other backgrounds and educational backgrounds, and it really adds to that investment process. And the—and we can challenge each other and ask questions and be learning about different aspects and different ways of thinking about the world. So I think diversity does bring a lot to how we approach company analysis and market analysis.

I think—yeah—

And yeah, and you’re bringing the additional perspective of coming from Ukraine to Canada as well, so.

Yeah. I keep people in check.

She does.

I think it is very important to have a diverse team. It just makes it for a better day, I think. And again, as I mentioned, that companies now [are] starting to really make a conscious effort to build diverse teams. It doesn’t happen overnight, right, so we can’t expect them. But what we do expect them to do is to have a plan and say, yes, maybe my board has one woman, but maybe in three, four years from now I’ll have more, and I consider all candidates equally. And you can even see some firms in the United States now say, if we have applicant pool of 1,000 people and I’m going to see 20, but there is only 200 women applying out of 1,000, you get me 10 women and 10 men. So even drastic like that, there’s just policies in place. And I think every year, it’ll just be more opportunities for everybody.

Yeah. Well, and it’s moving along.



Maybe a little slower than—


—than we’d like it, but—

Change takes time.

—but certainly, in your team, it’s moved along a long way and I think it’s something to celebrate.

It has. And it’s a great profession.


I think it gets lost a little bit sometimes in—when you—when people think about investment management or Wall Street or Bay Street and that it’s like a real macho sort of career and it’s kind of like the Wolf of Wall Street sort of movie situation, and people often don’t want to live that life. We don’t live that life, everybody.


And it’s a great life for women who want a more flexible—


—career or for people who have this lifelong curiosity and interest. And it changes every day. It’s not just sitting, looking at spreadsheets. We are out there—

On the ground.

—meeting with management teams, touring so many facilities and oil plants. But it’s great. It’s always learning, it’s always changing, and I think it’s a really excellent career for men and women.


And hopefully, we see more women approach this career.

I think every day when we come to work, we just kind of view ourselves as stewards of capital. We want to make sure that we picture my grandma, your grandma, making sure that their money is invested properly, taken care of, and it’s lasting them for the future. And we have a great responsibility and it’s—it is definitely not Wolf on Wall Street kind of environment, so. And it goes well with being a female.

Well, that’s great. I know we struggled to book this time together but I really enjoyed the conversation. It was certainly worth the wait. It’s just great to watch—to see two people who work so well together and produce such great results. So—

Thank you.

—thank you very, very much for your time.

Thank you for having us.

Thank you for having us.

Thank you for listening to Personally Invested. If you have suggestions for future podcasts, please email us at rbcgampodcasts@rbc.com.


Recorded February 2020

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