Nick Dedes: We recently placed Invesco Canada's Stewardship Grade under review, largely on the back of a key investment professional departure. That was Dana Love, who was the lead manager of Trimark Fund, a flagship fund of the firm, and also head of the global equities team. We have taken the opportunity to reassess our thoughts on the firm's stewardship and we've reinstated the stewardship grade.
So, Salman, let's talk about what the current grade is and some of the thoughts that went into the assessment.
Salman Ahmed: So the overall stewardship grade remains a B. This is where it was in the past, but the largest component of the stewardship grade, which is the corporate culture score, was lowered from a B to a C. Now when we went through this exercise in November last year, we were cautiously optimistic that the leadership team that was created to replace the CIO role in April 2011, would be doing… would do a good job of maintaining a corporate culture and guiding the investment professionals, the young analysts to become good portfolio managers in the future. But with Dana Love's departure, like you mentioned, we're taking more of a wait-and-see approach. We want to see more tangible evidence of this leadership team's capabilities and their decision-making before we go out on a limb and call it a good structure.
Dedes: Yeah, I think, a couple of examples of that tangible evidence that we're looking for include the development and mentorship of young talent at the firm. I think it's an area that they've identified as needing some improvement, and an area that they're refocusing on with the introduction of the Director of Research role, specifically playing that role of sort of oversight and mentoring. So, I think, it's important to see how that plays out, what sort of talent moves up the ranks.
Also just the cohesiveness of that leadership team, how they interact, how they deal with various challenges that may arise and how they resolve these various issues that inevitably do come up and need to be addressed and now having multiple people making that decision instead of just one individual. So, I think, these are couple of things that we'd be keeping a close eye on.
Ahmed: Yeah. That's right. The other two components of the Stewardship Grade, the manager incentives and fees, were maintained at the grade that they were. So, one of the reasons that stewardship… that Invesco's stewardship grade remained a B, was on the back of a very strong management incentive structure. So, all portfolio managers have at least one year's salary invested in Invesco Canada's funds and all of them have some amount invested in their own funds. They do have a component of their bonus that's geared toward performance, but this is geared toward long-term numbers, it's just three-, four- and five-year numbers, and we think that this is among the best we've seen in Canada, and it does a very good job of aligning the interests of the portfolio managers with those of the unitholders.
Another area of strength actually at Invesco is their transparency and communication as well. So, this was another factor that we included in our overall assessment. They go well beyond the regulatory requirements in their portfolio disclosures; all the portfolio managers have quarterly portfolio disclosures, and quarterly portfolio commentary, and they have monthly disclosures of their top-10 holdings. This is not required by them, but they go above and beyond to provide this information to unitholders by and large. In terms of their fees though, they are middle of the pack. They do have some cheaper series, which are the SC series, but by and large their fees tend to be around the medians.
Dedes: So to sum up, the corporate culture score has been reduced from a B to a C, but the overall grade for Invesco Canada Stewardship remains a B, and a couple of items that we'll be keeping a closer eye on as mentioned is the development and mentorship, and the focus on that aspect with respect to the analyst team, in addition to the effectiveness of the broader leadership team.
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