How one top PM got his start and developed a strategy built on reasonable returns and the power of compounding
In part one of this series, we discussed the Mackenzie Global Dividend Fund and the approach taken by its lead portfolio manager, Darren McKiernan. His approach is governed by a commitment to risk adjusted returns, backed up by the power of compounding.
McKiernan, who is also a Senior VP of Mackenzie Investments and the Head of Mackenzie’s Global Equity & Income Team, shared some stories of his life, career, and the experiences that shaped his outlook and approach. What started as an interest in finance and a will to network, turned into an illustrious career and a philosophy for the Global Equity & Income Team. Much of it started when, as a student, McKiernan cold called a company for advice.
“I opened up the yellow pages and found this firm called Fure Financial Corporation that looked impressive. I literally cold called the place, the receptionist answers, I give them my spiel and tell her I want to know a little more about their business, she asks me to hold on and the next thing you know I’ve been patched through to the president and founder of the firm,” McKiernan says. “He told me that if he’d done what I did, the first five years of his career wouldn’t have been as aimless. He invited me to visit the company and gave me a book by Michael K. Evans covering everything from investments to estate planning to savings. That was the first time I was exposed to compounding.”
“I read it and told him I loved the section on investing, and he told me about a book by Peter Lynch called One Up on Wall Street and another by Martin Zweig. I hoovered up his whole reading list and realized that this is what I wanted, I wanted to be a stock analyst.”
McKiernan spent the first years of his career repeating that formula, finding industry leaders, listening to their insights, taking their reading lists, and reading what they recommended. He built up a depth of knowledge and wisdom beyond his years, such that he started on the buy side with Scotia as a junior research analyst.
Two years later he joined the esteemed team at the Trimark fund under Bay St. legend Bob Krembil. There, McKiernan learned to look at businesses critically and deeply. He learned to see these businesses not just as numbers on a page, but a collection of human work and macro forces. He learned to analyze businesses based on their longevity and underlying mechanics, he learned to take long term views on companies no matter their past track record or market capitalization. These are views espoused in every financial magazine, to be sure, but under Krembil, McKiernan learned to put them into practice.
At Mackenzie, that’s what McKiernan does. His Global Equity & Income Team is informed by this learned philosophy: that a diversified portfolio of high-quality companies informed by deep analysis can consistently deliver strong returns on invested capital that compound upon themselves year over year.
McKiernan takes that first nugget of wisdom he gleaned about compounding and made it a core of his team’s approach. Their “Dividend Dream Team” is made up of what they see as the best 350-400 compounder companies operating in the world. He uses his analytical knack to find protective “moats” that give a company the best opportunity to maintain its competitive edge for a long time to come. He uses that same chutzpah that had him cold-calling CEOs in his early days to inform a flexible and nimble management approach. His team’s mandates are dividend-focused, but not beholden to a specific yield target, allowing them to make long-term strategic moves and block out all the noise most PMs are buffeted with constantly.
While the lessons and wisdom passed to McKiernan in his early career have informed his approach today, he’s also taken the next step and put his money where his mouth is, putting all his public equity investments into the funds he runs. In a deeply uncertain time for investors and advisors, it’s his alignment with investor interests that makes this man behind the curtain worth paying attention to.
“I think it's the right thing to do,” McKiernan says. “It aligns my interests with every unit holder. They know that anything that happens to the fund, good, bad, or otherwise, I feel it as much as they do. It makes for very easy conversations when we're talking to clients.”