Jay Nash’s rules-based approach to portfolio management takes the emotion out of selecting investments
Name: Jay Nash
Title: Senior vice-president and portfolio manager
Practice: Nash Family Wealth Management
Firm: National Bank Financial
Location: London, ON
Years in the industry: 20
Certifications: CIM, FCSI
When Jay Nash, SVPand portfolio manager with National Bank Financial, began his career in the late ’90s at Midland Walwyn, he observed several turning points in the market, including the long-term capital issue in 1998, irrational exuberance in 1999 and the technology correction of 2000. Witnessing it all, he realized that basing a strategy around current events in the market would result in being wrong more often than right, so he decided to adopt a rules-based approach that removes any emotion from picking stocks and sectors. Two decades later, that approach has paid off, judging by Nash’s multiple nominations for Portfolio/ Discretionary Manager of the Year at the Wealth Professional Awards.
“My process has evolved over the last 20 years, but that was where it started, and it was a matter of tightening it up over time,” Nash says. “I work from asset allocation first and foremost. When you are looking at portfolios, you want to make sure the risk for each client is appropriate and that they have the right balance. Then you look at the top-down macro side, deciding if the current environment provides a better or worse risk/return ratio than would be present. Then you turn to the bottom up – the individual positions.”
Far from a cookie-cutter approach, Nash endeavours to control the ingredients for each client and their unique situation. “No two portfolios are the same, as everyone’s timeline, risk parameters and types of accounts – corporate or individual – are unique,” he says. “It doesn’t mean you have to have different stocks or managers in each one; you just have to adjust the weightings.”
After he establishes individual parameters, Nash applies his rules-based approach. “One of the rules I adhere to, in the managed realm for mutual and exchange-traded funds, is I hold no sectors of any kind, whether geographic or economic,” he says. “I focus primarily on the ETFs or managers – active or passive – that provide the best exposure to a given portion of the portfolio. When looking at opportunistic moves, much of my process is driven by Morningstar and CPMS data and the rules we have in place within that quantitative program. They guide us day-to-day and remove the emotion when it comes to one sector or stock at any given time.”
“[Fear and greed] drive everything, unless you have a set of rules that sets your process”
Removing that emotion is one of the biggest challenges Nash sees today. Given the access to information that’s available now, any investor at any level is susceptible to making emotional decisions.
“When we look at other factors, news flow is there and the data is changing constantly, but it still feeds to an emotional response, whether fear or greed,” Nash says. “Those two emotions drive everything, unless you have a set of rules that sets your process.”
An integral part of that process for Nash is active management. While he agrees with the statistics that show the benefits of holding passive investments in larger and more liquid markets, he has also seen that when it comes to global equities and small cap, active management tends to be successful.
“Overall, there are exceptions in both cases,” he says, “but I am a believer that active management in the less liquid or overly diverse markets has a real advantage.”
In addition to observing a shift in market events and the types of investments used, Nash has also noticed a change in the role of a portfolio manager.
“The job itself has evolved significantly,” he says. “It was very stock- and story-focused in 1998. People turned to you, as an advisor, to provide guidance for their portfolio alone. Today, the guidance is much broader. They are looking for your help with their portfolio and many of their lifestyle decisions as well, such as a financial plan, and you need to provide all of that within your services. That has been a huge change and requires a more diverse set of skills. I believe the modern investment advisory relationship is much more team-focused than it was, with the need for specialties versus the old individual advisor-to-client relationship.”
To meet investors’ growing expectations and create productive relationships with clients, Nash believes strong communication is a must for portfolio managers today.
“The ability to communicate with those who work with you, the ability to listen and hear what clients truly need, and the ability to adjust your approach to everyone’s unique needs are key qualities,” he says. “While every investor would happily turn to you and say, ‘Give me all the upside without any downside,’ it isn’t the reality. In our business, understanding what the client is really asking for is a skill set that is required today.”