Emerging opportunities

As he approaches three decades in the advisory business, Scott Totten, CIBC Wood Gundy’s first vice president, is clear about where the best investment opportunities lie in the years to come

While the Canadian economy is showing some signs of a resurgence heading into the summer months, for Scott Totten, the real returns will be found farther afield – in particular, in India. The subcontinent and its huge population are primed for growth; while the IMF cut its recent global predictions, it maintained its stance that India would increase its GDP by 7.5% this year and next.

As such, Totten will be keeping a close eye on developments in New Delhi and Mumbai. “We have done well in the developed markets, but going forward, the emerging markets will be a lot more attractive, especially India,” he says. “I was at the Excel Funds Emerging Markets Symposium in Toronto, and Mahesh Patil did a wonderful job of promoting India.”

The benefit of experience
Now approaching four years at CIBC Wood Gundy after moving on from previous stints at Richardson Greenshields and BMO Nesbitt Burns, Totten is clearly quite satisfied with his current advisory role. 

“I love it here at Wood Gundy,” he says. “It’s the best firm I’ve ever been with. I’m a portfolio manager and a first vice president, and there’s a lot of responsibility that goes along with that. I do discretionary trading on behalf of our clients, and we buy independent outside research. I know a lot of people in our industry don’t want to spend much money, but we are very happy to do that to help our clients achieve their goals.” 

And who are these investors?

“Our average client would probably be around age 60 and either retired or semi-retired,” Totten says. “They tend to be more conservative investors. We look on clients as our best friends, but they have to be a nice person; otherwise, we don’t want them.” 

With close to 30 years of experience in the industry, Totten’s cautious approach to investing is something he has developed exactly because it produces results.

“We have always run a very conservative and defensive portfolio, so almost every year our clients end up making money,” he says. “Last year was less positive, and it’s not overly positive this year either, but over the past 10 years, our models have around 14% [growth] per year. These are customized portfolios and very exclusive. We can build our own strategy, and it’s very exclusive and proprietary.”

Looking abroad
As the loonie hovers around 80 cents to the US dollar and the Bank of Canada increases its growth forecast for the domestic economy, one could be forgiven for feeling slight optimism about the Great White North. Totten acknowledges that things do seem to be improving at home, but for those seeking investment opportunities with high rates of return, emerging markets are undeniably the way to go.

“In Canada, I like the names that have high and growing dividends – so financials and consumer product names that have tax-friendly dividends,” he says. “But for
the next few years, there’s going to be a lot of coupon-clipping, and I don’t see a lot of growth here.”

Here, or indeed in most developed nations, the world’s emerging economies are sure to receive much more focus from savvy investors. Totten details the reasons why Canada’s growth simply can’t match up – basically, the country is already too rich to match the growth rates in China or India. 

“I think the developed markets will struggle for the next few years,” he says. “I don’t want to be too hard on the US, Canada and Europe, but the demographics are so old. We have everything we need here; every family has two cars, for example, so they’re not going to buy another car. Then you look at India – the market penetration there is very low. It may be more volatile, but with better overall returns.”