18 august 2007 Advisor’s Edge Report
Value Stalwart Won’t Stray
Core Value, which she has manWhat has changed over the years
aged since January 1999. She has is the equities mix. For example,
also managed the equity portion the current 3.5% in income trusts
By Diana Cawfield
of the $869.1-million CIBC Bal- in the value portfolio is probably
As both a value-style equity manBut that hasn’t thrown Morphet anced since January 2006.
the lowest in eight years, says Morager and a recreational marathon off track. “To protect clients’ cap“We’re not changing anything,” phet. And going back to 1999,
runner, Gaelen Morphet believes ital and grow it means that we’re says Morphet, “despite the fact there are more large-capitalization
in overcoming adversity by stick- going to miss some of the upside that there’s lots of people chasing companies today, chiefly because
ing to her long-run discipline.
of the market,” says Morphet, who returns and sexy stories.”
of the growth in the market.
Lately, that discipline has been is first vice-president, Canadian
Morphet points to her Canadian
Morphet doesn’t want sector roput to the test. Over the most re- equities, at Toronto-based CIBC equity model that hasn’t changed tation or market-timing risks. She
cent two-year stretch, the $292.7- Global Asset Management Inc.
in 12 years – “even under duress, aims to be diversified by industry,
Morphet’s longer-term perfor- because I’ve seen it work.”
and to always be fully invested.
million CIBC Canadian Equity
Value that Morphet has managed mance is much more robust. The
The model consists of in excess
Among the current 45 equity
since August 2005 has looked head of a five-member team, she of 500 names with at least $100 names, there is no ceiling for a
sluggish. As of June 30, its two- is also responsible for a number million in market capitalization. stock weighting. That said, she
of Renaissance and Talvest funds. Morphet uses a relative-value ap- doesn’t want a holding to represent
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two decades of experience. After
graduating with a bachelor of arts
in psychology from the University
of Western Ontario in 1984, she
joined the former McLeod Young
Weir as an assistant financial analyst in the research department.
Her mentor and head of the department, John Pepperell, told
Morphet that if she kept proving
herself, the sky was the limit.
In 1988, Morphet moved to the
Bank of Nova Scotia as a portfolio manager in the pension fund
area. She received the CFA designation in 1992. In 1993, the pension fund unit evolved into Scotia
Investment Management Ltd. and
she was eventually promoted to
head of Canadian equities.
In 1996, she joined AMI Partners Inc. as a partner and portfolio manager. In 1999, she moved
to Merrill Lynch Investment
Managers Canada Inc. as a senior
vice-president.
In 2002, CIBC acquired Merrill
Lynch’s Canadian asset management unit, which was temporarily
renamed CM Investment Management. The operation eventually became CIBC Global Asset
Management.
Currently, Morphet’s total assets under management exceed
$6.2 billion. She says the 10 top
holdings are identical across all of
her mandates. Among those names
are “phenomenally sound companies,” such as Canadian banks and
companies like Manulife Financial
Corp. that are all globally competitive. Plus, she adds, the Canadian
dollar is going in our favour.
Historically, portfolio turnover
has been “about 25% to 30%
and we’ve been as low as 13%,”
says Morphet. The sell discipline
is based on a target price, the intrinsic value of a company or fundamental changes.
Turnover was higher when
Morphet took over the CIBC
mandates. She adds that she’s very
pro-Canadian equities, and there
was a higher exposure to non-domestic equities and fixed income
that she reduced immediately.
Morphet’s Canadian equity
value mandate is currently underweight 10% in oil and gas versus
the S&P/TSX Composite Index.
And while she’s neutral in financials, telecommunications and
utilities, she’s more than double
the market weight in consumer
discretionary stocks at 12%.
But her weightings are “totally
a fallout” of individual stock selection. “We just happen to have
big positions in the areas that we
AER
own,” she says. Diana Cawfield is a Toronto financial
writer.