Patience pays off

Vito Maida’s career was going nowhere until stocks crashed

by Sean Silcoff

Patience pays off

Vito Maida is arguably the most stubborn money manager on Bay Street, and he has paid dearly for it. A decade ago, when he was lead Canadian portfolio manager at mutual fund giant Trimark Financial Corp., he insisted soaring Canadian bank stocks were overvalued and stayed away from then-hot Nortel Networks. Instead, he invested in unpopular commodity stocks and gold. Investment advisers called for his head and pulled their clients’ money from his funds, and he was fired. Then the Internet bubble burst, Nortel crashed and commodities soared in value.

So Maida started his own money management firm, Patient Capital Management, based on the premise you should never, ever lose your clients’ money. For more than eight years, he kept 80 per cent of assets in government treasury bills, holding steady to the belief everything else was overvalued. As the TSX posted double-digit returns from 2004 through 2007, Maida earned between three per cent and seven per cent a year. Business was depressingly slow. “It was tough to sell a product that was 80 per cent cash,” Maida says. Today, Patient manages under $100 million, a pittance in the wealth management business. “We’d like to be bigger, quite frankly.”

He may yet get his wish. Investors who were patient with Patient are among the biggest winners in the worst market crash since the Great Depression: last year the TSX fell by a third; Maida earned a 4.5 per cent return. As markets cratered last fall, Maida finally began to plow much of his cash into stocks. “He’s one of the best pure investors I have ever known,” says friend and former Trimark colleague Keith Graham. “His timing is not always [perfect] but he sees big changes earlier and clearer than anyone I’ve ever met.”

Maida’s past newsletters to Patient investors reveal a deeply skeptical and prescient investor. For years he cautioned that assets of all types were expensive; in March 2004 he warned of a housing bubble and foretold “history will judge [then-U.S. Federal Reserve chairman Alan] Greenspan harshly” for keeping interest rates low for too long. It was a lonely opinion at the time, but not anymore. Months before the credit crisis began in 2007, he wrote: “The absence of fear and complacency toward risk truly astounds us.”

“He’s had a very bleak view of the future the last several years and it paid off big time in his results,” says Bob Krembil, Trimark’s co-founder and former CEO, who fired Maida but has remained close to him since. “You have to be wrong in the short term to be right in the long term,” Maida says of his style, known in investing circles as “deep value” and employed by famed investor Warren Buffett and Maida’s former boss, legendary Bay Street investor Prem Watsa. “And the short term can last several years.”

Maida, the son of Italian immigrants, grew up poor in Toronto’s west end; he was that kid who owned just two pairs of pants. His father was a construction worker, and when his mother was sick, the family relied on help from social welfare agencies. “Not being well off instilled in me the value of a dollar,” he says. “That’s really the crux of the whole adherence to value investing: don’t lose money, because money is really hard to come by.”

Maida’s other defining experience was the crash of October 1987. It happened five months after the newly minted M.B.A. began as a fund manager with the Ontario pension plan OMERS. The experience of watching his stocks collapse scarred him. “I never wanted to be in the position where I’d lose people this money,” he says.

Maida has lived up to that promise thus far, but building his business has been harder. Like other fund managers who strike out on their own, he has struggled to compete against the industry giants that have the scale, distribution and sales forces to reach and keep investors. “It’s a slow process, and gathering assets is a lot harder than I would have thought,” says Maida (Patient’s investors must also pony up a minimum $500,000). In a major setback last fall, more than half of Patient’s business vanished when an intermediary that had invested in Patient on behalf of a large institution had to pull out.

The other problem is Maida himself. He is the first to admit he’s a “terrible salesman, a terrible networker. I’m not very comfortable in social situations.” Graham describes the six-foot, heavy-set Maida as a “frumpled, crumpled curmudgeon. He’s more focused on investing the money than he is on getting more money.” Patient managed to raise $10 million in 2008 despite the fact Maida still hasn’t replaced his former head of sales, who left a year ago.

But to his loyal, if select, customers, Maida’s dishevelled appearance doesn’t matter. “He probably sells himself short,” says Matt Stewart, a Toronto-based client who has invested his mother’s savings with Patient. “It’s this kind of humility that comes with the disposition you need to be a great value investor. I can sleep very well at night knowing Vito Maida is managing my mother’s money.”

After a decade in the professional wilderness, Maida is sleeping well these days too.




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