The Globe and Mail, Report on Business
Published November 3, 2006

Until recently, I'd never heard of Alex Becks. I thought it was because I lived on the left coast and wasn't plugged in enough to the Toronto investment network, but I've come to realize that few in the business know who he is. When I ask people if they've heard of Alex or his firm, Gryphon International, they shrug and give me a blank look.

I find that odd because Gryphon International is a tremendous success story operating at the base of Bay Street. They are a small team that manages only foreign equities. No Canadian equity or monthly income funds here. They have $6 billion under management in non-North American (EAFE) and Global portfolios. About 80 percent of their assets belong to U.S. institutional clients of all shapes and sizes (pension funds, charities, endowments). They don't have a lot of Canadian clients, although they do manage international equities for Gluskin Scheff & Associates.

I met with Alex a few weeks ago and found the session quite inspiring. It made me want to share his pearls of wisdom and also remind Canadians that some of the world's best international money managers reside right here in the snowy north.

Gryphon International is categorized as a GARP manager (growth at a reasonable price), but it's the way they execute on that philosophy that makes them interesting. First and foremost, they keep it simple. As Alex said to me, "people just make it too complicated." He and his team stay within their areas of competence - "If we don't understand it, we move on. There are 2500 stocks to choose from."

Related to that, they don't feel compelled to dance with every pretty girl at the party. For instance, they don't invest in highly-cyclical or resource stocks. When they do dance, however, they make each holding meaningful. In other words, they concentrate the portfolios on their best ideas. And finally, they don't trade much. They stick with what they have.

Gryphon International has one of the most important ingredients to being successful - experience. Alex and his partner Larry McManus, who co-founded the firm, have been through many cycles and made their share of mistakes. Alex's career has been totally focused on international equities. He started in his home country, the Netherlands, at ABN Bank and subsequently plied his trade in Canada and the U.S before starting the firm in 1995. One of his stops along the way was the CN Investment Division, which was also a part of Larry's background. When you talk to Alex, the experience oozes out of him. He told me that he started in the business in 1969 and it was fifteen years before he saw a bull market. He pointed out that the market declines in the early eighties and the most recent bear market were nothing compared to 1974-75 - "Hong Kong was down ninety percent."

There is also plenty to like about how Alex and Larry run the business side of Gryphon International. Their discipline and strength of conviction are demonstrated there too. The firm relies on its corporate partner, Gryphon Investment Counsel, to help run the business so the research team can focus on what they do best. As the firm's assets have grown, they haven't felt compelled to expand the research team. They've kept it small because that's what works for them and they don't own hundreds of stocks like some managers do.

They're also thoughtful about who their clients are. Alex related a story about turning down a billion dollar mandate early in the firm's history. While it would have put Gryphon International in the black and on the map, they didn't want to be beholden to one big client. In a similar vein, they are willing to close for new business if they think their ability to add value will be compromised. Currently, they're not taking on new clients and as a result have a growing waiting list.

I also wanted to write about Gryphon International (and subject myself to the wrath of Alex and Larry) because I think Canadians are too quick to assume that we can't do international investing here in Canada. Canadians, whether they are individual investors or institutions, are inclined to look for large global firms. Canadian firms often don't make it to the short list. Our attitude reinforces the old adage - "The definition of an expert is someone who comes from some place else."

This is a common theme when you look at other Canadian firms that have had success in the foreign equity arena. You'd be hard pressed to find a better track record for EAFE equities than that of Sprucegrove Investment Management or Sky Investment Counsel, both of Toronto. Where do most of Sprucegrove's clients reside? The U.S. of course. Jarislowski Fraser and Burgundy Asset Management have also been successful in building a substantial foreign equity business and in both cases the money has come almost exclusively from south of the border.

So what can we learn from studying Gryphon International and spending an hour with Alex Becks? Don't make it so bloody complicated. Concentrate on your best ideas. Stick to the approach and process that works for you. Don't trade too much. If asset growth starts to impact your existing clients, stop growing. And the inspirational part - we can do this in Canada.