An Independent Mind

Kim Shannon has made a career out of being a contrarian: She abandoned a career in science for the vicissitudes of the market, then walked away from CI Financial Income Fund to form an alliance with Brandes Investment Partners. Shannon now has a bone to pick with the conventional wisdom that says men are better investors than women. Here, she explains why.

By Steve Ladurantaye
Globe Investor Magazine, Feb. 21, 2008
Photograph by Vanessa Heins

You were studying zoology in university. Why did you give it up for business?
In 1980, I saw a posting at the University of Toronto that said after a PhD you can enjoy a job that would pay you $16,000 a year. I was submitting my application to do a master’s in zoology and anthropology, and I decided to change course. I talked to a friend and said, “I love organizing. How do I steer myself toward more organizing?” And he said, “Well, that’s business.” It was an epiphany.

You’re a deep value investor. What made you take this approach?
I started working with John Di Tomasso, and he was a deep value guy who came from a background in philosophy. I questioned him a lot at the beginning. I have a science background, and he said emotions move markets more than fundamentals and that you can take advan-tage of that. Give it enough time, and stocks will revert to their means. I asked “What’s your evidence?” but he didn’t have any. So I was a disbeliever—until I worked with him for about two years, and all at once these stocks were reverting. He knew exactly what he was doing.

How do you make decisions each day on your investment choices?
Investing is very much about psychology. Trading is incredibly emotional, so a lot of the structure that we put in place is about using tricks and techniques to keep us disciplined and unemotional.

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What sort of techniques?
We write research reports, we have structured templates, we meet regularly, we all believe the same philosophy, and that helps us stay out of the groupthink that goes on. Eventually, you start getting addicted to being contrarian. Not ridicu-lously contrarian, but realizing that if the crowd is moving in a specific direction, then it’s time to look in the other direction, because eventually the tide will turn.

Does the amount of money for which you’re responsible ever freak you out?
Oh yes. How we trick ourselves to deal with that is by not thinking about how much money we’re trading. We invest in per cents, so the decision remains very rational. I don’t look at how many dollars are getting traded; it would drive me nuts. The other thing we do that helps is, we make many little trades. We slowly move in and we slowly move out.

The investment industry loves to rank its players. What’s it like to be judged all the time?
Every day your neighbours can open their newspaper and know how good a day you had the day before. It is psycho-logically tough when you aren’t doing well against the market, and you just feel terrible for your clients. But you can’t win the game all the time, and you just have to keep focused on the long run. We do our best when markets are weak or de-clining. If we underperform when the market is strong, we don’t like it, but we know that’s the way it is. We set expecta-tions with our clients, as well, and they’ve learned to be comfortable with those particular times of underperformance. A lot of research shows that people are still intimidated by investing, especially women. Is there anything to that? Most studies show that women tend to get better returns. One reason may be that they tend not to invest with their ego, and the other is that they tend not to overtrade.

Do you see that in yourself?
Absolutely. I see myself as a pretty boring, conservative investor. What I work at is, I like to play the tortoise style, not the hare—steady, boring, consistent, win in the long run. It’s much better to be dependable and get to the goal at the end than try to play a momentum-oriented, money-fast game where you could actually lose principal.

What does that mean in day-to-day terms?
We’re into principal preservation and getting a deep and above-average return in the long run. We try to do it by taking on lower than average risk. We think that serves a lot of Canadians. They certainly don’t want to hand their money to a pro-fessional manager and pay them to lose their money for them. So they are looking for us to protect their capital and get a decent return. If we can do that, they are happy.

Are there more women getting involved in your industry?
My rough guess would be about 10% or less of all financial advisers are women, but they tend to be amongst the best in their teams. It’s a tough field—financial advisers are entrepreneurs.

What makes women managers different?
Clients tend to trust that we will take our fiduciary responsibility of preserving their capital seriously. They have an innate sense that we won’t invest with our egos, and I think that’s where some of the trust comes from. I think women might ulti-mately have an advantage in this field.

What do you make of the way the market has acted this year?
I’ve been thinking for a long time that this is a sideways market, and what we’ve been seeing is the volatility you get in a market like this.