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909C13

BLAIR HOWARD: DEVELOPING AN EXCEPTIONAL PRESENTATION

(A)

Ken Mark wrote this case under the supervision of Professor Denis Shackel solely to provide material for class discussion. The

authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised

certain names and other identifying information to protect confidentiality.

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Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.

INTRODUCTION

On a wintry February day in 2005, Blair Howard, co-founder and chief investment officer (CIO) of Red

River Asset Management (Red River), a prominent investment firm, sat at his desk in his company’s

headquarters in Winnipeg, Manitoba. As Howard reflected on the presentation that he had given the night

before, his self-assessment was not flattering. Howard had been offered the opportunity to talk about the

stock market and Red River’s approach to investing to a large group that included many prospective clients

for his firm. However, in Howard’s view, the opportunity with the audience had been lost due to a

combination of his inadequate presentation skills and the complexity of information he had presented.

Given his role at the firm, Howard knew that he could regularly be asked to speak and that such

opportunities would be very valuable for the continued growth of Red River.

RED RIVER ASSET MANAGEMENT

Howard and his two co-founding partners had worked together for several years in the investment

department of a large insurance company in Winnipeg. In 1997, when this company was taken over by a

competitor, the threesome had contemplated starting their own investment management firm. During

1998, they took the plunge, opening their doors during the third quarter,1 with a staff complement of six

employees (including themselves), no clients, no assets to manage and no revenue.

From this inauspicious start, Red River had steadily grown. The employee count of six in 1998 had grown

to 27 by 2005. The firm’s assets under management (AUM) had grown from $0 to more than Cdn$1

billion. For perspective, Canadians had approximately Cdn$500 billion in mutual funds in 2005. The top

10 firms in Canada, such as IGM Financial Inc. and the Canadian banks, had a combined market share of

80 per cent of the industry’s total AUM.

1 The third quarter of 1998 still holds the record as being the worst quarter for returns in the history of the Toronto Stock

Exchange. Q3 1998 saw the TSX drop 23.5 per cent due to fears of the Russian debt crash. By comparison, Q4 2008 saw

the TSX drop 22.7 per cent.

This document is authorized for use only in Prof. Archana Parashar’s BC I Term I at Indian Institute of Management – Raipur from Jul 2020 to Jan 2021.

Page 2 9B09C013

The Traditional Approach to Stock Selection

The vast majority of investment management firms employed a traditional approach to portfolio

management. This traditional approach had been around for decades, ever since the creation of stock

markets. At the center of this approach was the belief that an experienced investment professional could

select a basket of stocks that would outperform a benchmark index, such as the S&P 500.

The investment professional would begin by gathering all relevant quantitative and qualitative data —

financial statements, analysts’ reports, industry analyses — on a group of publicly traded companies. The

investment team would typically include investment professionals who had extensive experience in the

industry being examined. As part of their analysis, the team could have an opportunity to speak with

executives at each of the target firms. In addition, site visits were often planned to gain a better

understanding of the culture of the firm, its prospects and its weaknesses.

An investment team would be interested in uncovering information that would suggest whether the

company’s current stock price was undervalued, overvalued or correctly valued. For the traditional

approach, incorporating qualitative data into the analysis was an essential part of the process. Then,

investment professionals built financial models to estimate the potential value of the firm and, by

extension, the degree to which the stock was undervalued. Last, the team would review the results, relying

on their experience to inform their decisions. In summary, the traditional approach was very much “hands

on.”

In theory, professionals could utilize this approach to pick stocks that fit within their investment criteria.

For example, the manager of a country fund could be looking for high-quality companies that were or

could be market leaders in their industries, generating (potentially) higher stock returns at lower risk. To