Robert Hager, president of Phillips, Hager and North Ltd., in December, 1981.
Few icons of the investment industry are celebrated outside the confines of Bay Street, but Bob Hager is one.
Hager was a driving force in building one of Canada's most successful asset managers. In 1965, he and partners Art Phillips and Rudy North, started a fledgling firm called Phillips, Hager & North. By the time Hager retired in 2001, PH&N's family of mutual funds had given thousands of Canadian investors access to direct, low-cost investing and the firm had become the largest independent manager in Canada. When it was sold to Royal Bank in 2008, assets under management were $69-billion.
There were many people who contributed to the firm's success, but it was built in Hager's image and on his personal values, which stand in sharp contrast to how the investment industry is viewed today. Like Hager, the company was quiet and understated, growing without advertising, acquisitions or sales commissions. The values of the firm were grounded in the best interests of the client. And, like Hager, it achieved success without leaving the West Coast.
Indeed, Robert Stewart Hager was West Coast to the core, born in Vancouver in 1937 and raised in the Kerrisdale area. He went to high school at Magee, and received a commerce degree from nearby UBC. After marrying Judy, his long-time sweetheart, he ventured south to do his MBA at the University of California at Berkley, then returned to begin working with Art and Rudy.
PH&N was unique in the early years. The young partners, along with Dick Bradshaw (who just missed getting his name on the door), used to brag that the company was the largest investment counsellor in Western Canada. Truth told, it was the only investment counsellor in Western Canada.
In the early days, the firm relied heavily on Phillips' financial resources and track record. He was the oldest of the four and had already tasted success while running the All-Canadian Fund. PH&N didn't truly catch fire until it won an important pension client in Eastern Canada in 1972. By then, it had established an outstanding record and was in position to benefit from an emerging trend that saw pension plans shift their assets away from the traditional providers – trust and insurance companies – to independent asset managers.
Hager didn't have a sales bone in his body, but his values and sensibility were the best marketing tools a firm could have. Clients took to PH&N because it was humble about its successes, and brutally honest about its mistakes. No matter how good the results were, Hager often led off client presentations with what went wrong. There were meetings where the client had to remind him that the returns were actually very good.
Clients and consultants also liked that the company's ownership was spread widely amongst employees. Bob and the other senior shareholders were exceedingly generous in this regard. He always said that he didn't mind selling shares to a new partner, as long as he or she helped build the business. He was happy to own a smaller piece of a more successful firm.
While PH&N was primarily a pension manager in the early days, Hager and his partners had the foresight to create a family of mutual funds. This was partly in response to pension trustees and executives who wanted to put their personal money with the company. It was telling that Hager never viewed the funds' low fees as a marketing ploy or missed profit opportunity. To him, they just seemed appropriate.
Not only did his gentle nature appeal to clients, it also set the tone inside the firm. Executive rank or shareholding meant nothing to him. He bonded with people at all levels of the organization. Whether he was president and CEO (1973-87) or chairman (1987-2001), he was subject to the same ridicule as everyone else when his picks in the basketball pool went bad. It's noteworthy that after stepping back in 1987 to focus on his clients, he subsequently worked for three CEOs. He grumbled from time to time, but his support was unwavering.
But Hager's warm personality hid an intense, competitive fire. He couldn't stand mediocrity and took it hard when the firm wasn't performing well. As says, "Bob worried so much that the rest of us didn't have to."
As the firm grew, Hager's dedication to clients, common sense approach to investing and decisiveness in troubled times, continued to influence the analysts, portfolio managers and support staff he worked with. He never mailed in a client meeting, even though his experience and stature would have allowed it. He prepared extensively, to the point where he was no fun travelling to a meeting. Flights home, on the other hand, were some of the most enjoyable times had. Hager was an engaging and interesting seatmate. He always had stories to tell of the early days and was a wealth of knowledge on sports, golf courses, Four Seasons Hotels and Air Canada's fleet.
At his core, he was an investor, and his simple approach helped ground more than a few young analysts. He reminded them that bottom line profits drove stock prices, not the more fashionable EBITDA numbers (earnings before interest, taxes, depreciation and amortization). No matter how fancy the wrapping on an investment product, or grandiose the claims, no new source of return was being created. These securities would perform in line with their underlying assets, namely stocks and bonds.
Hager's most lasting lessons came in weak markets. While he worried incessantly about his clients, it never prevented him from acting. Indeed, that's when he was at his best.
"With every bear market, there are always unknowable concerns, and every time we're told that this bear market is different."
"Make sure you go up with more than you went down with."
"My best trades turned out to be the ones when my hand was shaking as I gave [the equity trader]the blue ticket."
One particularly memorable moment came in September of 1998. The S&P/TSX Composite Index had dropped more than 20 per cent in August and the research team was shaken. Bob's not-so-gentle nudge moved them to start buying stocks.
"… the Canadian market has been particularly hard hit in recent sessions. It is important to remember that picking the bottom of the market is virtually impossible. We are, however, starting to see some values in Canada that look quite compelling. We will be buying into these companies as the market declines …"
Judy and Bob lived in the same home for 38 years, but travelled extensively throughout their 57 years together. Their philanthropic interests were many and varied, but they took a special interest in helping young people achieve their potential. Hager's retirement passions were rugby, fishing, gardening, travel, his daughters Leslie and Shelley and their families, including six grandchildren.
His family and friends will miss his stories, his laugh, his irreverence, his grumpiness, his kindness and his wise counsel. He will also be sorely missed by his former partners and competitors. They've lost one of Canada's great investment executives at a time when he's needed the most. As Dick Bradshaw said, "Bob was our keel. He kept us focused on our goal of achieving the best possible results for our clients." He was the conscience of a firm that was known for its conscience.