Although FI Capital Ltd. only opened its doors for business as a discretionary investment management company in 2007, the roots of the company began over 40 years ago. Founded in 1972 as a fraternal benefit society, FaithLife Financial (then known as Lutheran Life Insurance Society of Canada) is a Christian investment and financial services organization that has moved from serving only select strands of the Lutheran Church to now serving the broader Christian community.
In the early 2000s, Lutheran Life recognized the lack of insurance and financial service organizations serving members of other Christian denominations. As a result, Lutheran Life broadened their market to include most recognized Christian groups, rebranding itself as FaithLife Financial in 2005.
While fraternal benefit societies follow the same government regulations and are supervised by the Office of the Superintendent of Insurance (OSFI), the same as a standard commercial insurance company, they also offer exclusive benefits for their members. FaithLife Financial’s members are investors under the umbrella of a wide variety of Christian churches and denominations in Canada.
FaithLife Financial is an overtly Christian fraternal society, with its profits providing both contributions to various faith-based charities and ministries, as well as the capital needed to support products and services offered to its members. The Society seeks to do good within the community through its core values of stewardship, compassion, and generosity.
“The common link between our policy holders is their membership within the Christian community. Any person of any denomination whether under the Evangelical Fellowship of Canada or Canadian Council of Churches can become a member,” explains Ben Marshall, Chairman of the Board for FI Capital and CFO of FaithLife Financial.
Two years after broadening its membership, FaithLife Financial again decided to expand its presence in the market by buying the shares of THA Bodnar & Co. Investment Management Ltd., and forming FI Capital Ltd. “Even though FI Capital’s history only goes back to 2007, its predecessor [Bodnar & Co.] goes back to 1999 and earlier as the principal investment managers of the former Bodnar & Co. had nearly 50 years of investment management experience. This is not a new or upstart company,” says Terry Bodnar, President & CEO of FI Capital Ltd. All of FI Capital’s portfolio managers hold the distinguished Chartered Financial Analysts (CFA) designation.
FI Capital attempts to offer the best ‘low fee, appropriate risk, high return’ strategies for its clients and investors. Their unique pooled fund approach allows small investors to receive institutional money management services at a significantly lower rate than that of a typical mutual fund. FI Capital’s management fee for its pooled funds is targeted at 0.75%, as compared to the equivalent mutual fund management fee in the range of 2% to 3%.
FI Capital also invokes a performance fee of 20% for most of its various pooled investment funds. Pooled fund clients will pay a performance fee equal to 20% of the amount by which the relevant Fund outperforms the applicable market benchmark (Index) for the fund. “Let’s say we beat the Index by one dollar – we keep twenty cents and the client keeps the additional eighty cents of outperformance,” explains Bodnar, “If there’s a return deficiency (meaning the performance of a fund is less than the performance of the relevant Index), we carry it forward and there are no performance fees paid until the performance of the fund thereafter relative to its Index has exceeded the amount of the return deficiency… In other words, we don’t get paid any performance fee unless we beat the market Index over the long haul, not just within any individual year.”
As of December 31, 2013, FI Capital (in conjunction with Bodnar & Co.) maintains a 10-year track record of solid market performance with both its Canadian Equity and Fixed Income Funds handily exceeding their benchmark indices, net of all fees and expenses.
Today, led by Terry Bodnar, President and CEO, the firm puts social responsibility and civil stewardship at the core of its business. Proclaiming their motto, “Building Wealth – With a Difference!” Mr. Bodnar and his colleagues seek to increase their clients’ assets while promoting worldwide charitable good.
One of FI Capital’s biggest differences is in its adherence to Socially Responsible Investing or SRI. FI Capital’s approach to SRI involves three basic stewardship factors: Environmental, Social, and Governance. Environmental and Social stewardship factors involve, among other things, a company’s involvement in their wider community’s well-being. Governance issues can include the company’s policies on independence of the Board of Directors and corruption avoidance. FI Capital portfolio managers will evaluate each prospective company on these issues, in addition to using traditional investment analysis metrics to select companies suitable for investment. FI Capital also uses an independent research company, which independently evaluates companies based on the three SRI factors noted earlier, developing a “score” relative to competitors in its industry.
“The principle behind SRI is that companies incorporate these [environmental, social, and governance] issues into their daily operations and policies. The theory is that they make good, sound, long-term investments, and by doing so become good corporate citizens. A lot of our decisions are based on a company’s score relative to competitors in their industry,” says Duncan Smart, FI Capital’s Senior Canadian Equity Portfolio Manager. “I’m looking at which companies have better SRI policies in addition to traditional research metrics.”
Stemming from the firm’s SRI mandate, FI Capital does not invest in businesses involved in industries such as tobacco, munitions, or gambling. “In the past this has been seen as negative or restrictive investing,” explains Mr. Smart, “But there aren’t really too many [companies] we eliminate using our process. For example, a convenience store operator in Canada and the U.S. would not be included in our universe of potential investment candidates based on our principle, because a significant portion of their revenue comes from tobacco and alcohol sales. However, companies like Loblaws and Shoppers [Drug Mart] do sell tobacco, but it’s such a small part of their revenue that I wouldn’t simply exclude them because they sell cigarettes,” Mr. Smart continues, “Usually I start to exclude companies for potential investment when revenue from an excluded product or activity reaches a significant level, say 15-20%.”
SRI is not unique to FI Capital. In recent years, many corporations and individuals have realized the need for responsible investment strategies. FI Capital’s distinctive approach resonates in its belief in doing charitable good in regards to Christian stewardship.
FI Capital does not currently actively invest directly in any non-Canadian investment vehicles. However, the company does plan to explore direct active portfolio management into the U.S. equity market in the near future. FI Capital has also recently hired a new Vice President, Business Relationship Development to actively promote FI Capital’s strategies to more Christian-based charitable and not-for-profit organizations.
Mr. Bodnar explains, “We believe that our strategic distinction resides within the fraternal and Christian market – not only because of our low fees and high performance returns, but also because of our willingness to put ourselves in the shoes of our charitable and not-for-profit organizations…we understand each of our individual clients’ needs and goals. In providing that additional level of understanding for that client group, we can serve that market better than any other investment firm in Canada. Relative to our competitors, we believe that we are able to do more for the charitable and not-for-profit sector.”