Vertex One Asset Management Inc.

Vertex One Asset Management Inc. (V1) is a Vancouver based asset management firm currently handling $1.9 billion in assets (as of December 31, 2013). Founded by three partners Mathew Wood, Jeff McCord and John Thiessen, the firm and its 20 staff adhere to its core value and focus on clients’ long term goals, and the fundamentals of capital preservation in both bad and good market conditions. To align the firm’s interests with those of clients, V1 employees are collectively the largest investors across its funds. A performance-based fee model further aligns the firm’s interests with investors. Vertex’s internal dynamics are ones of open communication and creativity when it comes to finding the most profitable opportunities.

Wood, McCord and Thiessen worked together at a boutique investment counselor that was acquired by a major bank, which meant more of a focus on index investing. The three wanted to offer a more business-oriented investment solution to Canadians. So they started V1, launching the Vertex Fund and Vertex Managed Value Portfolio in 1998, both actively managed and embraced alternative investment strategies.

The firm currently manages six funds offered to direct clients, advisors and institutions. The Vertex Fund, Vertex Managed Value Portfolio and newly launched Vertex Arbitrage Fund are memorandum based funds. The Vertex Enhanced Income Fund, Vertex Growth Fund, and Vertex Value Fund are prospectus-based, long-only funds, and the firm encourages clients to diversify their portfolio by investing in more than one of the V1 funds to offset any potential market risk.

The Canadian Business Journal spoke with Mathew Wood, Founder and Portfolio Manager, David E. Wallin, Vice President, Private & Institutional Services, and Rob Binnington, Manager of Operations & Marketing.

“The whole idea is that we look at every investment opportunity from a fundamental standpoint,” says Wood. “We strive for active management. Some firms tend to hug the index and benchmarks but we are fairly agnostic to that. We are being opportunistic on our investment process while driving results and protecting capital. We don’t want to be constrained to one investing style.”

The firm seeks to achieve superior long term performance by identifying value catalysts, and seeking companies that have low price-to-value metrics, have put themselves up for sale, or companies where a misvaluation has occurred within the capital structure of the company.

“It is pervasive throughout all of our portfolios that we take a risk-adjusted, value approach to investing. We look at the entire company in terms of opportunity, and we will invest at any level of the corporate structure (equity, bonds, preferred equity etc.) if we see that value is there. We seek companies that trade at say half the price of our value metrics, and we sell once they reach an average value. Arbitrage is also a strategy we utilize. For example, if there is a merger of two companies; or if there is an acquisition where a company is buying another company for $10 per share, we buy the acquisition target at $9.50 per share and turn it over for $10,” explains Wood.

According to Wallin, there is always money to be made, so a firm of V1’s size needs only a few dozen right opportunities per year to profit; yet, there are thousands of stocks available in the market. “We have been fully invested for over 15 years, and we always have more ideas than capital,” he says.

Internally, the corporate culture has been a major driver that distinguishes V1 from the competition. The company focuses on hiring creative and entrepreneurially spirited people who bring new and original ideas and solutions to the table.

“All of our employees are entrepreneurs in their own right,” explains Wallin. “Everyone who joined Vertex has made the place better without being told what to do. In the past 15 years, we have never lost an employee. This is a very unique phenomenon.”

He also says that the company culture is due to observing people in action rather than looking at a person and the number of letters behind their name, hiring based on intelligence, motivation and drive. All mixed with opened communication and good work/life balance, Vertex is a monolith of people who love their work.

With the no-nonsense, agnostic investment approach and strong company culture, Vertex One and its funds have received a multitude of awards for its investment services and results. The accolades include No. 1 in the category of Canadian Fixed Income Balanced funds for 2010 and 2012 on a one-year return (Vertex Enhanced Income Fund); No. 2 (2010) and No. 3 (2012) fund amongst North American Equity funds on a one year return (Vertex Growth Fund); No. 1 in the same category for 2012, one-year return  and 2013, three-year return (Vertex Value Fund); Bloomberg’s Top 100 Hedge Funds of 2012 (Vertex Fund);  2009 Multi-Strategy Hedge Fund Award, Bronze (Vertex Fund); No. 1 Ranked Canadian Balanced Manager (Vertex Managed Value Portfolio, up 1.84 per cent in 2008), Top 50 World’s Best Performing Hedge Fund list,  three year return (2005 and 2006); The list goes on…

With its solid track record and innovative products, the company plans to expand and offer its funds to more potential investors. To do so, Vertex engaged several wholesalers in Ontario, one of which also includes the Maritimes market. The firm also launched the Vertex Arbitrage Fund, which is suitable for investors who seek predictable, absolute returns with low monthly volatility, and for those pursuing an alternative to fixed-income in a rising interest rate environment.

“Traditionally we have taken a grassroots approach to market ourselves, mostly through conversations with investment advisors and meeting clients directly. A primary source for new business has been referral-based. We also take pride in writing candid commentaries which has helped differentiate us and although we are open to new initiatives, first and foremost, we want the product and service to speak for itself,” says Binnington.

With a strong suite of products that offer both, a full range of risk profiles as well as asset and strategy allocations, the company plans to continue to expand across Canada, growing their salesforce, and attracting more investors.

“Overall, we take an opportunistic approach to asset management which broadens our universe. This allows us to provide a variety of solutions for clients and advisors that cater to any risk appetite. Our industry may be complicated at times, but success is easily measured,” concludes Wallin.