Much has been written about the passing of former Vancouver mayor Art Phillips, best known for setting the agenda for a livable city in 1972 that has guided Vancouver’s future to this day.
While his team-building character, vision and pivotal accomplishments on the political front have been well celebrated, not enough has been said about his financial genius – both in the private sector and public sector.
John Montalbano, Vancouver-based CEO of RBC Global Asset Management and Phillips, Hager and North Investment Management, laid it out at the April 26 celebration of Art Phillips’ life at the Fairmont Hotel Vancouver. He shared an office with Phillips from 1989 to the day he retired in 1996. “That period was, without any doubt, the most fulfilling experience of my professional life,” he told the packed ballroom.
“For much of the eight years we were together, the incredible tandem of Art Phillips and Rudy North, with me as their apprentice, held the honour of managing the best-performing U.S. equity fund in Canada, as well as being among the best in North America. I know that Art took quiet satisfaction that our U.S. equity fund also kept pace with, or outperformed, the performance of Berkshire Hathaway, Warren Buffet’s legendary investment holding company.”
Phillips started All Canadian Funds when he was 25. He sold it to Power Corp. in 1964, who moved it to Montreal, a reflection of the prevailing view that it made no sense to base an investment management firm in Vancouver. Phillips dreamed bigger than that, and in late 1964, at the age of 34, he dared to team up with Bob Hager and Rudy North, both still in their 20s, to start Phillips, Hager & North (PH&N).
Right off the top, Phillips demonstrated the teamwork that later characterized his four-year term as mayor: “Although Art’s capital from the sale of the All Canadian Funds bankrolled PH&N in those early days,” recalled Montalbano, “he insisted that he, Bob and Rudy be equal partners. That single gesture of equality and sharing in the success of the firm was the secret to PH&N’s success.”
Starting from scratch as Western Canada’s only money management firm, with no assets under management, the trio built PH&N into Canada’s largest independent investment management firm, with $70 billion in assets under management by the time it was sold to RBC in 2008 for a cool $1.4 billion.
Montalbano recalls how in 1991 Phillips made “one of the most astute and gutsy investment moves I have ever seen,” betting against unprecedented bearish sentiments about the imminent demise of the U.S. financial system to put 50% of the firm’s entire portfolio into maligned financial services stocks. “Art almost perfectly timed the recovery of the market, and that investment portfolio went on to outperform the market benchmarks and our peers for years to come.”
Montalbano is convinced that if Phillips had been based in a major financial centre, he would have been celebrated as a pioneer and visionary in the business for his embrace of leading edge technical analysis, investor sentiment analysis and computerized quantitative analysis long before they became common practice in the industry.
Of even more public impact was Phillips’ top personal project upon becoming mayor in 1972: to establish a property endowment fund to end the practice of selling off pieces of the city’s then-$60 million worth of property assets to finance new spending. Using a portfolio manager’s mindset – build, don’t sell the endowment – he set up what has grown into a $3.4 billion asset for the city. As it grows, it kicks out $11 million a year in market-generated dividends to city taxpayers, a golden goose that just keeps on laying, year after year – the envy of every city in Canada.
Most of all, Phillips did all this without anyone ever remembering him saying an unkind word about anyone.
Art Phillips’ contributions to the business and public wealth of this city put him in a league of his own.
