Fustey rebrands Elysium, aims for expansion

When Alan Fustey headed up a team to buy Elysium Wealth Management Inc. last month, he didn’t want there to be any confusion about its operations so the first order of business was changing the name.

Gone was the Winnipeg-based portfolio management firm’s moniker of 20 years, replaced by Index Wealth Management Inc.

“It brands us closer with our investment philosophy,” Fustey says. “We use index investing as the core investment philosophy in our portfolio. People didn’t understand the name Elysium, they mispronounced it and it had no meaning in investment management.”

In Greek mythology Elysium, or the Elysian Fields, was the final resting place of the souls of the heroic and the virtuous. It is also the name given to a volcanic region of Mars and one of its volcanoes. Neither is particularly reassuring in the investment industry.

Fustey, who had been a portfolio manager at Elysium for seven years, is one of the partners who bought the firm from long-time owner, Ian Kalinowsky. The other two owners are Ken Serbo, who runs the six-year-old Calgary office, and Jeff Palles, a portfolio manager in Winnipeg.

“It was good timing. Ian wanted to go do something else and we wanted to grow the business more quickly and in a little different direction than he had done in the past. It was a nice, friendly transaction,” he says, noting the sale price has not been released.

Fustey says while Elysium bought individual stocks and wrote call options on them, IWM will take that to the next step by buying the entire underlying index and writing options on the index. He says this enables clients to receive a consistent rate of return — the goal is “market-plus” — along with reduced volatility.

“It’s more efficient to do it that way. It allows us a little more flexibility to tailor the strategy to an individual’s investment objectives. We’re not running a fund, but segregated investment accounts for clients,” he says.

“Investors in Canada pay a tonne of money to have their money managed and fees are around 2.75%. There is an overwhelming amount of statistics out there that shows that less than 5% of Canadian equity mutual funds outperform an equivalent benchmark over five years.”

IWM is currently going through the registration process with the B.C. Securities Commission to open another outlet in Vancouver. In total, it will have three portfolio managers and four support staff.

Fustey says the firm is going to continue branching out, possibly to Edmonton and somewhere in Ontario.

“We could get a full Western Canadian footprint. Everybody buys into the index investing philosophy instead of active management. That’s our competitive advantage. We want to get bigger. It’s not about filling all the seats on the bus for us, it’s about having the right people,” he says.

The firm doesn’t have a sales team, as all of its business comes from referrals from existing clients and “centres of influence,” such as lawyers and accountants.

Would-be clients of IWM, including individuals and charitable foundations, need to have at least $500,000 in investable assets, but Fustey says the firm’s average account size is in excess of $1 million. Its fee scale starts at 1.25% and because it’s an investment counsel fee, it’s tax deductible for non-registered assets, he says.

“The value proposition to clients is that we’ll buy the index for you, you’re saving on fees and then if you’re looking for value added, we do this call writing strategy, which is designed to bring more income into the portfolio with reduced volatility,” he says.

(07/19/10)