‘What it takes to be best’: Kash Pashootan’s keen focus drives $4 billion firm

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At a young age, Kash Pashootan studied the inner workings of businesses, from the inventory of the shops where his parents took him to buy his first bicycle to how Red Lobster selected the goodies for young customers in its post-meal treasure chest. This curiosity became an obsession that brought lessons he was soon using in his own enterprises, and it drew him to the stock market.

“You could dig perpetually into companies to understand them,” recalls Pashootan, founder and CEO of First Avenue Investment Counsel, an investment management firm and family office in Toronto and Ottawa. “Even when you’d dug as deep as you thought you could, you could dig more. Not to mention there’s endless companies to dig into.”

Pashootan, 42, continues to apply his passion for learning in uncovering investment opportunities at First Avenue. With alternative offerings that extend to residential real estate and private equity, the company today oversees more than $4 billion in assets, including the value of its development portfolio.

Growing up in Ottawa, the son of immigrants, Pashootan’s favourite book was How Things Work, and he found being an entrepreneur “very natural … even before I knew what a business was.” When he started delivering the Pennysaver newspaper in his Ottawa neighbourhood at age 12, for example, he saw that he could generate more revenue by taking on two more routes.

He knew he couldn’t physically deliver three paper routes, however. “So I had friends in different neighborhoods assemble the papers and deliver them, and I took a spread for getting them that job,” he explains. “On weekends, instead of my parents driving me to my friends’ houses to play, they were driving me to deliver a cheque for the work they did.”

Lesson one: “Anything I’ve done, I’ve thought big,” Pashootan says. “Five times five is more exciting than one plus one.”

At 14, he joined Columbia House, a subscription service for CDs, which were then becoming popular but were costly, at $16.99 plus tax in shops. The club offered five CDs for a penny and required members to buy at least one a month at $9.99, tax included.

He sold those CDs at school for $15 flat, drawing up a list of monthly selections on a typewriter he bought at a garage sale. These he handed out at recess, targeting the kids wearing brand-new Nikes, showing they had healthy allowances to spend. “They were getting the product for cheaper than they would get it in the stores, and it was delivered right to them. I would put a little bow on it.”

Lesson two: “In business, you have to offer something that is outsized in the benefit that it delivers to your consumer,” he says. “If that’s your starting point, and later, you figure out, ‘How do I benefit from this?’ you can build an amazing and large-scale business over time.”

He started working as a bank teller at 17 and moved on to helping the investment adviser who serviced the branch, a dream job he was so determined to create for himself that he was not paid for a whole summer. He continued the position throughout university (paid for 15 hours a week but working 55), researching stocks and investments as well as talking to prospective clients.

“I knew the investment-management business really well,” says Pashootan, who began a career analyzing and investing in equities, devising a quantitative model that First Avenue uses to this day to rank stocks. Most portfolio managers back then were simply selling mutual funds, he says. “It was ahead of its time.”

Pashootan founded First Avenue Advisory in 2008 as a division of Raymond James, where he served as senior vice-president and portfolio manager. He spun the company off in 2017, with a vision to make it “a boutique investment-management firm that was very entrepreneurial,” he says, noting that many such firms simply sell products and operate as advisors. “The better ones can also think like investors, and the best ones think like partners.”

At First Avenue, the person giving advice “has also created wealth and is invested in a meaningful way alongside the client,” he says. “We’re not brokers, we’re not selling other people’s products. We are managing a meaningful amount of capital for the principals of the firm, and our family-office clients are able to invest alongside us.”

A family office, too

Another factor that sets his company apart is that “we have a true, robust, multi-faceted family office offering,” says Pashootan. “Today everybody calls themselves a family office, and when you look under the hood, in many cases they’re a stockbroker.”

He feels it’s essential to have the capability to provide one consolidated statement on all client holdings, from real estate to interests in private businesses. “You cannot call yourself a family office if you only have visibility on the assets you’re managing.”

An additional element he feels is important is establishing and managing an advisory board for each family. First Avenue’s onboarding process includes spending time understanding who the family’s existing trusted advisors are, and identifying where voids or deficiencies may lie, he says.

Pashootan’s goal for the company, which today has 50 staff among its divisions, is to become “the pre-eminent, go-to multi-family office in North America,” integrating the use of technology and building investment strategies. He would like it to be the next Brookfield or Blackstone, “two companies that we have a high degree of admiration for, because they have been able to provide investors with a diversified offering to multiple asset classes.”

The most important thing about First Avenue’s investment strategy is its conservative, pension-style approach, he says.

“We don’t attract clients because we have a hot product or a shiny new strategy; we’re able to invest on a more diversified basis than the traditional stock-and-bond portfolio,” he says, noting that the three largest pension plans in Canada have approximately 70 per cent of their funds invested outside of stocks and bonds.

“That asset mix is vastly different than what your typical high-net-worth client is doing, dealing with a broker,” he says.

Building a real estate arm

First Avenue’s first direct foray into alternatives was in real estate. Pashootan and his team met with developers, with the idea of allocating capital to real estate, but he felt there was a lack of rigour in how they operated. “That did not align with my mindset,” he says. “The times I’ve had success in my life I’ve always been doing things at an obsessive level. That’s what it takes to be the best.”

Pashootan decided to build a real estate arm, Emblem Developments, putting together an executive team focused on residential property development and acting as CEO of the affiliate company. Emblem builds a mix of rental and condominium units, he says, “but as investors, it really comes down to intimately understanding the investment in order to be able to effectively underwrite risk.”

Having spent two-plus decades managing equities, he approaches all asset classes from this perspective. “We’re risk managers first and developers second. That has given Emblem one of its competitive advantages over firms that come strictly from a development background.”

Then came private equity

The company next built a private-equity arm, First Avenue Partners Fund, which Pashootan calls “a blue chip dividend fund but for non-publicly traded companies.”

He says the firm is “not looking for companies that are broken and we can go in and fix. We’re not looking for startup companies that are going to grow by 8,000 per cent. We’re looking for boring, well-established companies that have a deep management team and decades of earnings behind them.”

Its most recent investment target, for instance, is a large manufacturing company in Canada that it can help from a finance perspective.

“We’ve been able to go in and renegotiate the credit facility with its existing bank, have other banks compete for that business and get better terms,” he says. “It creates an ideal partnership, because we’re relying on that proven, established management team to run that business day to day, but we’re able to help them on the financial side.”

Economic conditions today

As for today’s financial outlook, Pashootan feels “there’s too much value based on the benefit or harm that the next interest rate increase or cut can provoke.”

His believes the current rate-tightening cycle has ended, and the probability of levels rising is low. “That’s the good news. The bad news is we don’t share the same optimism as many, that as soon as rates get cut, roses are going to grow.” There’s a delay factor, he says, a hangover effect of the rates going higher six to 18 months ago.

“So don’t be surprised that the economy continues to weaken for a good one to two quarters, even when rates start to be cut.”

Stocks, real estate and private equity will largely benefit from rates easing, he says, “and it will feel better for the investor in all three of those asset classes.” Where things will not feel better right away will be the economy overall, which “lags every other indicator,” he says.

The majority of Pashootan’s time today is spent on executing First Avenue’s investment strategies “and slowly and intelligently creating new strategies as we grow,” he says.

He feels strongly about the importance of the people around him in the firm. “Having a strong team helps me remain open-minded and always questioning the status quo.” Pashootan looks for diversity in First Avenue’s leaders, “and I don’t mean simply with race or gender but how they think. Alignment of principles and values is critical, but you want to create an environment where not everyone is thinking the same.”

His goals for the company over the next five years include continuing to build its reputation as smart investors in different asset classes. First Avenue will also continue to work on deepening its family office, Pashootan adds, “which is less about investing and more about helping families with all of the complexities that come with wealth.”

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