Geoff Wilson’s new venture: smoother path ‘using volatility as asset class’

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Geoff Wilson has spent more than three decades investing on behalf of clients, including 23 years as a portfolio manager at TD Asset Management, where he oversaw mutual fund products with more than $75 billion in assets.

Today he’s president and chief compliance officer of GB Wealth Inc., a new boutique investment management firm in Toronto.

Wilson, 57, the son of Michael Wilson, who served as Canada’s minister of finance from 1984 to 1991, left TD just after his father died in 2019 and co-founded GB Wealth in 2021. The firm has partnered with Bridgehouse Asset Managers, which in August of 2023 launched two investment funds that bring an all-weather strategy to goals-based investing. GB Wealth does this by employing derivatives and puts to create “protected equities” that target lower volatility, while providing some growth.

Wilson spoke with Canadian Family Offices about the roots of this approach, how his family ties have influenced his thinking, and what he sees ahead for the economy and his company.

How do you describe your firm’s clientele and direction?

Most of our clients we expect will be advisers who are more sophisticated, larger in size, working with quite sophisticated investors. We’re trying to present funds that have a time horizon where we would expect them to have a positive rate of return, and we’re going to maximize the amount of growth that we can achieve without risking a downside, a drawdown, that’s a negative in that time horizon.

We have a short-term growth fund, which has a two-year term, and an all-weather growth fund, which has a five-year time horizon. Within that, we want to maximize the rate of return using the risk budget that we determine is appropriate for the environment.

Was your position at TD Asset Management influential in this new venture?

I was head of asset allocation and innovative solutions when I left TD, and I managed a group in Montreal that was doing low-volatility strategies. A big part of what we were doing was retirement portfolios, which was a very interesting experience for me.

Your career is about learning and applying what you’ve learned, and really searching for a new frontier and expanding the boundaries of what you’re doing.

How have those boundaries changed?

The asset-management industry is no longer about stocks and bonds. That’s still a very important part of it, but it goes well beyond that today. You see that in private debt and private equity, but also in credit-focused strategies and in the liquid alternative space. Alternatives tend to focus on different aspects of creating products that add on to the broader picture that people are trying to accomplish. For us, that includes using volatility as an asset class.

Why and how should volatility be used as an asset class?

One of the things that we’ve seen in the last two years is bonds and equities both going down at the same time. When that happens, people who have balanced funds say, ‘That’s not what I signed up for, what happened?’ Adding volatility in there, typically you get volatility going up when markets are going down. And so that adds some diversification to the portfolio. That’s really one of the major selling features and attractive features of using derivatives.

All-weather solutions are exactly what they sound like. There’s different weather conditions, there’s different market conditions. If you’ve got a very diversified portfolio, then you get a smoother journey.

Did your father inspire you to start GB Wealth?

He thought it was good that I was successful in my career at TD Asset Management, but he was constantly challenging me to think about what it would be like to have some upside and some benefit from the success, by owning more directly the company that I was creating success for.

My father passed along a lot of wisdom to me and his grandchildren and others. He reminded us that we get caught up in our compensation and in the work that we do, but it’s very important to make Canada a better place.

Does that influence your new business?

Absolutely it does. It’s important to align our interests with our clients’. If they’re happy, if they’re satisfied, if we’ve done a good job and we’re compensated accordingly, then everybody should be happy. … It’s not just delivering outsized returns, it’s about smoothing the journey. And if we can smooth the journey with strong rates of return, then that’s great.

But if the economy isn’t growing much, and the returns are fairly modest, we want to make sure that we don’t then step in and say, ‘Okay, we’ll take lots more risk to get you more return.’ That doesn’t work for me. Because if we get caught in some kind of event risk that manifests itself in a drawdown in our clients’ assets, they’re not happy. And if our client base is typically 60 and older, they may not have an opportunity to recover.

Was that what your father advised?

That’s something I learned not from my father but from my father’s father, Harry Wilson, after he retired as chairman of National Trust. He showed me this elaborate stock-charting system that he had. We rolled it across the floor of the living room, and I said, ‘Oh, that’s great, how much money are you making in this?’ And he said, ‘I don’t use this anymore, because I can’t afford the volatility at my age.’ And he was probably right: if there was a drawdown in the market, he probably wouldn’t be around for the recovery.

Is this how you define goal-based investing?

Goal-based investing is really investing in the context of the goals that you’ve defined. It’s important for people to have an advisor guide them through this process. We want to work with the advisors to say, ‘Okay, if you have clients that have some near-term or medium-term goals, just to be able to keep them focused on achieving their goals and maintaining their growth in their portfolio, we’ll take a little bit of volatility out of the all-weather growth, and maybe that’s a better way of getting equity exposure.’

What do you see ahead for the economy and markets?

We’re a little bit more focused on what’s happening in U.S. politics. We’ve seen election years before, but we haven’t seen one of the leading candidates having to deal with lawsuits and jail terms as a hurdle in terms of getting to the Oval Office. So, we’re watching that fairly closely. Things will probably end up as expected, but we may see some periods of volatility along the way.

In Canada, the Bank of Canada hasn’t been quite as benign in their statements, they’ve been a little bit more restrictive in their outlook for interest rates. And the longer interest rates stay higher, the more we’re going to see some stress in the economy.

What does that mean for GB Wealth?

As a portfolio manager, if we’re going to smooth the journey, we have to take away some of the risk of corrections in the market. We want to be able to benefit from the volatility and use it to achieve income, by selling the volatility at some points and buying the volatility at others.

What are your next steps for your company?

There’s not really a big story there yet. A lot of people who are supporting us are putting a little bit of money in and watching how we fit in their portfolio. Between now and the end of June, we’re hoping that we’ll have lots of time to get in front of people and grow the company.

At some point, we’ll convert to a mutual fund, when we have broad exposure and people know what we’re doing. It’s my belief that in the first-year performance, people will pay attention and the support will come.

Responses have been lightly edited for clarity and length.

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