Guest: Liz Simmie is the co-founder of Honeytree Investment Management, an asset management firm based in Toronto, Canada.
Recorded: 12/13/2023 | Run-Time: 52:11
Summary: In today’s episode, Liz dives into the strategy of BEEZ, which focuses on responsibly growing companies that are stakeholder governed, purpose driven, and make a net positive impact on the world. Then she shares some hot takes on the state of both ESG and active management. As we wind down, Liz talks about the process of launching an ETF with our friends at Alpha Architect and shares advice for anyone thinking about launching one themselves.
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Links from the Episode:
1:15 – Welcome Liz to the show
1:46 – Launching BEEZ
7:11 – Finding responsible growth and being ‘quantamental’
10:19 – Active management and index hugging
15:14 – Main factors that filter out sectors and companies
21:30 – Overview of stakeholder governance
25:16 – How power balances inform Liz’s investment philosophy
34:56 – Position sizing
38:44 – What it’s like to start an ETF
44:24 – Episode #318: Perth Tolle, Life + Liberty Indexes
46:23 – Beliefs Liz holds her that her peers would disagree with
49:11 – Liz’s most memorable investment
Learn more about Liz: Honey Tree Invest; X
Transcript:
Welcome Message: Welcome to The Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Med Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: Hey, hey everybody. A fun show again today. Our guest is Liz Simmie, co-founder of Honeytree Investment Management, which recently launched an actively managed ESG-focused ETF ticker BEEZ. In today’s episode, Liz dives into the strategy of BEEZ, which focuses on responsibly growing companies that are stakeholder-governed, purpose-driven, and make a net positive impact on the world. And she shares some hot takes on the state of both ESG and active management. As we wind down, Liz talks about the process of launching an ETF with our friends at Alpha Architect, and shares advice for anyone thinking about launching one themselves. Please enjoy this episode with Liz Simmie.
Liz, welcome to the show.
Liz: Thank you for having me.
Meb: Where do we find you today?
Liz: Toronto, the great white north up here.
Meb: I heard an A in your diction earlier. Are you originally a Canadian?
Liz: Yep, born and raised in Toronto my whole life. I’ve never gone anywhere else. Actually I went to Montreal for school and then came back and will never leave this great city and country.
Meb: Awesome. I love it up there. We’re going to talk about a lot today. One of the topics listeners, which you probably really want to stick around for is this concept of starting ETFs. I get a lot of questions. Every day people want to start an ETF, they got an idea for an ETF. We’re going to talk about someone who’s done it very recently, putting out their first fund in November with our crazy friend, Wes Gray and crew. So we’ll definitely get into a little bit of that later. But I want to talk a little bit about you, your ideas, your process. Give us a little background.
Liz: I have an economics degree, economics and history degree, and I wanted nothing to do with this great industry of ours because I wanted to make the world a better place and do cool stuff. So I ended up in market research, so consumer insights, so testing brand strategy for PNG and big bank, new account, all these cool research projects, quantitative and qualitative. And then my dad started an emerging manager. So my dad’s a bootstrapped US equity manager based in Toronto, and they had this third guy who was American and he got divorced. So when you get divorced and you’re here on a spousal visa, you get sent back to the US, which it is what it is. So my dad needed a third person to come in. I begrudgingly said, “Sure, it sounds like an interesting idea,” having literally no concept of the investment industry beyond a little bit of exposure here and there. And I was lucky. I joined a bootstrapped dividend growth equity manager at about 10 million AUM and was there until about 1.5 billion AUM and then left to start Honeytree. And to be super clear, it’s ’cause my dad was a founder. There’s a whole pile of privilege in there, but if I had gone the traditional route to be a portfolio manager at a bigger shop or a pension or whatever, it’d be a very different experience that wouldn’t necessarily set you up to going to bootstrap your own emerging manager.
The firm’s called Bristol Gate for folks who want to google things. We launched ETFs in 2018, and I had met my co-founder at the same time, and we thought all these folks are trying to launch ESG strategies and they’re all missing what we think the end client for these ESG products want. And this, to be super clear, is long only equity universe, not alter hedge funds or anything like that. And so in 2018, we set out, which is the same year we launched the ETFs up here. 2018, we set out to found Honeytree. We were registered in 2019. It takes a lot longer up here to get approved by the regulators. We started our track records in 2019 for our global equity strategy. We did that so that we did not need to launch a vehicle off the bat because vehicles cost a lot of money and they take a lot of effort to distribute. They take a lot of awareness and all this stuff. Anyways, we had always intended to launch a retail vehicle. We did not ever want a private fund. Long-only boring strategies definitely don’t make sense in private funds in Canada or the US and we thought we’d have a Canadian vehicle first. So we went around. There’s not as many white label options up here, and the ones that they have are, we’ll call it not as good, but we thought we would launch a subadvised Canadian vehicle up here. And then we met Wes. And Wes decided that we needed to get ourselves into a US ETF. And then we realized, wait a second, US, the US market’s bigger, there’s just as much if not more demand for ESG products. One major distribution difference between Canada and the US is in Canada, nobody cares that we’re woman owned. We’re the fifth or sixth public markets asset manager owned by woman in Canada. That’s how many there are up here. So there’s no manager diversity initiatives up here institutionally or from advisors, whereas everybody knows in the US, lots of states have diverse manager initiatives at their pensions and things like that. So we thought, if we’re going to do this vehicle, let’s do it in the US, let’s do it as an ETF and let’s do it with Wes. And boom, November 7th, we launched our first ETF and the ticker is BEEZ, B-E-E-Z, ’cause branding matters and it’s a US large cap and it’s focused on responsible growth. So it’s the same investment thesis we’ve been working on our entire firm history, which is responsibly growing companies, stakeholder-governed, purpose-driven companies who take care of their stakeholders outperform in the long run. What’s really interesting is we did not like any of the existing ESG frameworks. We thought, and I could talk about for 10 years about the problems with existing ESG and investment frameworks, but we threw out a lot of the ratings and existing models and existing assumptions about ESG. And we took what my dad had built, a quantum mental model for Bristol Gate and we brought in ESG data…
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