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This video is sponsored by Harvest ETFs. For more information, please check out the link in the description below. I worked for more than 25 years in the investment space, and I saw a lot of different investment styles.
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And one of the styles that resonated with me, and in fact is the way I manage my own money of course, is just sort of the good old-fashioned buy good solid companies at a good price in growing industries, um, in, uh, holding for the long, long term.
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And, and that's something that's worked for me. Uh, it's also worked for another investor, you know, Warren Buffett, someone we're all familiar with.
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Uh, we are pleased to be joined today by Michael Kovacs, who is the CEO of one of Canada's fastest growing ETF manufacturers, which is the Harvest Portfolio Group.
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Michael, uh, welcome to, uh, welcome to the channel today. Great. And thanks very much for having me, guys. Appreciate it. V- very nice. Yes. Uh, very nice to have you here.
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Um, I, I know that your philosophy, your investment philosophy- Mm-hmm... is very much aligned with Warren Buffett's and that Berkshire way.
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Uh, I wonder if you could just talk to our audience about your conviction to that strategy- Mm-hmm... and how it goes to shape the team of portfolio managers that you have working there at Harvest. Sure.
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Well, let me start by, I have a couple of props I brought with me. This is a, uh, a credential, uh, and this is about my conviction.
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Uh, going back to 1999, this was my entrance, uh, credential for the, uh, Berkshire Hathaway meeting in Omaha. Uh- Yeah...
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and I actually have a book that I've been following for many, many years, uh, from the same time, uh, by Hagstrom, um, sort of going through the whole portfolio.
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So that, that 1999 was actually the third or fourth meeting I went to. I started in '96- Mm-hmm... uh, going to a lot of these meetings.
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And, uh, it's really underpinned everything we do in, in sort of the setting up of Harvest, if you will. Um, I find that we're in an industry that can sometimes make things very complicated.
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And, you know, the whole point about the Buffett way, if you will, or the, uh, the Berkshire Hathaway w- uh, structure is to,
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uh, position yourself as in great businesses, stay with those businesses over the long term, uh, grow capital over the long term, and in our case, uh, we pay income as well.
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But, um, you know, everything we do, our, our investment management team, uh, the portfolios we put together follow that underlying philosophy. Um- I find that kind of funny.
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You've been, you've been listening to Buffett longer than I've been alive on this planet, you know? [laughs] [laughs] I w- I was born in 1995, so that's, uh, hey, that's- There you go. There you go...
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that, that's special. Uh- Were you gonna say something there, Dan? Something to that. Well, yeah. What I, what I say there- Yeah... is, is, um, like you, Michael, I've been to...
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I've only been to a couple of the, uh, of the Berkshire AGMs. But- Mm-hmm... what I took away from both, deep in my whole...
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my, my soul, when I left there, left those meetings, it just takes you right back to the, the, the, the wholesome, uh, methods of investing properly. And y- I left there inspired both times.
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At the time, I was still working directly with clients, and I just- Mm-hmm... I went back with a renewed vigor just going, "This is why I do what I do."
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So, uh, it, it kind of aligns very closely with, uh, with what you, you guys do there at Harvest. That's really cool. Yeah.
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And as you know, when you're at those meetings, you profiles a lot of those businesses right there in the auditorium, uh- Yes. Yeah... stands and booths, and you really see the underlying...
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At, at the end of the day, you're, you're investing in the business. And I think people forget about that- Mm-hmm... where they look at stocks as little pieces of paper. So true. Right. Yeah.
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Well, if you can take us back, Michael, maybe you can tell us just a little bit more about basically the path that you've taken to where we stand today. Well, sure.
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Um, uh, I started even longer before you were born, Brandon.
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[laughs] I started in 1985, uh, as a stockbroker, and, uh, as an advisor and, and working with clients, uh, and sort of had a couple years in the business when '87 rolled along and, and, and pretty much clobbered me and everybody else, uh, with that big stock market crash.
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And, um, you know, but that was, that was a great, sort of great lessons to learn.
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And as you know, over the next 35 or so years, we've had all kinds of market corrections and crashes and things that came along, and that sort of...
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There's nothing you can learn theoretically that will get you through that. You have to sort of experience these things- Mm-hmm... and go through them, uh, to become a real sort of, uh, tuned-in investor.
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So I was very fortunate. And I, I r- I remember the day, sort of my aha moment was in 1990.
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Uh, I was reading the Global Mail, the business section, and there was an article there about how the, the US mutual fund industry had just hit $1 trillion. And that was just un- unbelievable.
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I mean, it's 35 years ago, but that, that was an- Yeah... unbelievable amount of money to think, "How the heck... A thir- $1 trillion. How many zeros are in that?"
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And, you know, I think, I looked at the Canadian industry, and we were 40 billion, I think, at the time, in the mutual fund business.
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And I sort of realized at that point, that's the business I've got to get into, 'cause that- Mm-hmm... that looks like, like a fantastic growth industry, and I want to be part of that.
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And at, at that point and over the next number of years, I transitioned into the mutual fund business, uh, worked in management roles and sales roles, uh, and product development roles over the next 20 or so years until, uh, 2009 when I, when I founded Harvest.
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So, you know, I'm sort of a long-term veteran of the business.
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Uh, I have lots of battle scars and, and, uh, I've seen, uh, not only through theoretical, uh, studying and so on, but just experience and time in the business- Mm-hmm... uh, to learn about the business.
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And fortunately, uh, as you can see, I caught on to Warren Buffett very early, uh, in my career, um, and started following, uh, that philosophy and knowing at some point if I start my own company, uh, which I eventually did with Harvest, I would follow that philosophy, because it just makes sense to me.
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Uh, I, I like that path and having someone who spent most of my adult life in the business, I can really appreciate, uh, going from being that stockbroker way back in the day to, to now running a company like Harvest.
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I mean, it's, it's a path- Mm-hmm... that I never went down, but I've always admired the people who can actually do that. Now, you mentioned the size of- Mm-hmm... um, the, the industry in general and how it's growing.
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And I gu- 'cause it kind of takes me to a question I have for you, because right now there's a lot of headwinds out there in the markets, and it's been- Mm-hmm... a pretty tough go in 2022.
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Now, your assets under management were, like, a billion dollars at the end of 2020. Mm-hmm. So not v- very long ago. I know they're r- now around the three billion, uh, mark.
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So-I guess the question I have for you, Michael, is with all those headwinds, how are you managing to attract assets when it, it's sort of bucking the trend and a lot of people are actually going in the opposite direction?
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Yeah. Well, um, there's three ways to grow a business, uh, in, in this industry. And, and one is, uh, market returns, which we haven't had this year. Mm-hmm. It's been a tough year.
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Uh, we'll be negative probably by the end of the year, uh, for the year. Uh, the second area is, uh, asset gathering, uh, which we've been quite successful at doing this year.
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And the third level is, uh, uh, acquisition, which, you know, that's, that's not the, uh, the area that we're looking at, at least at this point.
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So, um, if you think about the old hockey stick, uh, analogy, we spent from launch in 2009 till really 2016, um, launching closed-end funds- Mm-hmm...
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uh, converting some of those funds into mutual funds, uh, and building the sort of the base of the company. And we spent 10 years really going from zero to actually almost 11 years, a billion dollars.
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So you're, you're sort of going along, lots of efforts going out, lots of, uh, things going into the marketplace and not a lot of return. And then you hit that inflection point, which we did in, in, uh, 2016...
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Well, sorry, not 2016. In, in 2020, where I think a lot of- enough people had heard about us, we had built enough momentum that we started to sort of veer up, uh, and we hit that inflection point.
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So we've been very fortunate that we've been able to continue to grow, uh, and, and build our business and more through asset gathering, uh, over this last year as more advisors and more, uh, do it yourself investors look at Harvest and say, "Hey, this makes sense.
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Uh, we like what you're doing, and we want to allocate s- part of our portfolio to your, your products." Mm-hmm. So I think that's led to a lot of our success.
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And if I could also mention, um, I think it was Alexander Hamilton, but it's a very, very, uh, sort of famous line that, um, if you don't stand for something, you'll fall for everything. So we've- Mm-hmm...
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we've always been very focused on what we do, and I think that's starting to resonate with more and more people now, uh, that what Harvest does makes sense. So- It, it d- Long answer... it does.
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And yeah, no long answer, but great answer there, Michael. Good answer. Thank you. And, and it, you know, it, it kind of gives me a little follow-up here.
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As an up-and-coming ETF company in a very large space, is there a way that you guys differentiate yourself from these big players, like, of course, the iShares, the BMOs, RBCs? Mm-hmm.
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Um, yeah, how, how would you go about saying that? Well, the companies you mentioned are all big companies. They're great global players, uh, some of them.
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And, uh, and, and being a global player, you have to be very wide in your scope. Uh, you have to have a lot of products.
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A- and I've, as I've said to my team here, I'd rather be narrow and deep, uh, than wide and shallow. Uh, we, we can't be specialists in everything we do.
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So let's be very specific in our focus, uh, and, and in, in our development of our, our products.
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Uh, and as I mentioned, stand for something and really get a, build a reputation in that area and grow that part of the business. And as you guys know, uh, we're equity, for the most part, an equity shop.
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Uh, we have a lot of option writing, uh, to generate that extra income.
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And when we started the ETF company in 2016, we were one of a very few players that were actually, uh, following that strategy, and we've had a tremendous amount of success.
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And that's actually brought more players into, uh, the call writing- Mm-hmm... if you will, income strategy that weren't there five, six years ago.
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So we've been able to sort of get ahead in that space, lead in that space, and, and build it, and I think that's what's sort of given us our success that now we have six, seven-year track records of doing this successfully.
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Mm-hmm. Um, I, I did, um... When I started sort of doing my due diligence on the Harvest lineup of funds, I was surprised to learn that, if I'm not mistaken, Michael, you're the third-largest options writer in Canada.
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Is that correct or am I off the top? In the ETF business. Yeah. Yeah, you're right. In the ETF business. Yeah. Yeah. I mean, that says a lot.
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Uh, I've noticed, um, y- you, on that, you, you've sort of enhanced or added to that strategy because... Well, enhanced.
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You, you have, you've launched recently a number of new funds that I think have the enhanced, uh, the enhanced label to them- Mm-hmm... which adds an element of leverage to the strategy.
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What's sort of the overarching, uh, concept behind, behind that addition to the lineup? Sure. Um, well, first of all, the strategy, the investment philosophy has not changed.
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Uh, it, it is about long-term ownership of businesses over many years and, uh, positioning in them.
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What the enhancement is, is, is, as you said, adding the leverage to it, which will enhance the income level, so you can take it up 25, 30%, uh, on your income s- uh, payouts.
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And it also enhances your ability to, to grow that capital over time.
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'Cause when you take on a little bit of leverage, yes, you are taking on some more risk, but you're also getting, um, if you will, that additional 25%, um, uh, uh, in your portfolio, if you will, through a, an ETF strategy to take advantage of when we start seeing markets come back up.
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You'll have a little bit of a, um, a- an edge, if you will- Mm-hmm... uh, in your portfolio. But at the end of the day, you're still getting a very nice, uh, stream of steady income on a monthly basis.
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O- on that topic there, Michael, you know, as you just mentioned, you know, when people hear the word leverage, they do just think of risk. Like they kind of- Mm-hmm. Yeah...
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put one and one together, leverage and risk, and there's a lot of people out there that would just avoid investing in leverage funds altogether. Mm-hmm.
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Are there measures that your portfolio managers have in place to manage that risk? Well, uh, great point, Brandon. You see, you are increasing your risk level. Uh, when you, when you buy a levered fund,
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uh, you naturally just, you increase your l- risk level by taking on that, that 25%, um, leverage. Part of what we do is... First of all, uh, 25% leverage on a, on an overall scale is not a lot of leverage.
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Uh, you can, you can open up a margin account, put in $100 and borrow $100, and basically you're, you know, it's 50% leverage, but you're actually leveraging yourself up 100%.
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So we think 25% is sort of that area where it's-A little bit of leverage. It's still modest. It's not taking on an undue amount of risk.
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The other thing is, though, when you're writing options, you're offsetting some of the long end or some of the torquey side of the portfolio because what you're doing is you're monetizing taking some of the long end out of the portfolio to generate- Mm-hmm...
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that cash flow. So, I mean, it's my opinion, but I actually think when you're, you're writing options, you're actually offsetting that risk somewhat as well.
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Um, but we really see the, the option writing, and, and I mentioned there's a lot of firms that are doing it now. We're very active in that space.
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Sometimes we'll have 100 plus contracts in a month that we'll be writing as the market moves around. Uh, we see that as a way to sort of moderate risk and generate that extra income.
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So having a little bit more, uh, leverage on there, we don't see that as a high risk component. It's, it does, but it does add a moderate more, a moderate amount, uh, amount of more risk.
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Interesting, because, I mean, when I was, uh, working directly with clients and in my own portfolio, I've used, you know, covered call writing strategies- Mm-hmm... over the years.
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And just as a sort of a, a, a one man shop- Mm-hmm...
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uh, the work, the monitoring that goes into these, and that's where the very simplified strategy has always been one of the diff- most difficult, uh, parts of running, uh, my practice.
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And so, uh, gee, you talk about o- I, I think you said, like, 100 open contracts at any given time. Mm-hmm. Uh, the, the, the oversight that that requires... I, I guess what I'm trying to say here is, is I'm...
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You know, my philosophy has shifted, um, from the do it yourself, writing the options contracts for the most part, to handing that part, um, over to, uh, experts like yourself.
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Just because it, it can very quickly become ad- uh, unmanageable for the DIY investor. Mm-hmm.
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So, yeah, I appreciate, um, you know, the, the fact that you guys, uh, can take part of that off of our investment plate and, and manage that for us.
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Um, we, we talked a little bit about the, you know, the, the growth that you've had. Um, obviously, Michael, a company like yours, and starting from you on down there, um, will set goals. Mm-hmm. And I'm very curious.
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Because of the changes I've seen with Harvest, um, what are your goals for the coming months or the coming years? What can we expect, um, as consumers of your product to, to see?
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I'm very curious about what, what's coming down the pipe. Well, y- y- uh, you're right, Marc. I mean, we are always looking at ideas, but we want ideas that will sort of fit into our philosophy as to what we do.
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So equity based- Mm-hmm... uh, long-term cash flow generating ideas that we, we... Companies, uh, that we can write options on.
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So if we see a, a, a sector or a category of the market that we believe, A, is a growth gr- a growth area or has long mega trends behind it, we would, we would seriously look at that area as, uh, something that we might be able to build a product around.
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Um, so we always have a number of ideas, and I'll try to let the cat out of the bag here, 'cause I, I can't really.
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[laughs] But we always have a lot of ideas, uh, that we're looking at and some novel ideas that we're looking at for, uh, 2023.
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Uh, all I can really say is stay tuned, but it will stay, we will stay within our, our sort of bands- Mm-hmm... as to how we like to manage money. So I can't give you- Got it. Got it...
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any, any firm answers, but I can tell you that we are looking at ideas, and some very interesting ones for 2023. I was kind of hoping to get a little bit of a scoop here today. [laughs] But I gu- I guess not.
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St- more, stay tuned, more to come. Yeah. But you're not gonna tell us right now what that's gonna be. No. And I certainly appreciate that. [laughs] Yeah. And I think, I think- Well, I mean, if you think about... Sorry.
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If you think about, uh, we launched travel, uh, the travel ETF, um, as the sort of first wave, if you will, of COVID was coming to an end because that was an industry that got crushed. Mm-hmm.
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And, you know, and it's been still a tough go for the, for the travel industry, but you're starting to see more and more green shoots, more and more, uh, optimism come in.
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You're starting to see sales get booked for flights and hotels and cruise lines. Uh, I, and I've been watching the soccer games, and I can't believe the amount of cruise line advertisements are out there now.
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[laughs] But, but the thing is that is a growth industry. That's an industry that's been growing at a faster rate than the S&P was growing up until the pandemic.
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It got clobbered, uh, but you've got some fantastic companies there that got beaten up. So we look at that. Well, here's a growth industry. Here's an industry that we think has great long-term prospects.
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We start looking at demographics. We start looking even at the millennials are, are very known for actually going out and spending more on tr- on, uh, on vacations than, uh, say, the boomers did.
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Um, it's a great industry. We wanna be part of that. So we're always looking at ideas that we think over the long term will be, uh, will add value for our clients, will grow, and that we can generate some income on.
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I'll just say- Mm-hmm... you know, on behalf of myself, Marc, and the channel here, we really, really like and appreciate you taking the time to chat with us. Um,
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do you have any final words, Michael, that you'd like to leave with our viewers who would basic... that would basically help them understand- Yeah...
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you know, just what, what you guys do and, and what, why they might consider taking a deeper look into the Harvest funds? Sure. Uh, and appreciate being here.
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Um, at the end of the day, investing doesn't have to be complicated, uh, as I mentioned at the outset, and we're, we're in an industry that complicates things continuously, you know?
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So our objective is to help ca- people grow their capital over time, especially now that you've got this large amount of market, uh, in the, in the boomer area that's retiring.
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You've got now the upcoming millen- millennials that are now into their 40s, uh, you know, the Generation X that are now starting to approach retirement.
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We've got a huge cycle going through, and all we're trying to do is how can we help people retire, generate, uh, a very attractive income for them, and over time, very importantly, grow capital.
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Because people are living longer now than they were 20, 30, 40 years ago. I think the average lifespan has increased by 10 years since I was born. So people will be spending more time in retirement. And- Mm-hmm...
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how do you... You're gonna have to have that capital for the long term. So you can't just draw it all out.
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You need to find a way to grow it and take cash from it, and that's the underlying sort of basis of what we do at Harvest, which is our name, Harvest. It's about harvesting from the assets you've built over years. Nice.
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Uh, Michael, this has been a, a real pleasure to, uh, to sit down virtually, I guess like you do in 2022 here- Yeah... uh, hear more of your insights.
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And, uh, yeah, I know we've really enjoyed, um, learning more and talking more about the Harvest lineup of funds. So I would encourage all of our viewers to, uh, to have a look as well.
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And of course, as always, uh, we will have a link, uh, for- Mm-hmm... your Harvest group in the description below. Any last words, Brandon, before we sign off here? I would just say it was a blast, you guys.
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And, um, yeah, I'd echo exactly what you said. Links will be included down below. Go check 'em out, guys. Um, we already know the, our viewers are, absolutely love the Harvest funds.
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So for any new viewers, um, take the time to go check it out because yeah, very good product serving a very, very good role. And yeah, thank you, Michael, for taking the time. Brandon- Thank you...
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Marc, thank you for having me. Okay. Awesome. Take care. See you guys. See ya. Bye.
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This video is sponsored by Harvest ETFs. For more information, please check out the link in the description below. I worked for more than 25 years in the investment space, and I saw a lot of different investment styles.
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And one of the styles that resonated with me, and in fact is the way I manage my own money of course, is just sort of the good old-fashioned buy good solid companies at a good price in growing industries, um, in, uh, holding for the long, long term.
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And, and that's something that's worked for me. Uh, it's also worked for another investor, you know, Warren Buffett, someone we're all familiar with.
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Uh, we are pleased to be joined today by Michael Kovacs, who is the CEO of one of Canada's fastest growing ETF manufacturers, which is the Harvest Portfolio Group.
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Michael, uh, welcome to, uh, welcome to the channel today. Great. And thanks very much for having me, guys. Appreciate it. V- very nice. Yes. Uh, very nice to have you here.
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Um, I, I know that your philosophy, your investment philosophy- Mm-hmm... is very much aligned with Warren Buffett's and that Berkshire way.
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Uh, I wonder if you could just talk to our audience about your conviction to that strategy- Mm-hmm... and how it goes to shape the team of portfolio managers that you have working there at Harvest. Sure.
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Well, let me start by, I have a couple of props I brought with me. This is a, uh, a credential, uh, and this is about my conviction.
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Uh, going back to 1999, this was my entrance, uh, credential for the, uh, Berkshire Hathaway meeting in Omaha. Uh- Yeah...
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and I actually have a book that I've been following for many, many years, uh, from the same time, uh, by Hagstrom, um, sort of going through the whole portfolio.
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So that, that 1999 was actually the third or fourth meeting I went to. I started in '96- Mm-hmm... uh, going to a lot of these meetings.
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And, uh, it's really underpinned everything we do in, in sort of the setting up of Harvest, if you will. Um, I find that we're in an industry that can sometimes make things very complicated.
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And, you know, the whole point about the Buffett way, if you will, or the, uh, the Berkshire Hathaway w- uh, structure is to,
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uh, position yourself as in great businesses, stay with those businesses over the long term, uh, grow capital over the long term, and in our case, uh, we pay income as well.
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But, um, you know, everything we do, our, our investment management team, uh, the portfolios we put together follow that underlying philosophy. Um- I find that kind of funny.
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You've been, you've been listening to Buffett longer than I've been alive on this planet, you know? [laughs] [laughs] I w- I was born in 1995, so that's, uh, hey, that's- There you go. There you go...
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that, that's special. Uh- Were you gonna say something there, Dan? Something to that. Well, yeah. What I, what I say there- Yeah... is, is, um, like you, Michael, I've been to...
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I've only been to a couple of the, uh, of the Berkshire AGMs. But- Mm-hmm... what I took away from both, deep in my whole...
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my, my soul, when I left there, left those meetings, it just takes you right back to the, the, the, the wholesome, uh, methods of investing properly. And y- I left there inspired both times.
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At the time, I was still working directly with clients, and I just- Mm-hmm... I went back with a renewed vigor just going, "This is why I do what I do."
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So, uh, it, it kind of aligns very closely with, uh, with what you, you guys do there at Harvest. That's really cool. Yeah.
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And as you know, when you're at those meetings, you profiles a lot of those businesses right there in the auditorium, uh- Yes. Yeah... stands and booths, and you really see the underlying...
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At, at the end of the day, you're, you're investing in the business. And I think people forget about that- Mm-hmm... where they look at stocks as little pieces of paper. So true. Right. Yeah.
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Well, if you can take us back, Michael, maybe you can tell us just a little bit more about basically the path that you've taken to where we stand today. Well, sure.
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Um, uh, I started even longer before you were born, Brandon.
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[laughs] I started in 1985, uh, as a stockbroker, and, uh, as an advisor and, and working with clients, uh, and sort of had a couple years in the business when '87 rolled along and, and, and pretty much clobbered me and everybody else, uh, with that big stock market crash.
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And, um, you know, but that was, that was a great, sort of great lessons to learn.
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And as you know, over the next 35 or so years, we've had all kinds of market corrections and crashes and things that came along, and that sort of...
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There's nothing you can learn theoretically that will get you through that. You have to sort of experience these things- Mm-hmm... and go through them, uh, to become a real sort of, uh, tuned-in investor.
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So I was very fortunate. And I, I r- I remember the day, sort of my aha moment was in 1990.
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Uh, I was reading the Global Mail, the business section, and there was an article there about how the, the US mutual fund industry had just hit $1 trillion. And that was just un- unbelievable.
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I mean, it's 35 years ago, but that, that was an- Yeah... unbelievable amount of money to think, "How the heck... A thir- $1 trillion. How many zeros are in that?"
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And, you know, I think, I looked at the Canadian industry, and we were 40 billion, I think, at the time, in the mutual fund business.
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And I sort of realized at that point, that's the business I've got to get into, 'cause that- Mm-hmm... that looks like, like a fantastic growth industry, and I want to be part of that.
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And at, at that point and over the next number of years, I transitioned into the mutual fund business, uh, worked in management roles and sales roles, uh, and product development roles over the next 20 or so years until, uh, 2009 when I, when I founded Harvest.
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So, you know, I'm sort of a long-term veteran of the business.
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Uh, I have lots of battle scars and, and, uh, I've seen, uh, not only through theoretical, uh, studying and so on, but just experience and time in the business- Mm-hmm... uh, to learn about the business.
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And fortunately, uh, as you can see, I caught on to Warren Buffett very early, uh, in my career, um, and started following, uh, that philosophy and knowing at some point if I start my own company, uh, which I eventually did with Harvest, I would follow that philosophy, because it just makes sense to me.
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Uh, I, I like that path and having someone who spent most of my adult life in the business, I can really appreciate, uh, going from being that stockbroker way back in the day to, to now running a company like Harvest.
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I mean, it's, it's a path- Mm-hmm... that I never went down, but I've always admired the people who can actually do that. Now, you mentioned the size of- Mm-hmm... um, the, the industry in general and how it's growing.
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And I gu- 'cause it kind of takes me to a question I have for you, because right now there's a lot of headwinds out there in the markets, and it's been- Mm-hmm... a pretty tough go in 2022.
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Now, your assets under management were, like, a billion dollars at the end of 2020. Mm-hmm. So not v- very long ago. I know they're r- now around the three billion, uh, mark.
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So-I guess the question I have for you, Michael, is with all those headwinds, how are you managing to attract assets when it, it's sort of bucking the trend and a lot of people are actually going in the opposite direction?
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Yeah. Well, um, there's three ways to grow a business, uh, in, in this industry. And, and one is, uh, market returns, which we haven't had this year. Mm-hmm. It's been a tough year.
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Uh, we'll be negative probably by the end of the year, uh, for the year. Uh, the second area is, uh, asset gathering, uh, which we've been quite successful at doing this year.
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And the third level is, uh, uh, acquisition, which, you know, that's, that's not the, uh, the area that we're looking at, at least at this point.
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So, um, if you think about the old hockey stick, uh, analogy, we spent from launch in 2009 till really 2016, um, launching closed-end funds- Mm-hmm...
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uh, converting some of those funds into mutual funds, uh, and building the sort of the base of the company. And we spent 10 years really going from zero to actually almost 11 years, a billion dollars.
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So you're, you're sort of going along, lots of efforts going out, lots of, uh, things going into the marketplace and not a lot of return. And then you hit that inflection point, which we did in, in, uh, 2016...
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Well, sorry, not 2016. In, in 2020, where I think a lot of- enough people had heard about us, we had built enough momentum that we started to sort of veer up, uh, and we hit that inflection point.
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So we've been very fortunate that we've been able to continue to grow, uh, and, and build our business and more through asset gathering, uh, over this last year as more advisors and more, uh, do it yourself investors look at Harvest and say, "Hey, this makes sense.
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Uh, we like what you're doing, and we want to allocate s- part of our portfolio to your, your products." Mm-hmm. So I think that's led to a lot of our success.
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And if I could also mention, um, I think it was Alexander Hamilton, but it's a very, very, uh, sort of famous line that, um, if you don't stand for something, you'll fall for everything. So we've- Mm-hmm...
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we've always been very focused on what we do, and I think that's starting to resonate with more and more people now, uh, that what Harvest does makes sense. So- It, it d- Long answer... it does.
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And yeah, no long answer, but great answer there, Michael. Good answer. Thank you. And, and it, you know, it, it kind of gives me a little follow-up here.
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As an up-and-coming ETF company in a very large space, is there a way that you guys differentiate yourself from these big players, like, of course, the iShares, the BMOs, RBCs? Mm-hmm.
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Um, yeah, how, how would you go about saying that? Well, the companies you mentioned are all big companies. They're great global players, uh, some of them.
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And, uh, and, and being a global player, you have to be very wide in your scope. Uh, you have to have a lot of products.
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A- and I've, as I've said to my team here, I'd rather be narrow and deep, uh, than wide and shallow. Uh, we, we can't be specialists in everything we do.
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So let's be very specific in our focus, uh, and, and in, in our development of our, our products.
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Uh, and as I mentioned, stand for something and really get a, build a reputation in that area and grow that part of the business. And as you guys know, uh, we're equity, for the most part, an equity shop.
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Uh, we have a lot of option writing, uh, to generate that extra income.
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And when we started the ETF company in 2016, we were one of a very few players that were actually, uh, following that strategy, and we've had a tremendous amount of success.
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And that's actually brought more players into, uh, the call writing- Mm-hmm... if you will, income strategy that weren't there five, six years ago.
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So we've been able to sort of get ahead in that space, lead in that space, and, and build it, and I think that's what's sort of given us our success that now we have six, seven-year track records of doing this successfully.
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Mm-hmm. Um, I, I did, um... When I started sort of doing my due diligence on the Harvest lineup of funds, I was surprised to learn that, if I'm not mistaken, Michael, you're the third-largest options writer in Canada.
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Is that correct or am I off the top? In the ETF business. Yeah. Yeah, you're right. In the ETF business. Yeah. Yeah. I mean, that says a lot.
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Uh, I've noticed, um, y- you, on that, you, you've sort of enhanced or added to that strategy because... Well, enhanced.
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You, you have, you've launched recently a number of new funds that I think have the enhanced, uh, the enhanced label to them- Mm-hmm... which adds an element of leverage to the strategy.
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What's sort of the overarching, uh, concept behind, behind that addition to the lineup? Sure. Um, well, first of all, the strategy, the investment philosophy has not changed.
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Uh, it, it is about long-term ownership of businesses over many years and, uh, positioning in them.
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What the enhancement is, is, is, as you said, adding the leverage to it, which will enhance the income level, so you can take it up 25, 30%, uh, on your income s- uh, payouts.
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And it also enhances your ability to, to grow that capital over time.
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'Cause when you take on a little bit of leverage, yes, you are taking on some more risk, but you're also getting, um, if you will, that additional 25%, um, uh, uh, in your portfolio, if you will, through a, an ETF strategy to take advantage of when we start seeing markets come back up.
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You'll have a little bit of a, um, a- an edge, if you will- Mm-hmm... uh, in your portfolio. But at the end of the day, you're still getting a very nice, uh, stream of steady income on a monthly basis.
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O- on that topic there, Michael, you know, as you just mentioned, you know, when people hear the word leverage, they do just think of risk. Like they kind of- Mm-hmm. Yeah...
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put one and one together, leverage and risk, and there's a lot of people out there that would just avoid investing in leverage funds altogether. Mm-hmm.
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Are there measures that your portfolio managers have in place to manage that risk? Well, uh, great point, Brandon. You see, you are increasing your risk level. Uh, when you, when you buy a levered fund,
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uh, you naturally just, you increase your l- risk level by taking on that, that 25%, um, leverage. Part of what we do is... First of all, uh, 25% leverage on a, on an overall scale is not a lot of leverage.
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Uh, you can, you can open up a margin account, put in $100 and borrow $100, and basically you're, you know, it's 50% leverage, but you're actually leveraging yourself up 100%.
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So we think 25% is sort of that area where it's-A little bit of leverage. It's still modest. It's not taking on an undue amount of risk.
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The other thing is, though, when you're writing options, you're offsetting some of the long end or some of the torquey side of the portfolio because what you're doing is you're monetizing taking some of the long end out of the portfolio to generate- Mm-hmm...
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that cash flow. So, I mean, it's my opinion, but I actually think when you're, you're writing options, you're actually offsetting that risk somewhat as well.
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Um, but we really see the, the option writing, and, and I mentioned there's a lot of firms that are doing it now. We're very active in that space.
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Sometimes we'll have 100 plus contracts in a month that we'll be writing as the market moves around. Uh, we see that as a way to sort of moderate risk and generate that extra income.
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So having a little bit more, uh, leverage on there, we don't see that as a high risk component. It's, it does, but it does add a moderate more, a moderate amount, uh, amount of more risk.
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Interesting, because, I mean, when I was, uh, working directly with clients and in my own portfolio, I've used, you know, covered call writing strategies- Mm-hmm... over the years.
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And just as a sort of a, a, a one man shop- Mm-hmm...
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uh, the work, the monitoring that goes into these, and that's where the very simplified strategy has always been one of the diff- most difficult, uh, parts of running, uh, my practice.
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And so, uh, gee, you talk about o- I, I think you said, like, 100 open contracts at any given time. Mm-hmm. Uh, the, the, the oversight that that requires... I, I guess what I'm trying to say here is, is I'm...
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You know, my philosophy has shifted, um, from the do it yourself, writing the options contracts for the most part, to handing that part, um, over to, uh, experts like yourself.
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Just because it, it can very quickly become ad- uh, unmanageable for the DIY investor. Mm-hmm.
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So, yeah, I appreciate, um, you know, the, the fact that you guys, uh, can take part of that off of our investment plate and, and manage that for us.
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Um, we, we talked a little bit about the, you know, the, the growth that you've had. Um, obviously, Michael, a company like yours, and starting from you on down there, um, will set goals. Mm-hmm. And I'm very curious.
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Because of the changes I've seen with Harvest, um, what are your goals for the coming months or the coming years? What can we expect, um, as consumers of your product to, to see?
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I'm very curious about what, what's coming down the pipe. Well, y- y- uh, you're right, Marc. I mean, we are always looking at ideas, but we want ideas that will sort of fit into our philosophy as to what we do.
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So equity based- Mm-hmm... uh, long-term cash flow generating ideas that we, we... Companies, uh, that we can write options on.
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So if we see a, a, a sector or a category of the market that we believe, A, is a growth gr- a growth area or has long mega trends behind it, we would, we would seriously look at that area as, uh, something that we might be able to build a product around.
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Um, so we always have a number of ideas, and I'll try to let the cat out of the bag here, 'cause I, I can't really.
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[laughs] But we always have a lot of ideas, uh, that we're looking at and some novel ideas that we're looking at for, uh, 2023.
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Uh, all I can really say is stay tuned, but it will stay, we will stay within our, our sort of bands- Mm-hmm... as to how we like to manage money. So I can't give you- Got it. Got it...
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any, any firm answers, but I can tell you that we are looking at ideas, and some very interesting ones for 2023. I was kind of hoping to get a little bit of a scoop here today. [laughs] But I gu- I guess not.
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St- more, stay tuned, more to come. Yeah. But you're not gonna tell us right now what that's gonna be. No. And I certainly appreciate that. [laughs] Yeah. And I think, I think- Well, I mean, if you think about... Sorry.
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If you think about, uh, we launched travel, uh, the travel ETF, um, as the sort of first wave, if you will, of COVID was coming to an end because that was an industry that got crushed. Mm-hmm.
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And, you know, and it's been still a tough go for the, for the travel industry, but you're starting to see more and more green shoots, more and more, uh, optimism come in.
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You're starting to see sales get booked for flights and hotels and cruise lines. Uh, I, and I've been watching the soccer games, and I can't believe the amount of cruise line advertisements are out there now.
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[laughs] But, but the thing is that is a growth industry. That's an industry that's been growing at a faster rate than the S&P was growing up until the pandemic.
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It got clobbered, uh, but you've got some fantastic companies there that got beaten up. So we look at that. Well, here's a growth industry. Here's an industry that we think has great long-term prospects.
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We start looking at demographics. We start looking even at the millennials are, are very known for actually going out and spending more on tr- on, uh, on vacations than, uh, say, the boomers did.
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Um, it's a great industry. We wanna be part of that. So we're always looking at ideas that we think over the long term will be, uh, will add value for our clients, will grow, and that we can generate some income on.
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I'll just say- Mm-hmm... you know, on behalf of myself, Marc, and the channel here, we really, really like and appreciate you taking the time to chat with us. Um,
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do you have any final words, Michael, that you'd like to leave with our viewers who would basic... that would basically help them understand- Yeah...
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you know, just what, what you guys do and, and what, why they might consider taking a deeper look into the Harvest funds? Sure. Uh, and appreciate being here.
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Um, at the end of the day, investing doesn't have to be complicated, uh, as I mentioned at the outset, and we're, we're in an industry that complicates things continuously, you know?
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So our objective is to help ca- people grow their capital over time, especially now that you've got this large amount of market, uh, in the, in the boomer area that's retiring.
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You've got now the upcoming millen- millennials that are now into their 40s, uh, you know, the Generation X that are now starting to approach retirement.
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We've got a huge cycle going through, and all we're trying to do is how can we help people retire, generate, uh, a very attractive income for them, and over time, very importantly, grow capital.
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Because people are living longer now than they were 20, 30, 40 years ago. I think the average lifespan has increased by 10 years since I was born. So people will be spending more time in retirement. And- Mm-hmm...
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how do you... You're gonna have to have that capital for the long term. So you can't just draw it all out.
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You need to find a way to grow it and take cash from it, and that's the underlying sort of basis of what we do at Harvest, which is our name, Harvest. It's about harvesting from the assets you've built over years. Nice.
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Uh, Michael, this has been a, a real pleasure to, uh, to sit down virtually, I guess like you do in 2022 here- Yeah... uh, hear more of your insights.
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And, uh, yeah, I know we've really enjoyed, um, learning more and talking more about the Harvest lineup of funds. So I would encourage all of our viewers to, uh, to have a look as well.
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And of course, as always, uh, we will have a link, uh, for- Mm-hmm... your Harvest group in the description below. Any last words, Brandon, before we sign off here? I would just say it was a blast, you guys.
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And, um, yeah, I'd echo exactly what you said. Links will be included down below. Go check 'em out, guys. Um, we already know the, our viewers are, absolutely love the Harvest funds.
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So for any new viewers, um, take the time to go check it out because yeah, very good product serving a very, very good role. And yeah, thank you, Michael, for taking the time. Brandon- Thank you...
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Marc, thank you for having me. Okay. Awesome. Take care. See you guys. See ya. Bye.
