FOCUS 2025: The power of dividend investing – Ramona Persaud

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Have you ever heard your name said that loud?

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That was very embarrassing.

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It's pretty cool. Don't be embarrassed.

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I have to ask, and thank you for being here.

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Look at this crowd, and you can see through the lens there  there's thousands

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of people.

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You're an engineer by education, why are you even an

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active manager? I just listened to Neil, you should be on the quant team.

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You know, after listening to Nei I'm kind of wondering if I made a bad career

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choice.

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Let's talk about that.

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What are your thoughts on ...

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how did you become more fundamental and then how do you apply quant

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to what you do?

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Well, I'll start by saying, as everyone knows, in life

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so much of your outcomes can be attributed

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to randomness.

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I think it's just kind of the path that you end up on.

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There wasn't a conscious choice.

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I just happened to be in a capital market setting when I was in college.

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I found that really interesting.

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Investing in stocks was glamorous.

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You can randomly end up at a point in a place and then your trajectory goes

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that way and you make the best of it.

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That being said, what I love about Neil's team and really formalizing

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quantitative analyses and quantitative investing, I

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so enjoyed his presentation. It really speaks to my soul because I

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am a secret quant.

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Randomly getting on the fundamental path or trajectory and then combining

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it with my instinctive or natural

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tendency towards quantitative methods I think is one of the things that has

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led to good outcomes.

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Well, your secret is safe with us.

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You work really closely with Denise Chisholm, she's speaking tomorrow, how does

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she aid in what you're doing every day?

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Denise on Neil's team and a few other key

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disciplines on Neil's team is very

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reinforcing, affirming to this journey

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of investing fundamentally at its core but adding a lot of

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different types of really robust analytical

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methods. Fundamental investing has a lot of art and a lot of

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instinct to it. Even if you try to be

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analytically robust you are doing it in an analog kind

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of way. You're going out and you're meeting lots of companies.

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There are only so many hours in the day.

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What I love about quantitative methods, Denise included, she brings

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a very statistical lens to quantitative methods, you

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can basically have the world of 10,000 reasonably liquid stocks

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in your hand so you're not having to go necessarily all over the

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world to try to touch all of those companies.

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You can use quant to get really

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methodical and systematic about how you're going

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to invest globally across that landscape of stocks.

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I love that, that speaks to who I am which is just

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taking in a lot and trying to make sense of it in the most efficient way

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possible. To me, that's the beauty of really robust

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analytical processes.

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Is that need, is that something that's picked up a lot over the last decade

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in particular as the speed of information has picked up?

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When you think about when you became a portfolio manager you may not

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have needed that assistance so much but today is it a necessity?

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I think Neil was making the point that ...

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he did a really nice job of walking us through what created alpha, real alpha,

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active, excess return over time.

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He talked about factor investing and how that ...

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essentially it's arbitrage, how that got arbitraged away.

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The market is an extremely intelligent system.

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It's an extremely intelligent complex system because it's created by

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extremely intelligent humans.

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Because it's an intelligent complex system no one source

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of advantage sustains because the system figures out

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how to arbitrage that advantage away.

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The advantage keeps evolving so you sort of have

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to figure out where ... you have to look ahead and figure out where the

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advantage is. The advantage is your source of active alpha.

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Yes, I do think in the last 10, 15, maybe

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20 years that has become what Neil talked about, which is just extremely

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sophisticated approaches to

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data which has been aided by just

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harnessing the magic of computing power.

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For me, having a sort of quantitative orientation has been helpful as that

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advantage, that source of advantage has evolved to

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that.

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It gives you an edge.

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Yeah, and I kind of tell myself, if that's my edge and that gets arbitraged

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away am I going to ...

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and I don't think that's happening anytime soon so I think I'm good for a while

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but the real sort of philosophical question for me is if that's my

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edge will I be able to evolve my edge as the source of advantage

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shifts?

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I think that I will but it's something I think about.

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Is that a challenge for you?

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It's something I think about. I mean, I have enough challenges, I don't need to

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like...

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Let's talk about you as a portfolio manager overall.

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You're focused on value, quality and income.

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You have said that your approach is like watching paint dry

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on a roller coaster, which is a really interesting visual.

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Can you talk to us about that?

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You remember that, wow.

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Well, I wrote it down.

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Watching paint dry on a roller coaster is quite vivid and boring at the same

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time, which is essentially the roller coaster's the market.

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Another way of putting this is there is ever increasing noise, which was what

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Neil was also getting at, and you have to be able to

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process that noise, that ever increasing noise, in

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a way that doesn't suck you in and distract you.

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Just like everyday life, I kind of think investing is just a microcosm

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of everyday life. There's more and more and more

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draws on our attention which is what the noise is.

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The roller coaster is the noise.

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Maybe you can envision and accelerate ...

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a roller coaster gets more and more extreme over time partly because of all

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this data and all of the people, all really intelligent people trying to

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arbitrage.

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I think the core skill is being able to sit with

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that accelerating noise and believe that there is

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still decent signal to be found.

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That is because this very complex system called the market is

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still majority made up of humans and humans are still emotional

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creatures. I don't mean that in a negative way.

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Emotion drives decisions that aren't logical.

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Out of

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emotionality you get inefficiency

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in how things are priced and that is your signal.

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If you believe that that signal is enduring and can persist

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even in the backdrop of ever increasing noise, and you combine that

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setup with robust analytical methods you can actually

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find your advantage and take

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advantage of it. I don't know if that's too abstract

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but that's the roller coaster. Essentially, the watching paint dry is waiting

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for it. If the signal is sort of fixed and the noise is getting bigger

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and bigger the paint's taking longer to dry.

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You're sitting there and you're just waiting for that signal.

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The way I think about that is I've got a process that relies on a valuation

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framework at its core.

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There's certain valuations that I'm looking for in the context of what's going

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on in the market which has a lot to do with the interest rate environment,

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which is your discounting mechanism, and then I'm looking at quality

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businesses. There's a collection of businesses in the world that are high

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quality and that doesn't change that rapidly.

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That's what slows you down and grounds

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you. Then there's income and that doesn't change that rapidly so that slows you

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down and grounds you too. The one area that's moving really fast potentially is

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valuation. As long as I stick to that discipline

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against this really wild roller coaster we're okay

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The signal-to-noise ratio that you talk about, which you've talked about

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before, when did that formulate in your brain?

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I think it's always been there because you kind of learn that in

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engineering, in scientific fields.

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I don't think I had words for it until the last, you know, until I started

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sitting in this seat and being asked questions and had to sort of figure out

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how to articulate what's in my head, which is still a journey.

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I kind of think what I just walked you guys through is very abstract so feel

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free to make me...

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We're just going to digest that. Joel Tillinghast has been a real mentor

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to you as well.

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Yeah, sure. I hope so, I've got all these people watching.

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Oh, good.

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Thank you, thank you.

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Joel Tillinghast has been a real mentor for you and has probably helped with a

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lot of thinking around some of that as well, and then you apply your scientific

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knowledge to it. Can you talk about what he's meant to you?

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Yes. You know what's really nice?

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Joel is retired but he's still around.

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He's one of these people that will invest for the rest of his life.

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I know what you mean, yeah. Moving right along.

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It's a good analogy. That's what I want to ask you, how's retirement going.

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It's not about me, really.

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Unlike you, though, Joel is in the office and he and I...

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I just come to the trips.

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I actually see him all the time.

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It's so nice. We get to talk markets and we continue to have tea.

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He's one of my people that I sit down and have tea with.

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It's so enriching.

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The way that my brain works is different from his and so we kind of say the

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same thing in very different ways.

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There's this resonance because I think in doing so, in my getting a

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perspective on the way he thinks about things in his language, it

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just expands and deepens my thinking.

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That's been awesome.

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One thing that is enduring about Fidelity and has allowed people

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like me and others to be here now

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with an eye towards 25 to 30 years, which is a long time,

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is that there's just so many high quality people like Joel.

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Joel's not the only person. I spend a lot of time with Adam Kramer who I think

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is speaking here as well.

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He's the multi-asset

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person. Ford O'Neil is the bond person.

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Working together with them is incredibly deepening.

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There's just lots of people with different ways of thinking and articulating

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that just really deepens my thinking.

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I appreciate that tremendously.

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Good. Two more deep questions and then we'll get into the markets.

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Hello, investors. We'll be back to the show in just a moment.

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else you get your podcasts. Now back to today's show.

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Good. Two more deep questions and then we'll get into the markets.

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One is that Morningstar rated you gold, a gold star manager back in

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the spring. What did that mean to you?

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That felt big because it is really hard

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to get that--

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Congratulations.

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--thank you, hat accreditation from them, I suppose.

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It's only 2 to 3% of all funds have

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a gold rating. The process to get there was six

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years. We would meet, do a ton of

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prep, meet with Morningstar every year, more or less the same team, and

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a really thoughtful, detailed analyst that I

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really enjoyed working with because he was just as abstract and geeky

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and engineery and scientific and so we would just go for it.

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There are very few people I can do that with.

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He would put us through the ringer and then he

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initially moved us to bronze, two years later to silver, two years later

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to gold. It was never meant to be linear.

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There was no visibility on that.

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That was a highlight .

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Great accolade. You just mentioned to me before we came up that the fund that

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you run in the United States is 60 years old.

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There's a bit of legacy there. What does that mean to you?

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It's what's called a flagship fund.

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That feels really meaningful as well, 60 years is a long time.

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Bruce Johnstone who originally ran this fund, he is

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the most tenured employee now at Fidelity.

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He's been there a really long time.

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I'm having lunch with him next week.

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What's nice is he's been around, and he's presented here as well, Bruce.

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Bruce isn't here but he has presented here, yeah.

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He has, he has spoken to Fidelity clients.

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What's been really nice in terms of the word you used, legacy, is to be able to

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go back to Bruce every so often and access his thinking,

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speaking of people that influence how you think, and

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just asking him about what it was like running that fund for so

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many years in completely different market environments and what does it mean to

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pursue an equity income mandate.

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What needs to be modernized and what needs to never change?

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Those conversations with somebody who did this 40 years ago

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is incredibly powerful.

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I feel really lucky.

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Okay, let's talk about markets. The valuations are kind of steep and that's not

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something that's normally normal for you.

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How are you managing your portfolio these days?

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We keep having this ...

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yes, this has been true for a really long time.

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Valuation is kind of like my core enduring anchor,

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if you will. I think of valuation in a really mosaic

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kind of way. There's plain valuation, there's relative and then there's

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valuation spreads. I lean a lot on the differences in valuations

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among lots of different things.

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This is where quant comes in too. This is very, very quantitative.

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Valuation differences just compressed a ton so it's really hard to find spread.

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Spread is an expression of fear.

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Essentially, it's hard to really find fear.

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One of the only places where spread remains today is between U.S.

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and non-U.S., and specifically U.S.

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and what's called EAFE, or Europe, Asia

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and the Far East.

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Even that spread, that spread coming into this year was over 2 standard

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deviations. It was 2 1/2 standard deviations looking back a really long amount

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of time so that's incredible signal.

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We saw that play out this year where outside of the U.S.

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did much better than inside. That spread is compressed now to maybe

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01, 1 1/2 which is not as great alpha signal but it's still okay.

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I start there and then that gives me a sense of where there's opportunity in

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the world and where to go hunting.

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I spent a lot of time looking at European stocks.

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Asia is harder for me because there's less dividends but wherever I can find a

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little bit of sustainable dividend in Asia, or through proxies.

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Europe has been instrumental, European financials, European defence.

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I think a lot about anti-correlation

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when the market gets very correlated and when valuations get more arbitraged

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away, if you will.

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Anti-correlation has been a huge theme for me.

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Where can I find places to invest that are

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not AI?

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AI is not going to be my bread and butter as a boring,

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staid value person.

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European defence was a really good example of that where we got a

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really strong structural backdrop, pretty good valuations going

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in and incredible

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growth with decent enough quality characteristics and some dividends, which

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is very different from trying to invest in AI.

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The anti-glamour stocks that you would typically migrate towards

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are getting a little glamoury in some cases because they're inputs to

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these data centres and so on.

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What does that do to your thinking?

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That makes it hard. I really like anti-glamour.

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Glamour's hard.

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Are there fewer anti-glamours to research now?

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You just have to work harder to find the anti-glamour.

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Yes, you're right. With glamour kind of spreading to more and

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more parts of the market ... there's nothing wrong with glamour, the issue is

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glamour is just a nice word for very expensive and

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very high momentum so value and momentum are not on your side, per

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se. That's a setup for sort of

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a roller coaster crash, going back to the roller coaster.

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If you try to get your anti-correlation from anti-glamour, if

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you will, it's harder to do.

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What I love is I get to invest globally.

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The nice thing about being able to go all over the world is there's always some

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corner of the world that just isn't correlated

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as much with the centre of gravity of

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the market.

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I've sort of been at this long enough that I kind of know all the different

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corners of the world.

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I travelled all of them in the

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last 20 years so I kind of know where to look,

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but you just have to look harder. It just makes you work a little bit harder.

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You can travel anywhere in the world for work, of course,

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to see whatever companies you need to and to see the teams

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that support you. I recall you talking about a year or so ago going to the

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London office, spending, I don't know, I think you went two or three weeks.

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You also met an Asian team that was there that was coming through.

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You've covered a lot of ground, seeing companies but also seeing those

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analysts. Where do you wanna go next?

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It was nice. I spent the summer in London. I

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lived there and was there when we opened the office.

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It was beautiful to just go back and see how everybody's grown and how the

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office has evolved and to reconnect with that team.

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An extra plus was the Asian analysts coming through.

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They would stop in London on the way to Boston so I got kind of the whole

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world. That ended up being a nice template.

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I think what I would do next is park for a summer in Tokyo

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or Hong Kong or even Singapore, if it's possible,

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to try to really do that, have that experience across Asia.

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Asia is going to be more spread out, more disparate, and

[00:19:18.223]

sitting with the analysts to go deep on their stuff and then travelling to

[00:19:21.460]

companies would be great.

[00:19:22.728]

What about north of the border? Not to say you should come ...

[00:19:25.364]

well, you have family in Canada , but what are you thinking of the Canadian

[00:19:27.633]

market now?

[00:19:29.034]

Canada is wonderful in that

[00:19:33.672]

... well, my children are half Canadian,

[00:19:37.709]

the better half.

[00:19:41.680]

What I really like about Canada is there are some really high quality

[00:19:45.984]

businesses here that I can own, and I can't say that about many markets.

[00:19:49.621]

I can't really say that about many parts of Asia.

[00:19:54.126]

What I wait for is when there is fear about those companies.

[00:19:57.429]

For instance, one of them that I've owned for a really long time had a big

[00:20:00.599]

scare in the last few weeks where the

[00:20:04.670]

CEO is stepping down. When that happens, and it's a CEO that's really well

[00:20:08.674]

respected and is a part of the valuation of the company,

[00:20:12.611]

the nice multiple that the company has, you're gonna get a

[00:20:16.582]

derating. Moments like that, if you are close with

[00:20:20.552]

the company and you really have trust in their succession planning,

[00:20:26.124]

derating is good. You can buy more.

[00:20:28.727]

I've had that with various high quality Canadian companies and I just wait for

[00:20:32.097]

more. It's the roller coaster. You're just sitting and waiting, you're waiting.

[00:20:34.533]

Paint.

[00:20:35.968]

Watching that paint dry.

[00:20:37.002]

Paint.

[00:20:38.003]

Red, white and red.

[00:20:40.839]

With earnings season upon us now do you have some initial thoughts from

[00:20:44.843]

that standpoint?

[00:20:46.511]

No initial thoughts on earnings per se.

[00:20:48.947]

I like to step really far back and take the whole world at large

[00:20:52.951]

and just figure out what signals are there.

[00:20:57.589]

Earnings are useful in that you get to retest your

[00:21:01.660]

thesis on every single company.

[00:21:03.762]

Earning are also extremely noisy.

[00:21:05.597]

It is very much quite a tactical battle

[00:21:11.270]

in separating what matters from what doesn't matter.

[00:21:13.472]

I a way the noise factor accelerates even more in earnings season

[00:21:17.409]

so there's this discipline that you have to have to just recognize that

[00:21:21.647]

and be even more patient. What I do love about earnings is you get these very

[00:21:25.784]

momentary opportunities where a company

[00:21:30.155]

will have a hard time and it'll be transitory.

[00:21:32.591]

But the market is emotional.

[00:21:34.726]

It is built by humans who are not always logical.

[00:21:38.697]

You'll get derating opportunities where you can just buy more, or massive

[00:21:42.734]

reratings where you can sell more.

[00:21:45.304]

Earnings give me a chance to just tighten up the portfolio.

[00:21:49.541]

Makes sense. Let's talk about any

[00:21:55.213]

... actually, I'd like to ask you about Tactical High Income.

[00:21:57.282]

You're a great contributor to Adam's work with that as a co-portfolio

[00:22:01.453]

manager. Could you talk about that?

[00:22:03.455]

That's been one of the highlights of my career.

[00:22:06.892]

I think I started on that about 10 years ago.

[00:22:10.929]

This is a very solitary pursuit.

[00:22:12.698]

Our structure is you've got a fund and you have a single fund manager on

[00:22:17.169]

that fund. We successfully attract people who are

[00:22:21.173]

happy to do that by themselves.

[00:22:23.742]

What has been really enriching is collaborating

[00:22:28.513]

with two other people who are just

[00:22:33.452]

masters of their fields as well.

[00:22:36.455]

So Ford on bonds, no more said, Ford

[00:22:41.059]

O'Neil. He's just wonderful. He's won Morningstar Manager of the Year many

[00:22:43.395]

times, for instance.

[00:22:45.397]

Adam across the multi-asset world.

[00:22:48.633]

So they're both really high quality.

[00:22:50.769]

I like to think of this great fortune of working with people

[00:22:55.640]

across Fidelity but in this case, specifically, of super high quality people

[00:22:59.311]

who are technical masters. There's nothing, there's nothing more

[00:23:03.415]

joyful than that professionally.

[00:23:06.084]

He's standing at the back and I think he was going to run out but you said nice

[00:23:08.720]

things so he stayed. That's good.

[00:23:11.256]

Cover your ears.

[00:23:13.892]

A question that's just come in asking what are some examples of anti-glamour

[00:23:17.996]

themes that you're most interested in?

[00:23:20.232]

Anti-glamour.

[00:23:23.101]

I think of what I do as finding the most boring parts

[00:23:27.305]

of every sector.

[00:23:30.809]

An example is like insurance in financials.

[00:23:33.512]

Insurance are like the staples of financials.

[00:23:35.247]

There have been times in the market, so think of like P&C insurance, property

[00:23:39.017]

and casual, there have been times in the markets where nobody cares.

[00:23:42.254]

When glamour is off to the races

[00:23:47.058]

... we have excellent investors in glamour.

[00:23:49.861]

Mark Schmehl is amazing at glamour. I will never be amazing at glamor.

[00:23:52.397]

What I like is we have this collection of people that are good at different

[00:23:55.634]

things.

[00:23:57.402]

You have to lean into what you're good at.

[00:23:59.171]

When that stuff is off to the races my

[00:24:03.208]

really boring parts of every sector just get

[00:24:08.213]

... I call it apathy and  controversy. I sort of lean into either apathy or

[00:24:12.150]

controversy. It can be easier to lean into apathy.

[00:24:15.887]

There's more apathy in anti-glamour.

[00:24:18.423]

Insurance is one place that I'm always looking to see what's the apathy factor.

[00:24:23.495]

Essentially, you're looking for where the momentum is low but not destroyed.

[00:24:28.767]

In tech it can be cyclical, what I call dirty tech

[00:24:32.838]

or cyclical tech.

[00:24:34.473]

Very cool. We've just got a few minutes left and I'm going to ask you some

[00:24:37.242]

questions, five questions that are fun facts about you.

[00:24:40.412]

One is what's your favourite podcast right now?

[00:24:43.248]

Fidelity Canada, of course.

[00:24:46.384]

If you could live anywhere for a year where would it be?

[00:24:48.653]

Canada.

[00:24:52.057]

No. If it were ... probably Vancouver, actually.

[00:24:54.192]

Okay, so Canada, good.

[00:24:54.926]

I love Vancouver, yeah. You didn't prime that question.

[00:24:59.531]

No. Last movie you watched.

[00:25:00.632]

KPop Demon Hunters, of course, come on.

[00:25:04.035]

My wife tried to get me to watch that but it didn't happen.

[00:25:06.104]

Your kids are not young enough for that.

[00:25:08.173]

Quiet workspace or background noise?

[00:25:10.909]

Depends on the work.

[00:25:13.178]

Best ice cream flavour.

[00:25:15.914]

Any ice cream flavour.

[00:25:17.482]

Any ice cream. Those are good answers.

[00:25:20.752]

As we head towards 2026 what are some things that you're keeping an eye on that

[00:25:24.789]

we should keep an eye on?

[00:25:25.957]

I'm always keeping an eye on valuation and valuation differences and just

[00:25:30.262]

laughing at how hard it has been forever.

[00:25:34.833]

Every time you clear a really good year,

[00:25:39.004]

every time you get through a year and it's an okay year I just tell myself, all

[00:25:43.041]

right, it's hard and I'm good at that so it'll be all right.

[00:25:47.746]

So valuation continues to be difficult and just reminding myself

[00:25:51.883]

that the core sort of very

[00:25:55.854]

amorphous skill is like excessive patience.

[00:26:00.258]

What's nice is I've got an extremely full life.

[00:26:03.094]

I've got little kids and I go deep on everything that I

[00:26:07.065]

do. It keeps me busy enough that it makes extreme

[00:26:11.069]

patience easier. Does that make sense?

[00:26:12.971]

It makes sense. You're rated gold, you're looking at high quality paint and

[00:26:16.775]

your patience is appreciated. Thanks, Ramona Persaud, for being here today with

[00:26:20.278]

us.

[00:26:21.513]

Thanks for watching or listening to the Fidelity Connects

[00:26:25.450]

podcast. Now if you haven't done so already, please subscribe to Fidelity

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Connects on your podcast platform of choice.

[00:26:32.390]

And if you like what you're hearing, please leave a review or a five-star

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Visit fidelity.ca/howtobuy for more information.

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We'll end today's show with a short disclaimer.

[00:26:59.117]

The views and opinions expressed on this podcast are those of the participants,

[00:27:02.954]

and do not necessarily reflect those of Fidelity Investments Canada ULC or

[00:27:06.891]

its affiliates. This podcast is for informational purposes only, and should not

[00:27:10.895]

be construed as investment, tax, or legal advice.

[00:27:13.431]

It is not an offer to sell or buy.

[00:27:15.734]

Or an endorsement, recommendation, or sponsorship of any entity or securities

[00:27:20.071]

cited. Read a fund's prospectus before investing, funds are not guaranteed.

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Their values change frequently, and past performance may not be repeated.

[00:27:28.446]

Fees, expenses, and commissions are all associated with fund investments.

[00:27:32.283]

Thanks again. We'll see you next time.