QUINTESSENTIALLY KIKI
Called competitive, driven, elegant, gorgeous — even goofy — investment adviser Kiki Delaney brings all that and more to the table for her clients — and their $1.5 billion. By Judy Steed
he rarely gives interviews. Her ideal is to
work quietly, privately, without a name on the door or a listing in the phone book. Here we are at C. A. Delaney Capital Management Ltd. The view from a Bay St. bank tower is dazzling. As are the carefully chosen art works, including a massive Burtynsky photo of Chinese factory workers. As are the achievements of Kiki Delaney, born Catherine Herrndorf in Winnipeg, daughter of German-born parents who immigrated to Canada via Holland after World War II.
Delaney, 56, manages $ 1.5 billion of other people’s money and seems to relish the risk — though she’s known for her caution. An old-fashioned “value investor,” she didn’t put clients into Nortel or JDS or any of the harbingers of a new era when the tech boom was building.
“ It was painful at the time. I was told I ‘ didn’t get it’ and worried that maybe I didn’t,” she says. But she held her ground and was deemed a saviour after the tech bust.
She’s up at 5 a. m. most days, working out with a personal trainer — watching CNBC as she lifts weights — and in the office by 7: 30 a. m. She reads six newspapers a day, goes through Bloomberg, scans emails and voice mail, then has a trading meeting with her investment department, which consists of two portfolio managers ( including herself), three analysts and a trader.
Thus, Delaney is ready with coherent opinions on complex issues, derived from massive amounts of research on behalf of 275 clients/ families for whom she manages those $ 1.5 billion in assets, and that’s highfee money. ( The firm does not reveal its client list — the minimum investment is $2 million — or what it charges for services. Its annualized returns over the last 13 years are 15.2 per cent, compared with 12 per cent for the TSX-composite index and 9.6 per cent for S& P.)
So, where are things going on energy and income trusts?
“ Bay Street has gone berserk thinking the federal government is trying to bring down income trusts, but it’s not in the government’s interest to destroy income trusts,” Delaney says. In her view, the government “ wants to equalize the tax impact and stop the tax leakage, especially in royalty trusts.” The problem is that foreign investors are not paying taxes. “That’s why the government wants to withhold at source — then maybe give back at some point to Canadians. (Finance Minister Ralph) Goodale is listening, he’s asking for submissions.” Income trusts have been beaten up due to “ uncertainty about
Show they’ll be treated ( by Ottawa). A lot of value has peeled off; they’ve dropped 13 per cent from their highs, while the TSX fell 6 per cent in October.” Add to the mix oil, “ falling from a high of $70 ( U. S.) a barrel to $60 — with 35 per cent of the incomeindex in royalty trusts, which go up and down with the price of oil. Then there are REITS, which comprise 15 per cent of the income- trust index. Interest rates are going up and will continue to go up.
“ The economy is pretty strong, we’re working close to capacity in Canada, and the Bank of Canada will continue to tighten interest rates. We’re still behind the U. S. in this phase.” Take a breath. It’s only 9 a. m. Where does the drive come from? Delaney is modest in describing her career trajectory. She wasn’t a child genius and she didn’t play team sports. She was aware her parents were different. They spoke English with German accents and her father had a global view of business at a time when Canadian business leaders were quite parochial. Helmut Herrndorf — his friends called him Bobby — ran Herrndorf Securities with an eye on the international scene. He taught his daughter to pay attention to the world beyond Canada’s borders.
At the University of Manitoba, she took an arts degree, majoring in political science — though she’d always been good at math and “ liked numbers” — and had no grand aspirations. “ In those days, women went to university to find a husband. That’s just the way it was.”
Destiny had other things in mind. She wound up working at Merrill Lynch in Winnipeg, where she encountered a young man from her neighbourhood. Ian Delaney, five years older, had grown up a block from Kiki Herrndorf, but they didn’t meet until they bumped into each other at work. Nowadays, Ian Delaney is a man whose reputation precedes him by a country mile. “ Fidel’s favourite capitalist” ( Business Week) or “ The Smiling Barracuda of Bay Street” ( numerous articles) was just a college dropout back then. He moved on to Merrill Lynch’s Toronto office, eventually becoming president and chief operating officer; Kiki Herrndorf landed in the city in 1972, shortly after his arrival. She joined Guardian Capital Group as an analyst. “At the time, it was hard as a female to get a job in the industry.”
At business luncheons at clubs, she often had to go in the back door. “ It was only 30 years ago. Sometimes, in meetings, I was asked not to sit at the main boardroom table.” She ignored such requests, supported by her colleagues at Guardian, and roseto executive vice- president and director. Of Guardian, she says, “so many good teachers in one place.” One of them, Jim Cole — for whom Delaney recently organized an 80th birthday party — says, “ Kiki was an unusual person: trustworthy, disciplined, imaginative, hardworking, integrity; she had all those qualities. All I did was encourage her, and she didn’t need much encouragement.”
In 1975, she married Ian Delaney at City Hall and went right back to work. She spent 13 years at Guardian, and in 1985 joined Gluskin Sheff & Associates, where she eventually became executive vice-president and partner; she managed private client and pension fund assets. ( To become a client of GS, the minimum entry amount is $ 1 million.)
Ira Gluskin and Gerry Sheff were already legendary figures in the business. “ Those guys are smart, aggressive, dynamic,” Delaney says. “ Gerry is incredibly decisive and I learned how to run a business from him.” The Delaneys, meanwhile, had two sons, in addition to Ian’s two boys from his previous marriage. (His first wife lives in Winnipeg). Today, the four “ boys” range in age from 40 to 19. There is a grandson, age 3. They raised their boys with “ a lot of help,” including two nannies. She suffered the inevitable mother’s guilt, but she feels the boys thrived. “They’re good guys and I have a great relationship with them.” The younger ones were 8 and 6 when she set up C. A. Delaney Capital Management in August 1992, taking with her Nancy MacKellar, Gluskin Sheff’s vicepresident of finance to run the new business.
Delaney says she couldn’t have done it without her husband’s “ adamant” conviction that she should do it. “ Left to my own devices, I wouldn’t have had the confidence to do it.” Responds Ian Delaney: “ I wouldn’t have taken over Sherritt without her adamant insistence. It’s a partnership.”
In 1990, he masterminded the takeover of near bankrupt SherrittMines, which he transformed into Sherritt International Corp. A major investor in Cuba ( metals, oil and gas and electricity) and Canada, where the focus is on coal, Sherritt is betting that coal will become a major energy source.
“ North America is running out of gas and has 40 per cent of the world’s coal,” he says. “We’re thinking about gasification, turning coal into gas” for industrial purposes.
Along the way, Ian Delaney was banned by the U. S. government from entering the U. S. — a prohibition handed down 10 years ago that extended to his spouse, as a result of Sherritt’s determination to do business in Cuba. His wife says he “ marches to his own drummer,” which could be said of her, too.
“ The professional Kiki kind of scares me, she’s such an awesome figure,” says her sister- inlaw, Eva Czigler, CBC’s acting executive director of network programming ( English TV) — married to Peter Herrndorf, former CBC head of English TV, now president of the National Arts Centre in Ottawa.
“ I know the Kiki in her slippers, nesting at home. She’s an elegant, gorgeous woman who’s goofy, funny. She’s an amazing athlete who’s broken her toe twice. I adore her.”
Kiki’s known for being very sociable. “ Ian will say, ‘ I guess I’ve exhausted my social talents,’ and go home early,” says a friend. “ Kiki will stay all night.” Nancy MacKellar disagrees. “ Kiki doesn’t stay all night — she’s too disciplined. But it’s true that our business requires sociability. It’s a high- net- worth business.”
Ira Gluskin observes, “ Kiki’s out there spreading goodwill, getting clients.” (“ She has half our assets with one- fiftieth our overhead,” he adds. “ We have 55 people and she probably has 15.” He’s right.) Among her volunteer activities, she has served or is on the boards of various institutions — the AGO, Shaw Festival, National Ballet School, Canadian Women’s Foundation.
“Kiki’s very competitive, relentless,” Gluskin says. “She’s been on top for a long time and it doesn’t just happen. There are no fat cats in this business anymore. You have to be reading and researching and Blackberrying all the time. You’re never off duty, and she never is, yet I believe her to be a good mother and a good wife. She travels around the world with her husband.” Which is fun, for both Delaneys.
“ Ian is a highly entertaining person to hang out with,” she says. “ He’s a big- picture guy, he has great vision. Like the coal business.” ( She won’t put clients into any companies on which her husband sits on boards, including Sherritt and EnCana, unless the clients specifically request the investment.)
Last year, the Delaneys saw China with their own eyes. Their next big trip is to India, to celebrate their 30th wedding anniversary. “ The power of China and India,” she says, marvelling at the prospect of the two most populous nations on Earth propelling themselves into the forefront of the world’s economic powers. The key for North America “ is how we will benefit, or not.”
“ We work on themes, we look out into the world, analyze major changes and look at companies that can benefit from those changes.” Resource companies — producers of copper, nickel, zinc — are obvious beneficiaries of “ the huge sucking sound from China.” The issue for North American firms is to “ figure out how to trade with China.”
Ian, on the phone from Havana, says of the Chinese, “ Scary, it’s scary how fast they do things, how quickly the changes happen. Much of the manufacturing base has shifted over there. Their trade surpluses are our trade deficits.”
Kiki stands in front the Burtynsky photograph hanging over her boardroom table, and we stare at the mesmerizing image of thousands of yellowsmocked Chinese workers making coffee pots in pristine precision, as far as the eye can see.
“ Think about that,” she says, and goes back to work.