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June 9, 2014

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Interview with Thane Stenner, TIGER 21’s face in CanadaJonathan Chevreau October 23, 2010 ‚Äì 6:00 am This weekend’s Wealthy Boomer column in the paper focuses on TIGER-21 and its new managing director inCanada, Thane Stenner. What follows is an edited transcript of an interview with Stenner conducted earlier thisweek:Jonathan Chevreau (JC):To start, I wanted to clarify your role with Richardson GMP Ltd., which is full-service investment firm.Thane Stenner (TS):Yes, Richardson GMP is focused on the High Net Worth investor, defined as $1 millionplus. Our group is $10-million.JC:Decamillionaires.TS:Right.JC:Or Ultra-High-Net-Worth?TS:Technically, UHNW is $20 million to $30 million. For our group, we say a minimum $10 million, which isdecamillionaires. My group, which I founded, is Stenner Investment Partners, a private investment office withinRichardson GMP, with clients across Canada.JC:You describe it as fee-only, but I think you mean fee-based?TS:Yes.JC:So if you charged 1% of a $10 million portfolio, that would be $100,000 a year?TS:Yes, but it’s a function of asset allocation and is less for portfolios with more fixed income.JC:So what would your fee be for an all-equity portfolio?TS:For a $10 million portfolio, around 1.2%, all in, and for Fixed Income portfolios 20 to 50 basis points (0.2% to0.5%). It depends on the actual asset mix, how much dividends, corporate and government bonds, etc.JC:So a traditional balanced portfolio of 60% stocks to 40% bonds would come in around 1%?TS:Exactly.JC:And the underlying investments are directly in individual securities held in segregated accounts?TS:Yes, and pooled funds. On the pooled fund side, we have some good tax efficient wrappers to go aroundinstitutional pooled accounts, in order to turn interest income into ROC or return of capital. We add tax alpha bystructuring it very tax efficiently.JC:Do you use ETFs or mutual funds too?TS:Yes, we use ETFs and institutional class or F class mutual funds. For sizeable portfolios we negotiate fees sothey’re off the grid.Charter cities are Vancouver, Calgary, Toronto, MontrealJC:So for TIGER-21, you said you’ll be visiting each of the four Canadian cities once a month?TS:Yes. I’ll visit and attend each of the four groups. I was in Toronto [this week] because we’re still recruiting. Imet with eight Toronto candidates and to meet with the likely chair/ facilitator which we’re just finalizing.JC:Richard Deacon?TS:Yes. He’s an independent contractor who has been on the sponsorship side for many years. There are somestrategic partnerships or sponsorships available for companies that want to align with TIGER-21. Candidly, theymust be best in class.JC:You became the Managing Director in Canada when?TS:A few weeks ago. We announced it on October 5th.JC:They pay you for this?TS:TIGER-21 collects all membership fees. I’m paid a a stipend to assist in recruiting and developing an overallplan for Canada. In an average month it will probably take up three or four business days. But it complements whatI do since I have clients in each of these cities [Vancouver, Calgary, Toronto and Montreal.] For me, this is personaland professional, since it allows me to have three or focus groups a month, and keeps me sharp for what I dowith my own investments. I’m 46 so over the next 10 or 15 years this is a wonderful network to plug into in NorthAmerica.JC:Will you go beyond these four cities?TS:Not in the next year and a half. The maximum is 14 members per city, plus a facilitator. Then we’ll go to asecond grouping in each city, then see from there. There’s no current plans for other cities yet unless there’s strongdemand.JC:Apart from being worth $10 million and paying the $30,000 annual fee, how do you become a member?TS:There’s a verification process on domain knowledge, background checks through Google etc. They mustprovide three character references: an accountant and typically a business lawyer. They’ll go through three or fourinterviews, and not just with me. There’s Nancy Reid in New York’s TIGER-21 office and Montreal members willtalk to Martine Cunliffe.JC:Do you see cultural differences among the wealthy in the U.S. and Canada?TS:Yes. I do believe it will be a little bit more representative of humbler more private persona. I have a mandateto ensure Canadian content is relevant. Having worked with a US firm – Merrill Lynch – years ago, I can see howthings can get too US centric; given my contacts and footprint I will ensure it’s Canadianized to be relevant everysession; but there are some great thought leaders like Steve Forbes, Rudy Giuliani and John Paulson in privateequity: the best of the best from an international perspective but also lifestyle issues around philanthropy, leadingminds on philanthropic giving; issues like personal security and privacy. From a content perspective, portfoliodefense is really the most dynamic piece of the curriculum.Is the fee tax deductible?JC:Is the $30,000 annual fee tax deductible in whole or in part?TS:There’s a high probability of the majority being tax deductible, based on the latest my accountants are saying.JC:So more than half the fee is tax-deductible?TS:Yes, it’s legitimate, pertaining to investments so that’s a positive. It’s probably not 100% tax deductible buthaving said that given the quantum of the fee its something each member will need to get advice on just to be surethey’re comfortable with what they’re deducting, hence most of the content is around investments.JC:What kind of speakers will there be?TS:Private equity, hedge funds, long-only fixed income, credit. Bill Gross at PIMCO, Barry Allan at Marret. DavidRosenberg of Gluskin Sheff speaks in the U.S.JC:I presume these aren’t open to the press.TS:No, but we’ll arrange for private media interviews out of sesson; if they come in for lunch or dinner, I’ll pickone or two national guys and a few local ones in each city.JC:Can TIGER-21 members become your clients or vice versa?TS:Absolutely. It’s quite regular that members can and do do business together; From a liability perspective,TIGER-21 can’t be seen as an advisory group; it’s not. It’s a network. Given US and Canadian laws, it’s simplyfacilitating an open forum discussion. That’s what they’re paying for but relationships are built in different waysand people deal together. It’s a little different than YPO or Tech, which are focused on maximizing business valuewhile TIGER-21 IS more on being a good steward of wealth and being in essence a good CEO of your investmentcorporation is what it boils down to.Members split on prospects of double dipJC:Your Fall outlook survey suggests your members are still worried about the economy and the stock market.TS:I’d agree. A big part is they feel responsible for themselves, the next generation and the community. You’ll findthat most worked hard to earn it and want to preserve it: growth is secondary.JC:Do you help them with hedging and options?TS:Mostly, the third party managers do that since they can more efficiently capture the hedge cost-wise. Much ofthe managers or structures we use have that option built in to it and priced in it; at the end of they day you wantsome fluidity in an investment strategy. Some alternative managers will range from 50% to 100% hedged, oftenwhere can add incremental return.JC:The survey shows members split about whether we’re headed for a double dip recession (40% said no, 37?%yes).TS:I’d concur with that. I’d argue lots of that is already baked in to prices. It’s not a new theme.JC:They’ve become more conservative since 2008? How much are they in alternative investments?TS:They’re doing more but this was even before 2008. Historically it’s been between 20% and 40%, but it dependson the quantum of assets. Through our Portfolio Defense, speakers and dialogue, TIGER-21 members influencedeach other other to get more conservative late in 2007 and early in 2008, before the bear market. It helped thempreserve capital though they certainly weren’t immune. More cash, bonds and some market neutral strategies. Manyreduced long-only exposure for sure, some shorted. In essence, they became more defensive.Collective intelligence gave members early warning on financial crisisJC:Did they identify the subprime mortgage problem before it was widely known about?TS:Yes, absolutely. They were well aware of it and in tune. Having access to the brightest portfolio managers oreconomists out there does give you an edge.JC:So in 2008 at least they recouped their $30,000.TS:Easily. But seen the other way, there was also a tremendous amount of dialogue early in 2009 about membersgetting more aggressive. In hindsight, it may have been obvious there was a buying opportunity but when you havethat much capital you want to debate the issue and do the right thing. From a fear perspective, it wasn’t that obviousbut most did increase their risk profile and fully or almost fully recouped their high watermark balances.$5,000 deposit to bring in guest attendeesJC:Can members bring in guests and family members?TS:No, just one member per membership due but in the portfolio defence sessions, a member can bring in a spouseto listen in on the dialogue on Net Worth and asset allocation. They also tape it, which can be shared with spouses oradvisors.JC:Wouldn’t you want them to bring guests for referral business?TS:That’s a different issue. Members are encouraged to introduce us to others but whoever is interested must gothrough a vetting process. To go to a meeting as a guest they must sign a confidentiality agreement and must putdown a $5,000 deposit as earnest money that they get back if they decide not to proceed.JC;A typical day goes on how long?TS:From Noon to 7:30 pm. There’s tapas at 5:15 and a dinner after. It’s very content rich. When you’re in a groupwith really bright people with successful backgrounds, you learn a lot. There’s definitely a social aspect to it. Theannual conference will be in West Palm Beach late in January. There will be a leading political figure I can’t revealand sessions for spouses at that.The day they look forward to each monthJC:The social part is a big element?TS:Absolutely. The most frequent comment from them is that the monthly meeting is the day they look forward tothe most each month. Some travel from out of town to attend. It’s a very vibrant network and at the end of the day youlearn a lot and also have a lot of fun. That’s why we have to be very careful as to personalities. It’s one thing to havethe money and background but at the end of the day you don’t want people who are too egocentric.JC:So you deny membership to some who do have enough money?TS:Yes, which is very delicate thing. There are different ways of doing that. It’s not easy but I prefer not to go intothat. By the same token there are only 14 spots per city. Seven have agreed and we should be at 20 or 25 by the end ofNovember and on our way to 40 or 50 by March/April.JC:What if you don’t live in the four cities?TS:Lots join from other locations. One Calgarian has joined Vancouver and we have Torontonians in Montreal andvice versa. These are busy people so we’ll schedule it out 12 to 18 months in advance. All the meetings are held atclubs.JC:Who approached whom when it came to you joining TIGER-21?TS:That’s interesting. I was approached by about 15 clients and contacts over the last 18 months after people readabout TIGER-21 in the U.S. I contacted them. They have been considering Canada for five years. It seemed a naturalfit after a 14-month dating period. I went to five sessions in New York. It can be quite intimidating. Compared tosome, I’m a humble pauper.I met with a 53-year old who sold his business and wants to do something to keep sharp and see what other brightpeople are doing with their money, how they vet things, and benefit from the collective wisdom of the group.JC:How did you get to $10 million so fast yourself? You’re just 46.TS:I’ve been an investor since I was eleven. My father [Gordon] was in the business for 45 years and I grew up livingand breathing it.JC:What was the stock you bought at 11?TS:It was a fund, Templeton Growth Fund.JC:You still own it?Berkshire Hathaway most popular investmentTS:I own Templeton Emerging Markets Fund. The largest individual holding of TIGER-21 members is BerkshireHathaway.JC;You said two years ago you wanted 65 to 70 clients. Are you there yet?TS:We’re at 52 now: we try to bring in one new relationship a month.JC:Can they all become TIGER-21 members?TS:They can if they want to but we have to be careful that everyone gets a good shot at it. Whoever responds first andis TIGER-worthy and met all the criteria can get accepted in.JC:Remind me what TIGER-21 stands for?TS:The Investment Group for Enhanced Returns for the 21st Century.JC:Too bad about Tiger Woods.TS:Yes, when you google it you do get some Tiger stories. Thankfully, this is not this kind of social network.