Leadership Transitions in Active Equity Strategies: How Mackenzie's Bluewater Succession Plan Ensures Continuity and Long-Term Outperformance

In the world of active equity management, leadership transitions are often viewed with skepticism. Investors fear that changes at the top may disrupt a fund's identity, strategy or risk profile. Yet, the Mackenzie Bluewater succession plan offers a compelling counter-narrative. By meticulously designing a transition that preserves institutional knowledge while injecting fresh perspectives, the team has demonstrated how thoughtful leadership change can reinforce, rather than undermine, long-term performance. This is not a case of passing the baton—it is a calculated evolution of a proven investment philosophy.

The Bluewater Team's succession plan is notable for its precision. Dina DeGeer, a 24-year veteran, retired in September 2024, handing the reins to Shah Khan, her 14-year protégé. Khan, who had already co-managed key Bluewater funds, inherits not just responsibility but a legacy of disciplined growth. Similarly, David Arpin's retirement at the end of 2025 will see Tyler Hewlett, a 22-year industry veteran, step into the co-leadership role. Hewlett, who has worked closely with Arpin for three years, brings both operational continuity and a deep understanding of the team's core principles. These transitions are not abrupt; they are gradual, with the outgoing leaders remaining in advisory roles until their departure. This ensures that institutional memory is preserved, while new leaders gain confidence in their roles.

The fund's investment philosophy is another pillar of its resilience. Unlike index-tracking strategies, Bluewater focuses on niche market leaders—companies with durable competitive advantages and secular growth potential. This approach is inherently less susceptible to short-term volatility, as it prioritizes qualitative assessments over quantitative benchmarks. The team's emphasis on ESG metrics further reinforces this focus, ensuring that environmental, social and governance risks are integrated into decision-making. For instance, the fund's weighted average carbon intensity is carefully monitored, and its exposure to sustainable impact solutions is growing. This alignment with global trends—such as the energy transition—positions the fund to navigate regulatory and market shifts more effectively.

Post-2024 performance underscores the plan's success. The Bluewater Canadian Growth Fund has grown to $5.4 billion in assets under management, with a management fee of 0.7%, reflecting both cost discipline and investor confidence. Its portfolio, a blend of 66% stocks and 30% fixed-income, includes holdings like Royal Bank of Canada, Microsoft and Loblaws—companies with strong moats and diverse revenue streams. This diversification, coupled with a focus on conservative growth (targeting 8-10% free cash flow growth in Canada, 12-15% abroad), has allowed the fund to compound value through cycles. The team's avoidance of speculative tech bets—while participating in AI-enablers like Alphabet and Apple—has preserved capital during market selloffs, a critical advantage in volatile environments.

The fund's strategic positioning in key sectors further illustrates its approach. In technology, it has added Alphabet, a company with a dominant search business and a growing cloud division. Alphabet's AI capabilities, particularly through DeepMind and Google Cloud, align with the team's focus on secular trends. In consumer goods, Loblaws exemplifies the fund's preference for businesses with defensible moats. As a leader in Canada's discount grocery sector, Loblaws benefits from shifting consumer behavior toward value-conscious spending. Its Shoppers Drug Mart division, now a key growth driver, reflects the team's ability to identify structural opportunities in healthcare innovation.

The telecom sector, however, serves as a cautionary example of the fund's risk-averse approach. Despite past growth, the team has exited positions in carriers like Telus, anticipating a shift from pricing discipline to volume-driven competition. This decision highlights Bluewater's willingness to adapt to changing industry dynamics, even at the cost of short-term gains. In a sector increasingly resembling a utility, the fund's exit underscores its commitment to capital preservation over speculative exposure.

For investors, the Bluewater succession plan offers a blueprint for managing leadership transitions in active equity strategies. The key lessons are threefold: first, continuity is preserved through gradual, mentorship-driven transitions; second, the investment philosophy must be robust enough to withstand changes in personnel; third, strategic flexibility allows the team to adapt to macroeconomic shifts without abandoning core principles. The fund's performance post-2024—marked by asset growth, cost efficiency and resilience—validates this approach.

Yet, challenges remain. The global economy is navigating a complex landscape of sticky inflation, geopolitical tensions and technological disruption. For Bluewater, the test will be whether the new leadership can maintain the fund's edge in an environment where market concentration—exemplified by the dominance of mega-cap tech stocks—complicates active management. The team's focus on niche leaders, however, provides a buffer against these headwinds. By avoiding crowded trades and emphasizing long-term compounding, Bluewater positions itself to outperform in a world where volatility is the norm.

In conclusion, Mackenzie's Bluewater succession plan is a masterclass in institutional continuity. It proves that leadership transitions need not be a liability but can be a catalyst for reinforcing a fund's strengths. For investors seeking active strategies with a proven track record of growth and risk management, Bluewater offers a compelling case study. The fund's ability to balance tradition with innovation, while navigating the uncertainties of the modern economy, is a testament to the enduring power of thoughtful leadership.