Wayne Deans at his Vancouver office (Photo: Tommy Hump / CEO.CA)

If you’re in the investment business in Canada, you may be just a little jealous of Deans Knight Capital: it’s a super successful small company with savvy entrepreneur clients and a fun, friendly corporate culture. And if you’re a Deans Knight client, you’re probably a happy camper -- the company has produced better than 15% average returns over the past 20 years.

On the occasion of the 20th anniversary of the founding of Deans Knight Capital, co-founder and CEO Wayne Deans co-authored a book about managing other people’s money called Don’t Listen To Everyone With An Opinion. It offers twenty colorful (and explicit) lessons to commemorate the firm’s 20th year of operation. When I heard about Don’t Listen, I called Deans’ office to interview him. We set up a meeting; at his office, I was welcomed by Mr. Deans and staff. Energetic and self-deprecating in person, Deans symbolizes the idea that smarts, hard work and aligning yourself with the right people can pay off for people who come from humble beginnings.

Deans tells me he was raised poor in the outskirts of Montreal. He was a competitive kid, academically and athletically, and he didn’t take much for granted. “Most kids I grew up with wanted a new bike and a pair of skis. I wanted central heat,” Deans writes in Don’t Listen.

During the late 60s, Deans attended Sir George Williams University (now Concordia) because he couldn't afford tuition at the more prestigious McGill. After his undergraduate coursework, he pursued an MBA from McMaster University in Hamilton and planned on getting into investing. But because he didn’t yet have the pedigree to land an industry job, Deans ended up at the Bank of Canada. He spent the next decade getting an “on-the-job PhD in economics,” and was told that if he worked hard and was lucky, he could earn his age for the rest of his career. But the advice didn’t resonate.

“I wanted to be a millionaire,” Deans told me enthusiastically in his upscale boardroom, overlooking Vancouver’s stunning Convention Centre and North Shore Mountains. “Earning my age wasn’t going to work for me.”

In 1980, after a decade of service to the central bank, Deans landed a corporate gig, working with Wood Gundy in Vancouver. He quickly became a top producer there, brokering profitable deals between Quebec companies and the BC Government. In 1985, Milton Wong of MK Wong and Associates convinced Deans to join him. Deans eventually became the firm’s president and led its equities investment group. There, at what was then one of Canada’s leading pension fund managers, Deans met Deans Knight Capital’s future co-founder Doug Knight, a debt specialist ten years Deans’ senior.

Seven years after taking the job, Deans left MK Wong, citing “fundamental differences of opinion”. Doug Knight joined him on his way out the door, and in early 1993 Deans Knight Capital become officially licensed to manage other people’s money. Their corporate headquarters took up all of 500 square feet in a small downtown Vancouver office.

Deans Knight managed money for the mutual fund industry in the mid 90s, but the duo dropped the model in 1999. “Mutual fund investors kept bailing after years of poor performance, and piled in during good years, which is unsustainable”, Dean explains.

Deans and Knight avoided the Dot Com boom and bust of the late 1990s, and instead preferred out-of-favour mining and energy firms led by managers they knew personally.

And they had some massive wins. They were early investors in Robert Freidland’s Diamond Fields, which soared from $.10 to over $140 in 1995. Deans Knight picked up shares in Lionore Mining in 1997, which ran from $.50 to over $27 per share when it was bought out in 2007. They even made money on Bre-X, the most famous mining fraud of all time, by selling their shares before the fallout went mainstream.

“When something is the ‘biggest ever!’ be careful,” Deans warns in his book. "When the head geologist falls out of a helicopter, pay attention,” he adds.

Still, Deans Knight never was solely a resource-focused investor. The firm was open minded and willing to consider any company in any industry. Their expertise also extended to high-yield debt, where Deans Knight was the first major investor to participate in the Canadian high yield market. Co-founder Doug Knight would roll up his sleeves and analyze debt contracts closely, especially for smaller companies whose instruments were just off of the radar of pension funds and other large institutions. Their generalist, “Know what you own” strategy has proved to be a winner.

“Investors should skip the readily available information and come up with their own,” offers Deans by way of advice. “If you can’t distill into one or two useful paragraphs why investing in a business is a good idea, then you probably want to move on to something else.”

As the Deans Knight model evolved, their clientele shifted to mostly wealthy entrepreneurs with net worths of “a few hundred million to ten billion dollars”. The benefits were obvious. Deans says his clients are themselves talented entrepreneurs and asset managers, who have helped immeasurably with due diligence and idea-flow throughout the years.

As a result, Wayne Deans values his clients immensely. He says he spends 70% of his time on the road looking at opportunities, often with those clients. At age 67, he has no plans to step aside. However, should he need to, he is confident his team can handle things.

And the people who work with Deans clearly admire him. “Wayne has this amazing ability to tell somebody what they’re saying is stupid without making them feel totally stupid - or maybe making them feel stupid but feeling good about it, knowing they’ve learned something,” commented Dillon Cameron, Co-Chief Investment Officer at Deans Knight.

One of Calgary’s most successful oilmen chimed in to offer Mr. Deans praise. “And there is the signature humour, warmth and utter lack of pretense,” said John Hagg, co-founder of Canadian Northstar Corp., and an early client of the firm.

1000 copies of Don’t Listen To Everyone With An Opinion are available by donation to the SPCA (Deans is a dog lover).