To thread,
Another buyer for Newbridge? As a Canadian RRSP eligible fund, at
least 80% at book value of the funds assets must be in Canadian
Stocks.
Ian.
+++++++++++++++++++++++++++++++++++++++
Altamira fund prepared for redemptions
Equity Fund has been selling stock to raise cash
for redemptions after star Frank Mersch resigned
Friday, May 8, 1998
By Shirley Won
Mutual Funds Reporter
Altamira Investment Services Inc. has been quietly amassing cash in
its flagship Altamira Equity Fund in anticipation of a flood of
redemptions following the resignation of its star manager Frank
Mersch.
Mr. Mersch, who has managed the $1.8-billion Altamira Equity Fund over
the past decade, yesterday announced his departure amid accusations by
Ontario securities regulators that he lied about a personal
investment.
Altamira said a new team will run the equity fund, whose assets
represent one-third of the $5.4-billion of the company's mutual-fund
assets. Toronto-based Altamira, which has been hit by net redemptions
for more than a year, has sunk from the No. 8 fund company player in
1994 to become the 20th-largest in Canada.
Ian Ainsworth, the newly appointed lead manager on the equity fund,
confirmed yesterday that he has been overseeing the sale of some of
its less-liquid, smaller-company stocks to raise the fund's cash level
to about $300-million.
"We accelerated that sale [of stocks] in the last few days because we
had to raise some cash just in case there were redemptions," Mr.
Ainsworth said.
The fund is not getting rid of all the small-capitalization stocks --
a feature of Mr. Mersch's active trading style -- but will as a
general strategy be buying more large-company names in areas like
high-tech stocks, he said.
Industry observers say Altamira's concern about investors redeeming
their units in the equity fund is not surprising, given that Altamira
is a no-load fund company where investors can come and go easily,
because they don't pay commissions. Many investors flocked to Altamira
because of Mr. Mersch's fabulous track record in the early 1990s when
the fund was much smaller.
More recently, the fund gained a dismal 11.9 per cent over the year
ended April 30, compared with the 30.3-per-cent gain for the Toronto
Stock Exchange 300 total return index.
"It's the end of an era, but Frank Mersch is the [Altamira]
franchise," said Stephen Kangas, vice-president of external funds at
Canada Trust. Recalling how Mr. Mersch used to attract overflow crowds
at financial forums in cities including Toronto and Vancouver, he
said: "He was like a rock star at one time."
Mr. Kangas said the rule of thumb for the size of redemptions is that
they could be up to about 10 per cent of a fund's assets for
"significant" management changes.
But he said that applies to load funds, which are sold by hand-holding
financial advisers who charge commissions.
The redemptions could be bigger in Altamira's case. "In the no-load,
do-it-yourself world, clearly it's a big story."
But many investors have been redeeming fund units because they were
disappointed with Mr. Mersch's performance, and because they were
uneasy about a bitter battle for the ownership of the fund company
that was finally settled last fall.
At its peak in early 1997, the equity fund had $2.5-billion in assets.
Gordon Cheesbrough, who became president and chief executive officer
of Altamira in January, acknowledged that "Frank was obviously part of
building Altamira," but said he has other strategies to turn around
the company.
Mr. Cheesbrough said the equity fund will be managed differently from
now on. It will still have a growth strategy, but use a bottom-up,
stock-picking approach, instead of Mr. Mersch's top-down look at the
economy, in which he made bets on the sectors expected to outperform.
The fund will now be managed by a team led by Mr. Ainsworth -- who
has racked up impressive numbers lately as manager of the Altamira
U.S. Larger Company Fund and the Altamira Science & Technology Fund.
Altamira managers Susan Coleman and Shauna Sexsmith will also be part
of the team.
Mr. Cheesbrough, formerly chief executive officer at Toronto-based
brokerage firm ScotiaMcLeod Inc., said there is now a "terrific team"
on the equity fund, and more changes will come following the recent
hiring of Chris Hodgson. He is the former head of the retail broker
network at ScotiaMcLeod.
Mr. Cheesbrough said the firm plans to examine the high-net-worth
business -- perhaps offering fee-based wrap accounts. And it is
exploring the sale of third-party front-end load mutual funds with no
-- a move that Canada Trust's discount brokerage arm has taken
recently.
Duff Young, president of Windsor, Ont.-based mutual-fund research firm
FundMonitor.com Corp., said he has been recommending Altamira's equity
fund for a long time, but removed his "buy" recommendation after Mr.
Mersch resigned yesterday.
"There are very skilful people running the fund now, but I think
Mersch remains the brightest guy in the business," said Mr. Young,
whose column appears in The Globe and Mail.
Mr. Young said Mr. Mersch has made great sector bets in the past, but
was "stung" by making the wrong calls lately -- such as not buying the
banks and getting heavily into gold stocks last year.
"He has made a fortune in junior oil stocks [in the past] but it's not
the environment for junior oil stocks today."
Mr. Young said Mr. Mersch has always been underweight in foreign and
technology stocks, "which are serious issues. They are an important
area of the market and the equity fund has entirely missed that part
of the market."
Peter Brewster, editor of the Canadian Mutual Fund Adviser newsletter,
said he doesn't believe there will be lots of redemptions because the
people who were already concerned about the Equity Fund's performance
have left.
"The people who say they are redeeming now because Mersch left will
probably be offset by people who feel that 'it's about time -- Mersch
has lost it,' and hopefully this will turn it around."
Mr. Brewster describes the previous money-management culture at
Altamira as "aggressive" and said Mr. Mersch's style is at "odds with
Mr. Cheesbrough's ideas on the mutual fund management business.
"I think that Cheesbrough is more of a marketing man. He probably
wants more conservatively managed funds."
How some of Altamira's North American funds are doing
To April 30, 1998 Returns
1 year 3 years 5 years 10 years
Altafund Investment Corp -12.6% +12.0% +9.2%
Balanced +17.3 +12.1 +9.0 +8.1%
Bond +23.3 +15.6 +12.8 +12.6
Capital Growth +21.2 +12.9 +11.9 +11.8
Dividend +32.7 +23.6 - -
Equity +11.9 +13.7 +12.5 +20.5
Growth & Income +2.1 +4.5 +6.4 +8.8
High Yield Bond +16.7 - - -
Income +10.3 +10.1 +9.4 +11.8
North American Recovery +21.3 +21.0 - -
Prec. & Strategic Metal -24.1 -3.4 - -
Resource -24.8 -2.5 -1.4 -
Science & Technology +59.7 - - -
Special Growth +25.6 +21.8 +10.6 +15.0
U.S. Larger Company +40.6 +25.2 - -
Source: Globe Information Services
[ News ] [ Sports ] [ The Arts ] [ Commentary
|
