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Manager mobility
Recent changes spark decisions

The movement of mutual fund managers from one firm to another is simply a fact of life in the investment business. Most of the time this isn't a problem. However, at times fund companies tie the merits of a particular fund to that of the "star" running the show. This week, we'll discuss a couple of recent moves that will force investors to make some choices.

Mackenzie hires Ian Ainsworth

A couple of weeks ago, Mackenzie Financial announced that it had signed former Altamira manager Ian Ainsworth to manage three funds previously handled by John Rohr - Universal Future, Universal Emerging Technologies Capital Class, and a portion of Universal Select Managers Canada.

Ainsworth is credited for bringing Altamira back from under the cloud of bad press. In 1998, company founder Frank Mersch left the firm after a long battle with the Ontario Securities Commission over questionable trades. Also, the firm's lagging performance at that time caused the firm to lose many pension and other institutional clients.

Ainsworth took lead of the firm's management team and the firm's flagship Altamira Equity Fund, the e-Business and other funds. Ainsworth transformed the firm's style to aggressive growth, which put a particular emphasis on technology.

For Mackenzie investors wondering what to do or what changes may occur as a result of this recent change, it's helpful to look at how these two managers differ.

Rohr is as sensitive to valuations as is possible for a technology manager. He trades infrequently and keeps risk in check by trimming any stocks whose prices take them to 6% or 7% of his fund's portfolio.

Ainsworth, on the other hand, is quite different, in my opinion. He trades about ten times more frequently than does Rohr; seems to exhibit more aggressive growth characteristics in his stock picks; and isn't as stringent on risk control. On that latter point, Nortel Networks accounted for roughly 1/4 of Altamira Equity at the stock's peak. By contrast, the same stock never accounted for more than 1/10th of Rohr's Universal Future fund because he was concerned about letting it ride too high.

While I was no great fan of either fund previously, I must admit that I view this as a negative change. Rohr's more conservative approach, relative to other tech fund managers, was a rarity. Now, unitholders are having their already battered funds handed over to a much more aggressive manager.

Recommendation: If feasible, dump the funds now being managed by Ainsworth and find suitable replacements, either within or outside of the Mackenzie stable of funds.

AGF lures Graham from AIM

AGF Funds announced just days ago that they have snagged one of Canada's leading small cap managers, Keith Graham. While he's no household name in the fund industry, Graham has had a very successful run managing Trimark Canadian Small Companies and the stock component of Trimark Income Growth for Toronto-based AIM/Trimark Investments. I happen to think that Graham is a very skilled stock picker and AGF is lucky to have him.

At the same time, Trimark's investment team has more depth than ever - giving it the capacity to easily handle this loss of personnel. Don't get me wrong, I think the Trimark team will feel the loss but I don't expect fund unitholders to truly be impacted.

If this had happened several years ago, I would have been more concerned for Trimark fund investors. However five years ago, Trimark added a whole slew of stock analysts to support the great fund managers they already had. It is this bolstered structure that gives me comfort in recommending that Trimark unitholders worry not one moment about this recently announced change.

As for AGF fund unitholders, this should prove to be a positive move. AGF is tight-lipped about any specific plans, but my guess is that the ailing AGF Canadian Small Cap will be high atop the list of new assignments for Graham, when he starts working for AGF in September. Also expect to see Graham participate in one of the Harmony pools.

The funny thing about this is that AGF has kind of come full circle. Back in the fall of 2000, I wrote that AGF's firing of value manager Tony Massie was a bad move since they lacked somebody with his strict value discipline to picking stocks. But value was not in vogue back then so it was easy to cast him aside. Today, value managers are on top of the world and AGF has chosen to (presumably) dish out big bucks to lure such a manager away from a competitor. Seems ironic. I just hope they don't make the same mistake again.

Recommendation: This should be a positive for AGF fund unitholders because Graham is a talented manager. However, I wouldn't necessarily say that AGF's gain is Trimark's pain. Trimark has the depth of analyst and manager talent to make sure Graham's former funds don't miss a beat.

History of manager changes

For a refresher on some of the more significant managers changes of days gone by, take a look at this 2000 article and this one from 2001.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and provides independent investment research to financial advisors. He can be reached at dha@danhallett.com
 
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