By McPherse Thompson, Staff Reporter
(At left) Audrey Richards said that despite market conditions, AIC's American Focus Fund has performed well and has been singled out by the Wall Street Journal for mention during a report in late August and Michael Lee-Chin has encouraged investors to continue to hold the funds as they would be rewarded in the long run. - File Photos
MICHAEL Lee-Chin has admitted that unit holders who have invested in his AIC Funds, a range of Canadian and United States-dollar denominated instruments that are being offered to Jamaicans as investment options, have not "prospered" in the past four years.
However, the chairman and chief investment officer of the Canadian-based AIC Limited, has encouraged investors to continue to hold the Funds as they would be rewarded in the long term.
At the same time, Audrey Richards, managing director of Edward Gayle & Company and local dealers for the AIC Funds, pointed out that mutual fund investments were long-term undertakings and therefore the short-term volatility being experienced should not unduly worry investors. She also said that despite market conditions, AIC's American Focus Fund has performed well and has been singled out by the Wall Street Journal for mention during a report in late August.
In a message to unit holders in the company's semi-annual report to the end of June, this year, Mr. Lee-Chin said AIC would not be abandoning the investment principles that have guided the company through previous uncertain periods of 1987, 1990, 1994 and 1998. "Given that we have built our portfolios on a fine array of strong companies that are responding to current market conditions, we are confident that our investee companies will emerge even stronger from this temporary transition," he said.
In March, this year, AIC Limited acquired majority stake in the National Commercial Bank (NCB), Jamaica's largest such financial institution. In June, then managing director Christopher Lowe announced that as of July 23, Jamaicans would be able to invest in the range of funds managed by AIC. He said the funds would be offered exclusively through NCB's stockbrokerage and investment arm, Edward Gayle & Company.
Mr. Lee-Chin, speaking with the Financial Gleaner from Canada yesterday, noted: "The fact that we in Jamaica are, more or less, insulated from what is happening in the North American market, it is now a good time to buy North American securities. This gives Jamaicans an opportunity to diversify outside of the Jamaican dollar to buy great businesses at reasonable prices, presented only in times of crisis."
Asked to comment on the lack of performance of the AIC Funds, Miss Richards noted that entire markets had not done well over the past two years, but AIC would continue to carry out its strategy of buying into quality companies to ensure positive return for its unit holders over the medium to long run.
Furthermore, she said it was the strength of AIC's philosophy and its strategy of investing in fundamentally sound companies that would ensure the Funds perform well in the long term, as it has in the past.
AIC's semi-annual report, posted on its website, quoted Mr. Lee-Chin as saying that "over the long term, if our behaviour is consistent, and we don't let emotions corrode our sound intellectual framework", then unit holders' capital would be preserved, they would receive above-average returns, and they would minimise taxes as mandated by their philosophy. In the report, the chairman said: "We are also aware that unit holders who invested in AIC Funds over these past four years have not 'prospered'." He suggested, however, that if investors were confident in companies that underpinned the Funds, "then now is a great time to 'dollar cost average', thereby lowering your average cost, and simultaneously capitalising on the prevailing opportunity presented by this crisis."
He said the company continued to be resolute in its belief that wealth was created by owning "a few great businesses" domiciled in strong industries, which it intended to hold for the long run. "We continue to be judicious in owning businesses that fit our stringent criteria," said Mr. Lee Chin. "We continue to work assiduously to assure ourselves that management is being smart and creative, energetic, hands-on, prudent and honest thereby building companies that are entrepreneurial, competitive and hardworking. We are confident that those unit holders who "stay the course" will over time be well rewarded."
Against the background of general market conditions, Mr. Lee-Chin noted that "the first half of 2002 has been punctuated by declining profits, corporate scandals, accounting shenanigans, fraud and poor corporate governance, resulting in a loss of confidence and trust by the investing public, and a stock market that seemingly has no bottom."
The semi-annual report said that with sharply lower equity markets in the first half of this year, the share prices of a number of businesses in the AIC Advantage Fund were adversely affected. In particular, about 55 per cent of the Fund is currently invested in businesses with a high degree of sensitivity to conditions in the capital markets, it said. Those businesses include all of the wealth management companies as well as the brokerage firms and TD Bank.
The key drivers of capital market profitability, such as valuations, trading volumes, new issues and mergers and acquisitions, have continued to decline, resulting in lower earnings and share prices in the short term for the companies affected, it said. In addition, investor malaise has been exacerbated by the recent spate of accounting transgressions in the United States.
