By Al Edwards, Financial Editor 
THE RECENT performance of Canadian mutual fund company AIC headed by NCB's chairman Micheal Lee Chin is the subject of intense scrutiny by the Canadian press with newspapers pointing to the high level of redemptions.
Figures released last week by the Investment Funds Institute of Canada ( IFIC) reveal that AIC suffered Cdn$304 million in net redemptions last month equating to just Cdn $10.66 billion in assets under management for the Micheal Lee Chin lead company. In its hey day AIC had assets under management of $15.5 billion. According to the Canadian broad sheet the Toronto Star this represented the single largest loss among all the fund companies listed on the IFIC.
But while AIC has suffered this most recent set back, the Canadian mutual fund industry saw new sales of between $1.3-$1.7 billion for the month of January.
Mr. Lee Chin seemed unperturbed by this latest news and in an interview with the Toronto Star said: " The frustration is that we have unit holders who are short-term in their thinking but the investment process is more of a longer-term horizon.
LACK OF PATIENCE
"The problem is one of lack of patience on the part of investors. What we won't do is change our behaviour. Wealth is created by owning a few excellent high quality businesses that you intend to hold for the long t run that are bought at reasonable prices. What we have to to do is work on investor education.
What has become apparent is that AIC is committed to stemming the redemptions with new fund managers being recruited to improve the company's supposed lack lustre performance.
A spokesperson at rival company Capital Group Companies Inc., speaking under anonymity said that AIC has failed to improve its product line and has not displayed innovative initiatives in order to capture a larger market share. "Because there has been an element of contraction in the business players are having to come up with different ways of drumming up business.
The feeling is that AIC is not heeding the advise of its advisers so to speak and is being left behind. Heavy redemptions means that it has to re-evaluate its position and no doubt off load some of its star performers.
Reputed mutual fund specialist Gordon Pape surmised " AIC has had a lot of problems.
STARTED BLEEDING ASSETS
The company was one of four firms that settled market-timing allegations with the Ontario Securities Commission. But the fact is they started bleeding assets long before that happened. AIC which performed very well during much of the 1990s, somewhere simply lost it and was not able to deliver.
Many of its funds suffered losses during the bear marker from 2000 to 2002. AIC tends to focus on financial services companies and refuses to diversify properly
Many analysts point to a telling fact, that while assets under management of most of the big mutual fund companies rose by as much as 15 per cent in 2004, AIC fell by 13.5 per cent..
In response to critics questioning his investment acumen Mr. Lee Chin speaking exclusively with Wednesday Business said: " A few years ago when many so call ed analysts and media pundits pointed to the expected crash of certain stocks that I was interested in, I was able to invest Cdn$100 million on those companies cheaply at an average price of Cdn$15 per share.
One year later, the stock prices rose and I sold those holdings for Cdn$30 per share. AIC made $Cdn 100 million in profits and we took $80 million of that to deposit on NCB."
Commenting on why investors are leaving AIC, Mr. Lee Chin explained:" We manage Cdn$12 billion for 1 million Canadians. Over 95 per cent of our assets are invested in long term- equity funds. However, as you may know, for the last five years the stock market in North America has gone nowhere.
CLIENTS ARE LEAVING
That creates fatigue and frustration for investors. So yes clients are leaving but not at an inordinate rate but that is not unique in the fund management business.
AIC's woes have not appeared to have inhibited NCB, which Mr. Lee Chin acquired in 2001.
Former managing Director Aubyn Hill is credited with putting the Group on a sound footing. For its first quarter to 31 December 2004, total revenues increased by 6 per cent to J$6.6 billion, an increase of almost J$285 million for the period under review NCB posted a 44 per cent increase in net profit from $746 million to $1 billion.
