Thank God he owns a wine label, as there might be some sorrows to be drowned over at O’Leary Funds Management.
You may recall that Kevin O’Leary admitted last Spring to Globe writer Tim Kiladze, after some blogosphere research forced his hand, to losing $253 million of assets to investor redemptions during the 2011 calendar year. According to O’Leary’s crisis management marketing material, the firm started 2011 off with $1.2 billion under management, and ended 2011 with the exact same quantum. In essence, it appeared as though he raised some money during 2011, experienced $253 million of investor redemptions from his various funds (his figure), and ended up static from an AUM standpoint at the end of it all. Mr. O’Leary told the Globe at the time that everyone on Bay Street suffered in 2011, although the writer called that explanation into question:
“We’ve had our lumps just like anybody else,” he said in an interview, noting that many mutual funds have experienced outflows as investors pile into income and balanced funds. However, he failed to acknowledge that his funds, which are dividend-and-yield heavy, are precisely the kinds of funds that investors have been flocking to.
Now that KO has published the December 2012 monthly reports for his 13 remaining mutual funds, and with the benefit of the December 2012 financial reporting for his four lonely closed-end funds, we can do the math and determine how much of his 2011 figure of $1.2 billion under management remains on hand a year later. At least according to my calculations based upon the net asset figures in O’Leary’s published investor updates.
According to these calculations, O’Leary is now managing $961.1 million, which reflects an AUM decrease of $239 million during 2012. The data is current as of Dec. 31st.
If true, that means 20% of total assets under management appear to have been redeemed or distributed/ground over the course of O’Leary’s 2012 (compared to a ~17% AUM drop in 2011). On that basis, O’Leary’s 2012 figures would compare poorly to the overall mutual fund industry, which saw net positive mutual fund sales during 2012 (according to IFIC), with a strong push into Balanced-type funds. IFIC reports that the overall industry experienced net redemptions only at money market and pure equity funds.
Feel free to check the math, and look up each of the individual fund reports yourself. You’ll see that it’s hard to come to any other conclusion, at least based on the latest data on O’Leary’s website. Each fund has it’s own Monthly Fact Sheet; here’s a link to the one for the Canadian Bond Yield Fund as an example. It’s all quite easy to do for yourself, actually. (Although I know you were probably waiting for us to do the heavy-lifting for you ).
According to IFIC, it was a decent year for many other asset managers. As of November 2012 (the most recent available report), net long term mutual funds sales were $34.5 billion year-to-date, of which $25.5 billion was net sales for “balanced funds”. Bond funds raised $17.9 billion net year to date, while pure equity funds saw redemptions of $12.9 billion. Specialty funds had net sales of $3.99 billion. 11 of O’Leary’s 13 remaining mutual funds are designated either “neutral balanced” or “fixed income”, which are the same asset classes that are attracting net investor capital elsewhere in the IFIC system.
As an industry, mutual fund assets under management grew 9% between January and November 2012, from $769.7 billion to $837.6 billion (source: IFIC). A 20% drop in assets under management for KO versus a 9% gain for the mutual fund sector as a whole; quite the dichotomy.
I wrote to Mr. O’Leary’s team to confirm the $239 million calculation as drawn from their own financial reports (see prior post “Question for O’Leary Fund Management on 2012 AUM figure part 2” Jan. 25-13), and this was their very polite reply:
Our 2012 AUM and performance information is available online. Please visit
www.olearyfunds.com for more details.
I asked the Officer if that could be taken as a confirmation of my $239 million redemption calculation, and they replied that “we are not commenting on your calculation, but merely directing you to the public information available on our website.” Since I drew the 2012 AUM figures from their website, one can only assume it’s accurate.
When your peers are up, and you’re not, I commend Ms. Deslandes for her calm approach to a difficult subject. Can’t be much fun there these days.
With redemptions in both 2011 and 2012 and a rough go in the media, following spectacular fund sales in 2009-10, what does the 2013 RRSP season hold for Mr. O’Leary and his fund managers?
(disclosure: this post, like all blogs, is an Opinion Piece)