AIC Ltd. is moving ahead with a new “turnaround” strategy that it hopes will quell the rising tide of redemptions and market failings that have cost the company $6.5 billion — or about 58% in assets — in the last six years.
The company is promoting its new partnerships with three American-based deep-value firms — Third Avenue, Ariel Capital and Loomis Sayles — and one Canadian-based infrastructure and real estate corporation, Brookfield Redding.
Through these partnerships, AIC will offer five new focused funds: AIC Global Real Estate Fund, AIC Global Bank Fund, AIC Global Insurance Fund, AIC Global Wealth Management Fund and, the latest, Brookfield Redding Global Infrastructure Fund.
Despite the tumultuous market, or, more aptly put, to spite the tumultuous market, these new offerings provide investors with exposure to areas that experienced tremendous volatility in the last 12 months.
The launch of these funds is the culmination of a process that AIC undertook two years ago to develop a partnership with the “best” value-investment firms around the world. At least that’s the party line.
During Tuesday’s roadshow to advisors, AIC CEO and CIO Jonathon Wellum said despite company losses, current market conditions were a great time for value investors.
As such, “the AIC portfolio management team will focus on global financials, Canadian equities, Canadian bonds and dividend and income opportunities,” he said. However, the newly minted partnerships would also allow AIC to augment its range of products and allow investors an opportunity to cash in on the “best-in-class” expertise these additional firms offered.
“These firms focus on products that are supported by long-term fundamentals,” Wellum noted. “By working with best-in-class partners to develop unique products based on their expertise,” we avoid “faddish products,” and provide investors with “products that do not violate long-term fundamentals.”
Michael Winer, portfolio manager at Third Avenue and a key player in the newly-launched AIC Global Real Estate Fund, explained to advisors how his company continues to post profits 22 years after opening its doors.
“We tend to run a concentrated portfolio because we tend to invest in stocks in which we have a high conviction. That [style of investing] is really a byproduct of value fundamentalism and it means we tend to know companies we are in investing in very well,” he said.
Winer added “if you don’t know the companies as well as you should, then you must diversify, but diversification is really a poor surrogate for knowledge, control and price consciousness. We are not concerned with having 50 or 60 stocks in our portfolio. We’d much rather have 20 stocks in our portfolio and know those 20 companies as well or better than any analyst out there.”
AIC hit its peak with $15.4 billion in assets under management in 2002, but since then, the company has stumbled. This new “turnaround strategy” may be the plan required to plug the leak by the fourth quarter of this year. Perhaps this is why, despite recent losses, Wellum and his fund managers are sticking to their core strategy: continue to focus on buying wealth management, and bank and life insurance companies, while adding new funds in countercyclical sectors like real estate and infrastructure to reduce volatility.
“The short-term behaviour of the markets is creating opportunities for disciplined managers to find attractive opportunities in the market,” said Wellum. With that in mind, AIC, which currently boasts approximately $7 billion in assets under management, is poised to launch a sixth fund in May or June of this year: a “special situations” fund, co-managed by Third Avenue.
Originally published in Advisor’s Edge Report in April 2008