I have always been vocal about what I like, and I want to tell you about my favourite fund company and fund manager, Irwin Michael. I don’t believe the sales propaganda that people say about all mutual funds being the same. Most mutual funds salespersons don’t have an investment direction/philiosophy and will sell the most trendy or performing fund. You end up seeing investors that have “flavour of the month” funds. You will see them having 3 or 4 mutual funds, because those are the ones that were good. And you also know when they were good based on when they were bought. The conservative salesman will go with a consistent fund, that is neither an under-performer or an over-performer. Having said all that, it’s not anything wrong if the ultimate goal is to get people to save their money rather than waste it on useless expenditures.
But here’s where I take a stand. A fund should be chosen based on some understanding of what it’s doing; based on the management of the fund. You ARE paying someone to manage funds for you, so wouldn’t you expect some accountability? My goal in particular would not be satsified by mere consistent performance but I want to see consistent outstanding performance. Let me tell you about what Irwin Michael brings to the table.
Having been on the inside of the industry as a mutual fund salesman. I can tell you in my humble opinion that the Canadian mutual fund industry is in shambles. Expense ratios severely outstrip those of our American counter part; more often twice as expensive. Mutual fund companies offer no transparency into their selection process, nor do they truly educate their customers to become better investors; perhaps being more content to have them just as customers lest they get intelligent and leave them. Sure, there are no scandals in the Canadian mutual fund industry but there isn’t any need because the companies get away with a lot of other things already.
I do believe that the funds I recommend to most people fit their goal. I admit that most customers neither want to spend the time to be educated, nor are really interested in going after the performance because of the average person’s risk tolerance. But once you understand how a fund manager works, I believe most people do feel comfortable with how Irwin Michael manages his ABC funds and the company.
Irwin Michael is a rarity among fund managers and companies alike. His proven track-record with his fund performance is outstanding to put it conservatively. He is totally transparent in his management of the fund, publishing his picks and fund details fully using two websites – ABCFunds.com and the amazing ValueInvestigator.com. He puts his money where his mouth/picks are… he fully invests his own money and his family’s money into the funds he manages. He eats his own home cooking basically. I do trust a fund manager that is tough enough to hold his mandate, and not be subject to the whims and expecations of the fund company. Most fund managers are handcuffed by the company to perform and fear being fired if they don’t. Irwin’s analysis into his picks are insightful and gives re-assurance to its investors. I may be bias here but I am also a fan of Irwin’s deep-value investment style.
Two of Irwin Michael’s picks have really shine out recently. RiverForest (TSX: RFP) and Decoma (NASDAQ: DECA) have really outperformed because Irwin was able to spot the deep discount to the company’s bookvalue, and realize they were potential takeover targets. The analysis rang true as Tolko and Magna International seeks to buy up these 2 companies respectively. Irwin took profits early with RiverForest (there’s never anything wrong with taking profits early, especially profits the size of RiverForest), and he’s still holding onto Decoma as the news about Magna’s privatization efforts are fairly recent. In fact, he only bought Decoma recently, and as of this writing, it is representing at least a 20% gain for the position in the portfolio.
The fortunate thing is that ABCFunds is a well-kept secret. As an investor, I may come off a little bit selfish in not wanting too many people to know about a good thing. Irwin knows that he cannot do his job correctly if his fund company behaved like other big players. He serves a niche clientele much like other boutique fund companies such as Chou Associates, and PH&N. All these fund companies have one common criteria, you cannot invest in their funds unless you’re investing large sums. For ABCFunds, it has to be at least $150,000. So there’s no messing around. That’s what I call an investor decision!
But I am invested into the picks I recommend. I also would like to put my money where my mouth is. I get to invest in the ABCFunds through my Canada Life Universal policy through monthly contributions. It is really the only way for anybody who would like to invest small amounts with ABC. My family also has Canada Life UL policies. We made a decision to go with Canada Life solely because of the investment potential. It is a decision that I am very proud of. Irwin, I do hope that you will continue doing your outstanding work!