Bissett in a slump
Returns have cooled off at this well-respected company. So now what?Two years ago, Calgary-based Bissett & Associates was named Fund Company of the Year by the industry. Its funds were the toast of the nation, offering excellent returns, low management fees, and no sales commissions. Investors rushed to climb aboard, to the consternation of the company’s managers who feared too-rapid growth would have a negative impact on returns.
They were right to be nervous. As assets under management increased 10 times over the three years to the end of November 1999, performance slumped across the board. The Bissett Canadian Equity Fund went from first quartile to fourth, with a gain of just 2% for the year to Nov. 30. The Small Cap, International Equity, Multinational Growth, and Retirement funds suffered similar fates. The Bond Fund fell from first to third quartile while the Dividend Fund dropped from second to fourth. Only Bissett Microcap held its ground, perhaps because its small size provided the manager with the flexibility the other funds had previously enjoyed.
Funds managed by Bissett for other organizations also were hit. The Atlas Canadian Large Cap Groh Fund, run by Bissett’s Fred Pynn, also fell from first to fourth quartile, with a loss of 0.9% over the year to Nov. 30.
We’ve seen this phenomenon before. It’s happened to Mackenzie, to Altamira, and to Trimark, to name a few. The whole company goes into a collective swoon. Sometimes, the only cure is a radical shake-up.
What’s the problem in this case? For starters, Bissett uses a GARP approach to stock selection (growth at a reasonable price). So although they focus on growth stocks, they won’t overpay for them. That puts a value overlay on their stock selection process, which tends to screen out high flyers of the type that have been driving markets recently.
Second, the style in their older funds has been to use equal weightings for diversification purposes. So although Nortel is in the portfolio of the Canadian Equity Fund, it only represents 3.5% of the assets, way below its actual market weight. That has pulled down returns.
The new Bissett Large Cap Fund has more flexibility to overweight stocks and sectors and performed better during the autumn as a result.
No major direction shift is being contemplated at Bissett at this time, but they are making some adjustments in their approach.
“The world is changing and we have to adapt our style to it,” says company president and CEO Kevin Wolfe. “We’ll look at some stocks with higher p/e multiples, within reason. And we’re reviewing our whole line-up to see if we need to offer new alternatives.”
We hope they turn things around quickly, because we like the company. But as things stand right now, we cannot encourage MFU readers to invest new dollars here. If you’re already a Bissett investor, you may want to move a little money around to take advantage of the few funds that are doing well — Large Cap and Microcap are the obvious choices.
Just remember that slumps in this business can last a long time. If a rebound in Bissett’s core funds isn’t well under way by spring, you may want to consider finding a new home for your money.