Investors: Watch fund manager’s decisions

There is a nasty little tiff between C.I. Fund Management and AIM, who are more than a little upset about one of their star managers, Derek Webb, suddenly decamping. Upset enough, in fact, to take the matter to court, where the legal wrangle continues.

In the meantime, investors are wondering what Webb’s arrival will mean for the fortunes of the C.I. American Fund and the companion C.I. American RSP Fund. It’s no small matter. Between them the funds have more than $1 billion of our money under management.

They had been run for many years by the capable Bill Priest, a conservative manager whose style tended to favour safety over performance. But few investors complained about the results. Over the five years ending June 30, C.I. American generated an average annual compound rate of return of 21%, making it a strong second quartile performer.

C.I. American RSP, with a shorter record, averaged 31.1% over three years, also high second quartile. Those aren’t numbers to make anyone ashamed, especially given the relatively low risk in the portfolio.

New investment style

But C.I. apparently wasn’t happy. Priest has been given his thank-you handshe. Welcome Derek Webb, who brings a much different style to these funds. The official word is that he’s not planning any major short-term changes, but just wait.

Webb is a hard-driving momentum investor, as he showed while at the helm of AIM Canada Growth Class. He makes big bets and, when they pay off, generates great returns. But the volatility is something else!

Great returns, higher risk

To give you an idea of what we are talking about here, according to the ATP analysis of Wilfred Vos of TAL Investment Counsel, only 4% of Canadian equity funds have performed better than AIM Canada Growth on an historic basis. Terrific! But 91% have done better from a risk perspective! Get the picture?

This suggests that if you own units in either of the C.I. American funds, you should keep a close watch on developments and make sure you are comfortable with the style change that Webb will eventually implement.

This will definitely not be a case of "same old, same old".

Mutual Funds Update is a monthly newsletter, edited and published by Gordon Pape.