It's the fastest-growing mutual fund company in Canada, and odds are most investors have never heard of it.
Brandes Investment Partners & Co. has kept a distinctly low profile for the past two years, quietly amassing about $2.6-billion in assets under management. That's up a stunning 300 per cent from about $600-million a year ago.
In a sector that's all about marketing and investor road shows, Brandes shuns publicity. It does no advertising or marketing of its nine funds. The senior vice-president of marketing doubles as a media contact.
"We do not talk about individual securities," said Oliver Murray, president and chief executive officer of the firm's Toronto office and former chief operating officer of Mackenzie Financial Services Inc. "We talk about why we are different."
The Brandes difference is what its managers call the "process," the firm's passionate adherence to, ironically, dispassionate value investing.
At the firm's head office in suburban San Diego, teams of researchers follow stocks looking for bargains. Then, a senior advisory team crunches the data again looking for a stock's intrinsic value and the all-important return on investment.
While employees have a cult-like reverence for founder Charles Brandes, critics and rivals alike praise his team-managed approach to investing.
"It's a really good firm," said Dan Hallett, president of Dan Hallett & Associates Inc. He applauds the rigorous process that each investment must pass before receiving the thumbs-up.
"Some of their investment pools are very well run, and it reflects well on the entire sector," said the chief investment strategist of a rival mutual fund company.
For example, the company's marquee Brandes Global Equity Fund reported a return of 33 per cent for the 12-month period ended June 30, well above the group average of 21 per cent during the same period.
Few observers would have predicted the firm's current success two years ago, a rocky launch that brought unwanted publicity to the Canadian startup. In the spring of 2002, Brandes announced it was parting ways with partner AGF Funds Inc. and launching its own Canadian operations. For the previous eight years, Brandes had managed the well-regarded AGF International Value fund. The divorce was bitter, and industry sources claim the separation accelerated the slow and steady decline of AGF's fortunes.
Troubles continued that summer as Brandes began courting financial advisers across the country. AIM Funds Management Inc. filed a $600-million lawsuit, accusing Brandes of stealing confidential client information. Brandes denied the allegations and an out-of-court settlement was reached that fall.
But Brandes advisers and unit holders were more concerned about investment decisions. A fund manager had made a bold bet on telecom, including a $433-million position in the shares of troubled Nortel Networks Corp.
"We will buy controversial securities," Robert Gallagher, director of mutual fund portfolio management, said in a recent interview. "Value will migrate across industries and certain countries and provide us with opportunities to invest."
The Nortel position was sold for a profit long before financial irregularities at the telecom giant surfaced in April this year. Similarly, Brandes profited when it sank dollars into Hong Kong stocks in the aftermath of the Tiananmen Square massacre and emerging markets following the 1998 Russian debt crisis.
"We are not looking at an efficient market. We are looking at a market that's run by emotion, rather than the rational evaluation of what these companies are truly worth," Mr. Gallagher said.
But some industry sources claim that future growth for Brandes in Canada will be a challenge. As part of the company's investing philosophy, funds are capped and do not accept new dollars to protect existing unit holders.
"There's deep appeal for those who supported Brandes from AGF," said a second rival fund executive. "As for their capabilities to turn it into a $12-billion shop, I don't know. It remains to be seen."
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
