Michael Lee-Chin, the poster-boy for value investing, has handed day-to-day management of his troubled mutual fund company to the man who has presided with him over its roller-coaster history.
The enigmatic billionaire has appointed Jonathan Wellum, a loyal first lieutenant for 16 years and the company's investment strategist, as the new chief executive officer of AIC Ltd. The fund company is in need of a fix. Investors have been leaving the firm for years, and industry sources say Mr. Lee-Chin had become a distracted leader, spending the bulk of his energies on investments in the Caribbean.
"Michael Lee-Chin is coming to the realization that he cannot be an absentee landlord any longer and has to put people in place to replace him," said a financial adviser who has dealt with extensively with AIC.
The fate of the fund company, which has struggled in recent years to recapture its former glory, is once again the subject of debate on Bay Street.
In the late 1990s, AIC was one of the fastest-growing fund companies in Canada, cashing in on intense demand for investment in other financial services companies.
More recently, it has fallen from favour. With little or no exposure to hot investments like income trusts and commodities stocks, its returns have been mediocre. Retail fund assets under management have fallen to about $8.2-billion from a 2002 peak of about $15.4-billion. For September, AIC reported $75-million in fund net redemptions.
There's some concern, however, that Mr. Wellum's new duties will do little to win over the fickle investment community. The nagging problem of fund redemptions and customer losses ultimately rests with Mr. Wellum, AIC's investment strategist and co-manager of about $2.1-billion in assets. About 69 per cent of AIC's retail funds receive a mediocre rating of three stars or less from Globefund.com. Only 12 per cent of funds receive a five-star rating from the fund data firm.
"I'm not so sure that this is the right move," said one former employee of Burlington, Ont.-based AIC. Mr. Wellum "is going to be running the investment department, he is going to be running his own funds and in addition to that, he's now going to be running the company. Those are all full-time jobs."
"Does he have the time to do all those things? If your [investment] numbers aren't looking good and you have less time to spend on it, is that a good sign for an investor?"
Mr. Lee-Chin and Mr. Wellum, AIC's chief investment officer and a key fund manager since 1990, were unavailable for comment yesterday. A conference call with the media is scheduled for this morning.
Mr. Lee-Chin made the announcement at an elaborate company birthday party.
On Wednesday evening, about 900 employees of Mr. Lee-Chin's financial empire gathered at the Hamilton Place theatre. The group enjoyed roast beef, lamb and jerk chicken and toasted the 20th anniversary of AIC and sister company, Berkshire Group of Cos.
Then, at 8:30, Mr. Lee-Chin took the stage and dropped the bombshell. The billionaire company founder was resigning as CEO and handing over daily management duties to Mr. Wellum. Mr. Lee-Chin owns more than 90 per cent of AIC and Mr. Wellum the remainder.
"I have every confidence that under Jonathan's stewardship as chief executive officer, AIC will stay the course in creating long-term wealth for investors," Mr. Lee-Chin said.
The charismatic executive will continue as chairman of the company and serve as executive chairman at AIC's sister companies, the National Commercial Bank of Jamaica and Senvia Money Services.
There is continued industry speculation that Mr. Lee-Chin may sell his interest in AIC. He has been courted many times before and, despite the company's shrinking value, he has refused to cut a deal. In recent interviews, Mr. Lee-Chin insists he is committed to the turnaround of AIC and its "buy and hold" investment philosophy.
"There's no big signal here at all," said one industry rival when asked about the senior management changes. The sale of AIC "is probably a coin toss. He [Michael Lee-Chin] might never do it. He's a pretty stubborn guy . . . I think he would do anything but sell it if he could."
© 2007 The Globe and Mail. All rights reserved.
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