The revival of the Fidelity NorthStar Fund got off to a shaky start last week.
On Feb. 20, Fidelity Investments Canada Ltd. presented the fund's three-member equity team to an audience of about 400 investment advisers. The goal of the Toronto event was to reassure the audience that their clients' money was safe and poised for great gains in the capable hands of Joel Tillinghast, Cecilia Mo and Chris Goudie.
The elephant in the room was star fund manager Alan Radlo. His name was never mentioned during the Fidelity presentation but his presence was overwhelming. In December, Mr. Radlo left Fidelity, a departure that has derailed the Toronto fund company's turnaround strategy. Fidelity reported net redemptions of $92-million in January, typically a strong sales month that marks the kickoff of registered retirement savings plan season. The bulk of dollars were from Radlo-managed funds, including NorthStar.
Launched in 2002, the go-anywhere fund struck a chord with investors and grew quickly, amassing more than $4-billion in assets across all classes. A healthy dose of that success could be credited to Mr. Radlo, an engaging speaker who was a strong draw. He ran 50 per cent of the money in the fund.
His departure pushed Mr. Tillinghast into the NorthStar driver's seat. Since December, he has run half the fund, up from 33 per cent. Ms. Mo, Fidelity's income trust guru, was a new addition to the team, taking over the 33-per-cent Canadian equity stake. Mr. Goudie, meanwhile, has continued to run the fund's 17-per-cent global stake.
The management shuffle has made NorthStar "a source of debate for anyone paying attention to their portfolios," said Raynor Burke, fund analyst at National Bank Financial Inc. in Toronto.
There were some warts showing at the fund forum. Mr. Tillinghast, a stellar money manager with a long list of accolades, is a plodding and painful speaker. Ms. Mo, meanwhile, has a winning but slender three-year track record running less than $200-million for the firm. Mr. Goudie offered a broad overview of global markets with few specifics.
Bob Haber, Fidelity's chief investment officer, facilitated the event and assured the crowd that the team was here to stay.
"There's no reason Joel won't continue on this fund . . . there's no reason for a change," Mr. Haber said.
The reaction from several advisers in attendance was a shoulder shrug. Several interviewed are hesitant to invest new money and are taking a wait-and-see approach to the fund's performance. Adding further concern is the fund's anomalous nature and how it fits within a portfolio. Is it an international fund? A Canadian fund with some global heft?
Analysts are skeptical, too. NorthStar is a best-ideas fund, holding each manager's favourite picks from every corner of the world. The portfolio has sold about 25 stocks in recent weeks and now holds about 368 positions.
"I don't know how you can have 400 best ideas. That's hard to swallow," one analyst said.
Banks not bad guys, AGF says
AGF Management Ltd. loves the big banks.
"The banks have been, frankly, terrific" and given credibility to the mutual fund sector, Blake Goldring, chairman and chief executive officer, told an audience of investors last week.
"The banks are sometimes viewed as a huge threat to the industry. . . . It's not all bad," Mr. Goldring said. "It's a matter of making sure that we work very closely as a partner. We're not conflicted. . . . We're on the [product sales] shelf of most of these organizations and we're proud to work with them."
The six big banks, especially Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal, have transformed the fund industry through strong product offerings and fund distribution through advisers and branch networks. The banks' total market share has climbed to 36 per cent today, up from about 24 per cent 10 years ago.
Their piece of the pie continues to grow. Collectively, the banks and their subsidiaries accounted for about $2-billion in January's net sales, about 50 per cent of the month's total net sales tally of about $4-billion.
AGF's business with the banks is increasing, Mr. Goldring said. As of Jan. 31, about $813.3-million of the fund company's $28.4-billion in assets under management was held in fund wrap programs, the bulk in bank-administered fund of fund portfolios.
© 2007 The Globe and Mail. All rights reserved.
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