Robert Krembil doesn't think too highly of what the mutual fund industry has become. And he thinks there's room for someone to try to change it.
"If I had to look at the business today, the observation I'd make is I'm amazed at the way it's developed," the co-founder and former chairman of Trimark Financial Corp. said in an interview. "For whatever reason, the focus by everybody, from the leaders to the client, has become very short term.
"Whether they admit it or not ... [the game is] protect your backside so you don't lose your client. And they say, 'Okay, how do I protect it? I don't deviate too far from the index.' That's not the way to get a good long-term result."
Mr. Krembil clarified weeks of rumours by announcing he will back Tye Bousada, who quit as lead manager of the $5-billion Trimark Fund last month, in a new investment management company. Mr. Krembil will buy a significant stake - between 25 and 51 per cent - in a holding company that will own EdgePoint Capital Partners Inc.
The 65-year-old investor said the aim isn't to create another Trimark, which was one of the largest publicly traded fund companies in Canada before it was sold in 2000 to Amvescap PLC, now called Invesco Ltd., for $2.7-billion. Rather, it's to start an investment management firm that will appeal to customers with a long-term view, "that allows a good manager to take a proper time horizon and do what he or she thinks is right."
Mr. Krembil was one of three employees of Bolton Tremblay Inc. who tried to buy the fund management company from its parent. Spurned, they left to form Trimark in 1981, where Mr. Krembil became chairman and one of its most important stock pickers.
Some people believe Trimark's sale eight years ago was an illustration of the short-sightedness Mr. Krembil is talking about. In the late 1990s, the firm's performance suffered as it refused to ride the technology bubble and stuck to its value-investing orientation. Its assets under management grew only 4.3 per cent in 1999 when every other major fund company was reporting double-digit growth, and Mr. Krembil ultimately bowed to the pressure to sell.
If he could do it again, Mr. Krembil said, "I wouldn't go public. That puts another level of pressure on the organization," leading to excessive focus on quarterly results and higher-than-necessary fees. "Fees have to come down."
Mr. Bousada said he could not reveal what the new company is planning to offer because its registration with the Ontario Securities Commission has not been approved. But he suggested it would be different that the current standard. "We believe the industry is ready for change."
Despite his ownership position, Mr. Krembil said he will not take a role in the operations of EdgePoint and will not be managing funds for it. He spends his time managing his own money and that of a charitable foundation.
"I'm backing Tye. I have a high regard for his ability, obviously, or I wouldn't be putting money behind it."
© 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.