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Knocked around Mavrix 'not for sale'


It's not easy being a small fund player in a tough stock market.

Shares of Mavrix Fund Management Inc. have taken an 80-per-cent hair cut over one year and have fallen 64 per cent this year, closing unchanged yesterday at 42 cents on the Toronto Stock Exchange.

While sources say there are interested buyers for Mavrix, its chief executive officer insisted it is not on the block. "We are not for sale," Malvin Spooner said yesterday in an interview. "We have been through many tough markets."

Mavrix is no different from bigger players like AGF Management Inc., whose stock price is off 35 per cent over a year, he insisted. "We are just a smaller company ... and the stock is thinly traded."

Mavrix, which went public in 2004 at $3.75, has about 8.5 million shares outstanding. More than half is in public hands. The rest is controlled by shareholders like Mr. Spooner and Brookfield Asset Management Inc. - who own about 30 per cent combined - and employees.

The Toronto-based fund company had $543.9-million in total assets under management as of March 31, down from a peak of $760-million last year. That includes $457.1-million in mutual funds, and $86.7-million in specialty funds.

"Because a money management company is really a leveraged play on the market, generally you are going to see them get knocked around when the market is being hit," said Dan Hallet, an independent fund analyst. "It's a smaller player, and its funds tend to be a little more volatile and specialized."

Except for last month, when Mavrix posted net sales of $58.9-million because of money rolled into mutual funds from its resource limited partnerships, the company has suffered from net redemptions for 11 consecutive months. Mavrix's fund flows are often volatile because monies rolled over into mutual funds will leave again to be invested in new limited partnerships, Mr. Spooner added.

But he acknowledged that its mutual fund flows are also affected by the fact his firm focuses on certain niches, such as smaller-capitalization, resource and income-oriented funds. It recently seeded an Asia Pacific stock fund, and also has a U.S. stock fund run by former veteran AGF manager Steve Rogers.

"We try to have a lineup that can be differentiated from the larger fund companies as well as the bank-owned funds," said Mr. Spooner. "There is no shortage of vanilla, large-cap portfolios."

Dundee Securities Corp. analyst John Aiken last month lowered his rating on Mavrix to an "underperform" with a one-year target of 60 cents because there are "few interim catalysts" for the stock in the "difficult environment" for funds.

Mavrix's strategy of managing highly focused funds creates more volatility in its assets and earnings, but "does provide significant upside potential for assets under management when the sectors and funds ... are generating substantial attention," Mr. Aiken wrote in a report.

"We continues to view Mavrix as a potential takeover target," but added: "We do not see an immediate impetus for action and believe that investors should focus on fundamental values in the near term."

© 2007 The Globe and Mail. All rights reserved.

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