CI announces Shannon’s replacement

CI Investments has officially named a replacement manager for its flagship CI Canadian Investment Fund, following last week’s abrupt departure of Kim Shannon. The fund is being handed off to Daniel Bubis, president and chief investment officer of Winnipeg-based Tetrem Capital Partners.

“Daniel Bubis is a well-known, top-ranked manager who meets the high expectations of CI Canadian Investment Fund’s investors,” said Peter W. Anderson, CEO of CI. “His long-term track record is exceptional and is one of the best in Canada.”

Bubis is perhaps best known for managing the United Financial Corporation’s Canadian Equity Value Pool, which he has headed up since March 1993. For the 10-year period ending August 31, the pool had earned an average annual return of 17.2%.

Bubis had been the leading candidate among fund analysts to replace Shannon. He was tapped by Dan Hallett, president of Dan Hallet and Associates, in a research note to clients issued on Friday, and then again this morning by Morningstar investment funds editor Rudy Luukko.

But even more convincing was an endorsement by CI president Bill Holland, speaking after a forum on income trust conversions last Wednesday. Holland said the most likely candidate was Dan Bubis. “He has the best record of the group. He’s a value manager. He has his top decile record for 10 years.”

Holland also pointed out that CI had “two or three exceptional options” already within the CI fund lineup, but that some of these managers were already managing large portfolios and may have been overwhelmed by an additional $7 billion.

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For example, Gerry Coleman’s name was floated, but with $8 billion in CI assets under his management, he was ruled out. Speculation also included Eric Bushell of CI’s Signature Advisors and David Picton of Synergy Asset Management, both of whom were ruled out either due to the size of their current portfolios, or ill-matched investment style.

That left Bubis, with a much smaller $1.4-billion portfolio and a roughly similar style to Shannon’s.

Bubis is not exactly an internal selection, but the ties between him and CI are quite close. Tetrem is an independent firm founded by the in-house investment management team of United Financial, which was formerly Assante Asset Management. CI Investments owns Assante.

The Tetrem investment team includes portfolio manager Sam Pellettieri, investment analyst Murray Hanstead, and trader/analyst Eileen Mueller.

“Advisors and investors can feel comfortable with our philosophy and our approach,” Bubis said in a press release. “They have invested in CI Canadian Investment Fund because of its consistent returns and downside protection — and that’s what we have delivered to our investors over the past 13 years. We will be applying the same successful and proven value-oriented investment discipline to CI Canadian Investment Fund.”

Hallett says Bubis appears to be a good match in terms of continuity, but points out there are differences between his style and that of his predecessor.

“We see some key style differences that are interesting from an academic standpoint but that may not amount to much for practical purposes,” says Hallett.

Among those differences, Shannon is a sector-neutral manager, using a relative value style. Hallet admits he has not yet conducted full research on Bubis, but says he appears to be more of an absolute-value manager and more likely to take big bets against the index.

“While both tend to focus on larger companies, Bubis tends to have more in smaller companies, though that may be a function of size since Shannon was known to (in the past) buy the odd small-cap stock,” Hallett says. “However, that may change now that Bubis is managing a significantly larger asset base.”

Hallett points out that Shannon’s portfolio generally had a dividend yield about 1.5 times that of the index, while Bubis’ absolute-value style will not necessarily result in a higher yield.

According to CI’s own data, net of fees, Bubis’ United Canadian Equity Value Pool has edged out the CI Canadian Investment Fund over the longer term, but has fallen behind more recently. Over a 10-year time horizon, the United pool earned 14.9%, beating the 13.6% return of the CI fund.

	1 year	3 years	5 years	10 years
United Canadian Equity Value Pool	9.4%	19.3%	17.5%	17.2%
United Canadian Equity Value Pool (net of fees(*))	7.2%	17.0%	15.2%	14.9%
CI Canadian Investment Fund	10.7%	17.9%	12.8%	13.6%
S&P/TSX Composite Index	15.6%	19.4%	12.4%	10.8%
(*) United Canadian Equity Value Pool reports its returns after operating expenses but before management fees because not all unitholders in the Pool pay the same management fees. For comparison purposes, the “net of fees” returns have been calculated assuming that the Pool’s total MER was the same as the CI Canadian Investment Fund’s historical MER.
Source: CI Investments

Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com, with files from Mark Brown, Advisor.ca

(10/10/06)

Steven Lamb