Cole steps into Sarbit’s shoes

(March 29, 2005) AIC has appointed James Cole as lead portfolio manager of the firm’s American Focused Fund, replacing Larry Sarbit, who resigned on Monday.

Cole already runs the AIC Canadian Focused Fund, AIC Canadian Balanced Fund and AIC Dividend Income Fund.

“U.S. stock prices are at their same level as four years ago despite substantial earnings growth in the interim,” Cole said in a release Monday evening. “That means a number of excellent businesses are available at attractive prices that offer us the opportunity of meeting both of the fund’s primary investment objectives, namely preservation of capital and above-average growth of capital.”

Cole’s statement hints at a change of direction for the $1.1 billion fund, says Morningstar Canada Investment Funds Editor Rudy Luukko, who notes that Sarbit has historically held the bulk of the fund’s assets in cash — 77% as of February 28, with only 21% in U.S. equities.

“This is fairly typical of the fund’s asset mix under Sarbit, whose fund received a Morningstar five-star rating and won accolades when it was in the U.S. equity category,” says Luukko. “The fund’s strong relative performance relative to funds that do belong to the U.S. equity category is attributable mostly to Sarbit’s high cash reserves.”

Last year, the fund lost its Morningstar rating when it was moved to the specialty category for not meeting the holding requirements of the U.S. equity category.

Luukko believes Cole’s appointment bodes well for investors, but he doesn’t think the American Focused Fund will be transformed overnight.

“Don’t expect Cole to rush to deploy the hefty cash reserve that he has inherited from Sarbit,” Luukko said in an online report. “Cole prides himself on conducting extensive due diligence on the companies he invests in, and in the past has also allowed large cash reserves to accumulate in AIC Canadian Focused.”

As for Sarbit, AIC is saying only that he has left the company to pursue other opportunities. “Larry Sarbit was a member of the portfolio management team and we wish him the best in his future endeavours,” said AIC founder Michael Lee-Chin in a statement.

Sarbit is the latest in a series of high-profile departures from the Burlington, Ont.-based fund company, which is suffering through a lengthy spell of net redemptions. Earlier this month, executive vice-president David Whyte, who headed up AIC’s sales and marketing team, resigned his position and was replaced by John Miller.

AIC also announced on Monday that it plans to introduce a new fund — AIC Global Focused Corporate Class — next month. The fund will be sub-advised by Third Avenue Management and will invest in a select number of businesses from around the world, AIC said.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com