Lee-Chin will decide AIC’s future, says CIO

(April 19, 2005) The chief investment officer of AIC says the fate of the company rests in the hands of founder Michael Lee-Chin.

Jonathan Wellum says the Burlington, Ont.-based firm has received no shortage of takeover offers and while he doesn’t believe Lee-Chin, its chairman, CEO and controlling shareholder, wants to sell, he isn’t ruling it out.

“There are offers all over the place, that’s the job of corporate finance people. The whole industry has ongoing chat, it’s a consolidating industry. But at the end of the day, that trigger has to be pulled by Mike,” Wellum says.

“Mike is a fighter and he believes in the business. He doesn’t want to sell. Will he over time? I don’t know.”

The AIC rumour mill has been picking up steam over the past four months as a trio of high-profile executives left the company.

Peter Hodgson, vice-president and national sales manager was the first to go in January. Last month, David Whyte, the executive vice-president who led the sales and marketing team for just nine months resigned. Six months ago, the CEO had referred to Whyte, who sat out a non-compete clause after leaving AIM Trimark, as a member of his “dream team.”

Then late last month, Larry Sarbit, executive vice-president and portfolio manager of the $2 billion AIC American Focused Fund, handed in his resignation to pursue other, still-to-be-determined, interests.

AIC has been in net redemptions for about three years. During that time, its assets under management have fallen by more than one-third from a peak of $15.4 billion to $9.9 billion at the end of last month.

James Gauthier, investment funds analyst at Dundee Securities in Toronto, says the sale of AIC is a possibility. “They have a big job ahead of them. I think things need to get to a level of stability but by the looks of it, that won’t be any time soon,” he says.

“They were late to the income fund party, people are moving out of Advantage funds and Diversified Canada and they didn’t have a viable income fund option until not too long ago.”

Gauthier says he expects redemptions for Sarbit’s fund to “balloon” once he officially leaves the firm at the end of the month.

Wellum says while Sarbit was certainly a unique manager, his fund was losing “$2 million to $3 million per day” in redemptions for the last six months. He says the company can’t control Sarbit’s presence or absence from the fund but it can control his replacement, James Cole, an existing AIC fund manager.

“He has a similar investment approach and style. Our view is that under Jamie’s tutelage, we’ll be able to turn that around faster,” Wellum says. He has similar expectations for John Miller, who replaced Whyte. “He’s well-liked, he knows the culture and he’s young. He’s up to the task.”

While the 58-year-old Whyte provided AIC with some good “processes and structures” Wellum suggests his energy level likely wasn’t sufficient for the job. “It was a daunting task,” he says.

Geoff Kirbyson is a Winnipeg-based writer