O'Leary Funds Comments on Soon-to-Appear Report on Business Magazine Story
MONTREAL, Sept. 27, 2012 /CNW Telbec/ - In response to the Report on Business Magazine story posted online on September 24th, 2012, and the soon-to-appear hard copy version on September 28th, 2012, O'Leary Funds Management LP and Stanton Asset Management Inc. today released the following statement:
"We believe in doing what's right for investors; searching the investment world for opportunities that in-turn offer value and yield to investors. In this story, there are a number of unsubstantiated and misleading comments made about our funds' performance and redemptions levels.
Investors rely on business media to get the facts right. Unfortunately, the Globe & Mail has once again gotten the story wrong, doing a disservice to the thousands of investors and their advisors who trust them for information.
Here are the facts. We participated in this "story," gave interviews and were assured by writers and senior editors that the financial information contained within would be accurate. What was written demonstrates a lack of balance and understanding for how structured and tax-advantaged products work, in a clear intent to mislead the reader. Here are some examples:
- Story: The Globe & Mail suggests that the performance of our funds is terrible.
- Fact: Performance overall is quite good. Many funds' 2012 performance places them in the top quartile amongst peers, are given 3 and 4 star-ratings by Globe Investor, and are named market movers among peers on Globe Investor.
- Story: The Globe & Mail reports that there was $253 million in investor redemptions as at December 2011, amounting to approximately 21 per cent of total assets under management.
- Fact: Omitted from the story was that our conventional mutual funds subscriptions are growing and far outweigh redemptions. Almost all of the redemptions relate to structured products for which annual redemptions of 20 per cent to 40 per cent are industry standard. This information was provided to the Globe & Mail several times over the course of the last few months.
- Story: The Globe & Mail quotes Mark McQueen on O'Leary Fund redemptions.
- Fact: In May, McQueen double-counted the redemption number, later realized his mistake after it was pointed out to him by O'Leary Funds and removed his related May 2012 blog post. The Globe & Mail, which incorrectly reported that number, twice, never corrected public record or publically admitted they got the facts wrong.
- Story: The Globe & Mail writes that total return on capital since inception to date for one of our funds is 25 per cent of distributions.
- Fact: That number is actually 17 per cent, and includes a year when most income funds returned capital to investors as a result of the financial crisis of 2008.
- Story: The Globe & Mail writes that O'Leary Funds' Yield Advantaged Convertible Debentures Fund returned $11.1M of investors' money in 2011, saying that this further evidenced a churn of capital.
- Fact: This specific structured product is intended to return capital. Paying distributions in the form of return of capital is one of the potential benefits of tax-advantaged products. It is always important to read and understand the prospectus for a fund. This applies to the Globe & Mail as well.
- Story: The Globe & Mail writes that performance of two of our funds was down by over 20 per cent.
- Fact: The Globe & Mail overstated the decrease of both funds, ignored the value of distributions paid, and omitted to mention that both funds were launched in mid-2011 as the markets unfortunately faltered. Year-to-date, these funds are up 10.4 and 9 per cent, respectively.
- Story: The Globe & Mail reports that our funds hold obscure securities, such as Brazilian bonds, that pay a 16 per cent yield, leading the reader to assume that there is a higher risk profile in the portfolio holdings.
- Fact: This Brazilian utilities company bond issued in $US, was less than 1 per cent of our emerging markets fund portfolio, was bought at discount, had an 11 per cent coupon and was sold 6 months later for a 22 per cent total return.
- Story: The Globe & Mail writes that: "O'Brien (our asset manager) purchased a "convert"—a bond that carries the right to be converted into common shares—for about $160, relative to its starting value of $100. At such a rich premium, these bonds no longer trade like stable investments; they swing like speculative stocks."
- Fact: The bond was issued by Salesforce.com, a market leader in CRM software - a company with a market capitalization of over $20B. The position size was small and is entirely in line with the fund's investment objectives and the portfolio advisor's investment process. Year-to-date, Salesforce.com shares are up in excess of 50 per cent with this convertible bond currently trading at around $187.
- Story: The Globe & Mail attacks the credibility of O'Leary's portfolio manager reporting that two Stanton funds "blew up on late 2008."
- Fact: Not only is this incorrect, the Globe & Mail omits contextualizing what was going on in the hedge fund market during the 2008 financial crisis, when many markets and banks stocks dropped by 50 per cent or more. Many hedge funds shut down entirely, while the Stanton funds managed to protect and recover some value for investors.
- Story: The Globe & Mail names at least 10 unnamed "industry" sources and ex-employees in their reporting, even with our offers to have reporters speak with people close to the company.
O'Leary Funds repeatedly offered access to company and industry sources who would be quoted and provide correct facts and balance to the article. All we asked for was the truth, which the Globe & Mail was never interested in reporting.
To the financial community, Canadians who have invested in our products, and our valued financial advisor network: if ever a piece demonstrated one-sided agenda-driven reporting, this is it. This approach to reporting is harmful to investors who deserve better from national business media. O'Leary Funds remains focused on its goals to serve Canadian investors. Total assets under management exceed $1B. The business is profitable. We truly believe in our value-yield philosophy and continue to invest our own money in our funds and Kevin O'Leary is personally invested in every single mandate. Growth of our traditional mutual funds was strong in 2011, is on track to be up 100 per cent in 2012 and is expected to increase again in 2013. We continue to attract investors looking to invest in our products for the reasons that popularized them in the first place: their focus on value and yield.
This is a story that, like the news of the day, we expect will fade. We are working to correct the inaccuracies contained in this article."
About O'Leary Funds Management LP
O'Leary Funds Management LP is a Canadian investment fund manager of mutual funds and closed-end funds striving to provide Canadian investors with reliable and unique income solutions. Focused on our value-yield investment philosophy, Canadian and global investment opportunities are identified through a disciplined investment process. Our core principles, Income, Capital Appreciation and Capital Preservation, are driven by each portfolio's investment objectives. Our portfolios are diversified by sector, region and asset class. For more details about O'Leary Funds, visit www.olearyfunds.com
SOURCE: O'Leary Funds Management LP
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