Two Fund Groups Exit Fund Business
October 1, 2001
Fund managers may not be bailing out of the mutual fund industry in droves. But at least two investment firms have decided in recent weeks to exit the open-end fund business altogether, choosing to refocus their investment management efforts in what they consider are their true areas of expertise.
Both Clemente Capital of New York and Rightime Econometrics of Rydal, Pa., have quietly opted out of managing mutual funds.
Clemente will be resigning as the sub-advisor to the one remaining mutual fund it has been managing. Rightime recently announced it was selling its three remaining Rightime mutual funds to Federated Investors of Pittsburgh. A fourth fund, the tiny Rightime OTC Fund that had transformed itself last fall from the Rightime Social Awareness Fund, was liquidated two weeks ago amid lagging sales.
Focusing on the Alternatives
For Clemente, the new focus will be on managing non-U.S. assets for clients as well as the establishment of a new non-U.S. alternative investments division that will likely include hedge funds, confirmed the firm's executives. The firm manages $500 million in assets worldwide, including managing assets for Wilmington Trust of Wilmington, Del., which owns a 24% stake in Clemente.
Rightime will apparently stick to managing separate accounts, its core investment focus since its founding in 1979. Rightime currently manages $1.8 billion predominantly in separate accounts using quantitative investment models that were developed by the firm's founder and President, David Rights. Rights did not return calls seeking comment.
Well Runs Dry
On Sept. 17, a proxy statement filed on behalf of the Citizens Funds of Portsmouth, N.H., disclosed that Clemente would be resigning as the sub-advisor to the Citizens Global Equity Fund by Oct. 17. The $217 million fund, which Clemente had been continuously sub-advising since its February 1994 inception, was the last open-end mutual fund Clemente advised.
According to Clemente officials, over the past 32 years the firm has served as the sub-advisor to several mutual funds, including a trio of funds from the Freedom Funds family which were eventually acquired by John Hancock Funds of Boston in 1992.
Clemente had also served as the advisor to several closed-end funds. But this past March, after an arduous multiyear struggle with shareholder activists who had infiltrated the board of directors, Clemente was fired as the global investment advisor to the $55 million closed-end Clemente Strategic Value Fund. The fund had previously been known as the Clemente Global Growth Fund.
At the same time, the activists-turned-board members also fired Clemente as the adviser to the $72 million Cornerstone Strategic Return Fund, which had previously been known as the Central European Value Fund. Clemente had been hired to manage the fund only 11 months earlier.
Clemente still manages the proprietary $38 million 11-year-old First Philippines Fund, which made a name for itself as the first closed-end fund to exclusively invest in the Philippines. But the fate of this fund is unknown. This past July, the First Philippines Fund's board of directors announced that by next July it would consider taking action, including liquidating the fund, if it's persistent double-digit discount hadn't fallen below 12%.