As The Funds Turn
February 17, 2003
If you ignored the fact that this tale involved mutual funds, it would read more like a soap opera.
In short, the South African firm Investec Asset Management inherited the Guinness Flight Investment Funds, worth approximately $400 million, when it acquired Guinness Flight Hambro Asset Management, the funds' parent company, in 1998.
Now, Investec is relinquishing the fund family back to its original parents, who have reassembled in the form of newly minted Guinness Atkinson Asset Management. The company, based in London and Glendale, Calif., is taking in the four remaining funds, with approximately $125 million in assets under management.
The funds, a small drop in Guinness Flight's original pool of $11 billion in assets under management, represented somewhat of a foundling to Investec, which was really vying for the company's offshore mutual funds and investment management. "The deal wasn't done on the basis of acquiring the U.S. mutual funds," said Royce Brennan, managing director.
Brennan, an energetic manager, had been imported to America from his most recent post in Hong Kong, where he had helped grow Investec's business. In late 2000, Brennan replaced Jim Atkinson, once president of the Guinness Flight U.S. mutual fund operation, and now CEO of Guinness Atkinson.
In the interim, Atkinson became president of MAXFunds.com, an Internet site that educates consumers about mutual funds, and eventually formed a consulting firm in Los Angeles, Orbis Marketing. He will continue working with both ventures after the Guinness Atkinson Funds come home to roost. Tim Guinness, founder and former CEO of Guinness Flight Hambro, stayed on with Investec as joint chairman.
With assets hammered by performance problems, Investec decided in October to focus on its growing offshore fund business. Brennan said that, even in the U.S., the company plans to tap an estimated $60 billion to $80 billion non-resident alien market.
To Brennan's surprise, Guinness jumped at the chance to take over the floundering U.S. fund holdings. In turn, Guinness called Atkinson and they, along with an unnamed firm, proposed the change to the funds' trustees. Financial details of the transaction were not disclosed.
Meanwhile, Investec, which intended to use the funds to extend its reach into the domestic U.S. market, rebranded the seven-member, no-load fund family as the Investec Funds, and, not unlike many fund companies, initiated a series of additions, mergers and changes of investment objective.
In fact, this part of the family saga, in many ways, typifies the history of the mutual fund industry during the economic boom-and-bust era. The changes variously reflected excitement over high-concept ideas, different investment focus of new management and the reality of dealing with undersized funds.
During its four-year stewardship of the family, Investec added two members, the Wireless World Fund and the internet.com Index Fund. The New Europe and Global Government Bond funds fell by the wayside because of insufficient assets. In 2000, the Asia Blue Chip Fund changed its name and investment objective to become the Asia New Economy Fund. In 2001, the Asia New Economy Fund was merged into the Asia Small Cap Fund and that fund, in turn, changed its name and investment objective to the Asia Focus Fund. Investec merged the Wireless World Fund and internet.com Index Fund into the Wired Index Fund.
As if that isn't confusing enough, the funds will undergo another metamorphosis as shareholders vote to approve the management change to Guinness Atkinson and the $6 million Mainland China Fund is merged into the China & Hong Kong Fund. Edmund Harriss, who comes from Investec, will remain as manager of the China & Hong Kong Fund.
Also, Guinness Atkinson will be changing the investment objective of the Wired Index Fund, which currently tracks Wired Magazine's index of 40 stocks. The fund will be recast as the Guinness Atkinson Global Innovations Fund. Because the committee met only once a year, it "doesn't necessarily meet on a timetable that would please a portfolio manager."
All this change may be wearing investors a little thin, and some may decide they have had enough of the new economy. "If you look at it from the investor's perspective, this is not the best investment environment, and there's been a series of changes. I'm worried that some of these investors will say, Enough is enough,'" he said. To assuage the frustrated departure of investors, "our No. 1 priority is to communicate our vision and that we do care about our shareholders."
Then, Guinness Atkinson will have another issue at hand: raising three undernourished funds into a full-fledged fund family. Atkinson intends to cultivate the existing funds and, unthwarted by the soap opera history of the company's older new economy offspring, bring out new "idea-based funds."
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