Decade of Daddy Mirror Fund Q1 Report

The tide is rising, and our boats are well positioned to benefit in the Decade of Daddy Mirror Fund.

I missed the 20%+ run of the past six months with our idle cash, and it is probably time to do something with it. Our Venezuelan bonds have been on fire, and our stocks have done ok. Not great, but ok.

The Mirror Fund continues to beat the key indicies and our true benchmark: OGE.UN:TSX, which is now a mutual fund called the O’Leary Global Equity Yield Fund. We don’t have the daily OGE quote on the TSX anymore, but the replacement Global Equity Yield mutual fund has a NAV and distributions to monitor, and it isn’t keeping up with our modest fund offering. That said, Kevin O’Leary remains the greatest Canadian mutual fund asset gatherer of this Century, which probably makes him happier than even good returns given the quantum of his firm’s management fees.

Our Decade of Daddy Mirror Fund was up 6.8% to $42.7 million as of the one year mark (July 1, 2009), and is now worth $57.844 million in total, thanks to a few great stocks and the ongoing dividend and income stream. Since inception, we are up 44.6%.

During the same timeframe post-launch (which was Canada Day 2008), the Dow is up 15.7% and the S&P 500 has risen just over 10%.

In the Mirror Fund, we’re making money in BCE (+16%), BMO (+4%), BNS (+12%), Bristol Myers (+52%), Goldman Sachs 2037 Subdebt (+32%), Duke Energy (+19%), JP Morgan (+6%), Merck (+11%), Royal Bank (+1%), Spectra Energy (+45%), TD Bank (+27%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+22.6%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+28.9%).

Since the fund began we’ve locked in our gains on BMO ($775k and $1.133MM but we are back in again), BNS ($136k but are back in again), CIBC ($242k plus dividends), JP Morgan ($1MM but are back in again), Merrill Lynch ($799k), MKS ($3.19MM plus dividends), Royal Bank ($566k but are back in again) and Teranet ($307k plus distributions) as you’ve read in prior reports. We’ve also realized losses on Canadian Oilsands and Eli Lilly.

In the red column: Berkshire Hathaway (-12%), Discovery Air 2016 8.35% Unsecured Convertible Debentures (-1%), and Thomson Reuters (-24%).

Over at OGE.UN:TSX, the trading price of the three year old KO fund (plus distributions) trailed the S&P, Dow Jones and our little test fund during the entire experiment, ending at a NAV of $10.13 plus distributions of $1.92 as compared to a $12 IPO price. The mutual fund initially kept about $26 million of OGE’s assets when it converted form, and has since traded from an initial $10 NAV down to a NAV of $8.50 over the past year or so. Distributions on the new mutual fund have totalled $0.4833 so far, but if you’d bought the original OGE IPO in 2008 at $12 and agreed to roll into the new mutual fund last March, you’ve lost money; which is telling when the Dow and S&P are up over the same period.

OGE mutual fund investors redeemed another $6 million in the in the 2nd half of last year, on top of the $5 million redeemend in the April-June 2011 timeframe. That leaves KO with less than $14 million as at Dec. 31st. Compared to the $40 million raised via the OGE IPO, it appears that most investors have ditched this pig. Despite the fact that it was KO’s first ever public investment vehicle. How unceremonius of Joe & Jill Retail.

Not that any of this matters, of course. Mr. O’Leary and his worthy team have raised $1.9 billion of assets since the summer of 2008, despite the losses in the initial fund. The question is, how much remains under management in light of these redemptions? A topic for another day, perhaps.

MRM
(disclosure: this post, like all blogs, is an Opinion Piece; we own BMO, BMY, BNS, GS sub debt, RY, SE, TD and those Venezuelan bonds in our household)