Fund managers begin to climb back in

I don’t count myself as a believer in the theory that the economy is already recovering, but I may well be wrong. If you read the tea leaves this week, many equity portfolio managers are acting as though the worst is behind us…or at least growth will return in 6 to 9 months, so they’d better buy “mo” stocks now.

To whit:

– a $90 million small cap uranium participation deal flew off the shelves last night, plus the greenshoe;
– which drove several Bay Street i-bankers to pitch other uranium names on bought deals before the market opened this morning…all predicated on the idea that China is building their stores of the commodity;
– not to be outdone, Oil and Gas investment bankers put up a $43 million bought deal (10% of mkt. cap.) for Crew Energy (CR:TSX) at a 3% discount to the prior close (aka “a very tight deal”);

Since so little net new capital has flowed into equity mutual funds over the past few months, it is hard to determine where this “new” money is coming from. The books are certainly not being driven by the hedge funds, unlike over the prior two or three years.

Without a doubt, one gets the sense that things are on the upswing. Higher i-banking revenues might have something to do with it, and that cheeriness could be spilling over onto the various portfolio managers.

Sadly for the holders of The Decade of Daddy Fund™ (aka the O’Leary Global Equity Income Fund {OGE.UN:TSX}), they haven’t participated in the market’s recent advance.

Since March 9th, the S&P 500 is up 32.2%, and the Dow Jones 30 has risen 27.5% as of yesterday’s close. For Mr. O’Leary’s unit holders, the net asset value is up a surprisingly small 5.6% over the same time period while the units themselves have advanced just 1% in value.

It was only this time last year (see prior post “O’Leary Fund promises to share the wealth and wisdom” May 8-08) when the mantra was “Get Paid While You Wait.”

At least they got the part about “waiting” right.

MRM
(disclosure – this post, like all blog posts, is an Opinion Piece)