Decade of Daddy Mirror Fund™ Quarterly Report

A few days late, but here is the quarterly report for our Mirror Fund. If you’ve already forgotten what the “fund” is about, Dragon Kevin O’Leary launched an equity fund during the summer of 2008 with the promise of unique stock market riches and index-beating private company deal flow (see prior post “O’Leary Fund promises to share the wealth and wisdom” May 8-08). Wondering how we might do against the returns of a self-proclaimed investment guru, we launched our own $40MM “fund”.

Our Decade of Daddy Mirror Fund™ continues to perform well versus the indices (and OGE.UN:TSX), although the drop in the US$ from 1.16 to 1.07 hurts performance over the last quarter by about 5%. Ouch. But things are going in the right direction nonetheless, despite making no “trades” for months.

Our Mirror Fund was up 6.8% to $42.7 million as of the one year mark, and is now up 8.4% since launch date. During the same timeframe post-launch, the Dow is down 15.7% and the S&P 500 is down 17.5%.

In the Mirror Fund, we’re making money in Bank of Montreal (+75%), Bristol Myers (+4.7%), Bank of Nova Scotia (+4.7%), Goldman Sachs 2037 Subdebt (+44%), JP Morgan (+6.0%), MKS (+23%) and Royal Bank (+40%) {gain/loss percentages in home currency}.

Since the fund began we’ve locked in our gains on BMO ($775k; but we are back in again), CIBC ($242k), Merrill Lynch ($799k) and Teranet ($307k plus distributions) as you’ve read in prior reports.

In the red column (again in home currency):

BCE (-24%), Berkshire Hathaway (-28%), CDN Oil Sands Trust (-44%), Duke Energy (-11%), Eli Lilly (-26%), Merck (-20%), Spectra Energy (-13%) and Thomson Reuters (-3%).

Over at the O’Leary Global Equity Income Fund (OGE.UN:TSX), Mr. O’Leary is still trailing the indicies and our little test fund. Since the market began its recovery in early March, the S&P 500 is up 52.3%, the Dow Jones is up 45.6%, yet the net asset value for OGE (aka the Decade of Daddy Fund™) is up just 26%.

The unit price of the O’Leary Global Equity Income Fund is down 25.8% since it was launched, and now sits around $8.90 as compared to the June $12 IPO price. One can’t forget that it has paid out 70 cents in cumulative distributions since launch; bake that into your return and you’re “only” down 20%; which is still worse than both the Dow and the S&P (and that excludes the dividends you’d have received).

With us up 8.4%, and his investment down 20% (including the benefit of monthly cash distributions), that’s what they call 2,840 basis points of “value add” in the fund management industry. All for free!

As has been mentioned in the past, OGE’s NAV correlation with the Dow between August 29, 2008 and Monday’s unit close remains as stellar 92.7%; the fund’s NAV continues to track one of the world’s best known benchmarks with almost a “mirror-like” perfection.

Although the Canadian media have turned a blind eye to all of this — or perhaps have actually been the enabler — Time Magazine wrote an interesting (if familiar) article a month ago on this very topic. The money lost via Vanity Investing isn’t newsworthy in Canada…but Time thought it made the grade.

MRM
(disclosure – this post, like all blogs, is an Opinion Piece; we own BCE, BMO, BNS, COS, MKX, GS sub debt and RY in our household)