Decade of Daddy Mirror Fundâ„¢ Quarterly Report

You thought I’d forgotten? Not to worry. The Decade of Daddy Mirror Fund™ is ticking along quite nicely, which comes as no tonic to the masters who oversee the investment of the suffering unit holders of Kevin O’Leary’s O’Leary Global Equity Income Fund (OGE.UN:TSX).

Our Decade of Daddy Mirror Fund™ continues to perform well versus the indices (and OGE.UN:TSX), although the drop in the US$ from 1.07 to 1.0334 hurts performance over the last quarter once again.

Things are up a bit in our fund, although I temporarily exited all of our financials in late November in a fit of concern about what was going on in Dubai (“Eid’s pause won’t help Western Banks as Dubai reels” Nov 27-09). When we got back in at the start of this week, I redistributed all of the cash on hand equally among five banks (BMO, BNS, JPM, RY and added TD for the first time).

Our Mirror Fund was up 6.8% to $42.7 million as of the one year mark, and is now up 10.8% to $44.3 million as of today. During the same timeframe post-launch, the Dow is down 7.1% and the S&P 500 is off 9.9%.

In the Mirror Fund, we’re making money in Bristol Myers (+19%), Goldman Sachs 2037 Subdebt (+49%), JP Morgan (+5%), Merck (+7%), MKS (+38%) {gain/loss percentages in home currency}.

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), JP Morgan ($1MM but are back in again), Merrill Lynch ($799k), Royal Bank ($566k but are back in again) and Teranet ($307k plus distributions) as you’ve read in prior reports.

In the red column (again in home currency):

BCE (-18%), BMO (-2%), Berkshire Hathaway (-28%), CDN Oil Sands Trust (-42%), BNS (-4%), Duke Energy (-4%), Eli Lilly (-18%), Royal Bank (-2%), Spectra Energy (-4%), TD (-2%) and Thomson Reuters (-6%).

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 66.5%, the Dow Jones is up 60.4%, yet the net asset value for OGE (aka the Decade of Daddy Fund™) is up just 32.6%.

The unit price of the O’Leary Global Equity Income Fund is down 20.7% since it was launched, and now sits around $9.52 as compared to the June 2008 $12 IPO price. One can’t forget that it has paid out 85 cents in cumulative distributions since launch; bake that into your return and you’re “only” down 14% — which is still worse than both the Dow and the S&P (and that excludes the dividends you’d have received from the shares in the indicies).

With us up 10.8%, and his investment down 14% (including the benefit of monthly cash distributions), that’s what they call 2,480 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 yesterday’s unit close remains as stellar 92.8%; the fund’s NAV continues to track one of the world’s best known benchmarks with almost a “mirror-like” perfection.

Well, except for the underperforming part, that is. Not that it matters to some. Despite all of the lackluster performance, Canada’s top Dragon has raised about $500 million from Canadian bank brokerage retail clients over the past 18 months.

$30 million of fees to Bay Street is nothing to sneeze at! Nor is the $10 million plus in annual management fees that KO’s funds are now generating.

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