Tuesday, December 4, 2012

O'Leary funds not beacons of investment brilliance

I've read a lot of criticism of the mutual funds carrying the Kevin O'Leary name. As I read the criticism I wonder how much of the animosity is generated by fund results and how much is the result of the brand --- the O'Leary name. Old Kevin is an abrasive fellow, and proud of it. On the surface, he seems to be more hot air than hot ideas. I did a quick check of one of his funds: O'Leary Global Equity Yield-X.

If you had invested $10,000 when the fund opened for business, you would have $9047 remaining today. A simple benchmark, see graph, delivers a gain of 10.3 percent rather than the 9.3 percent loss suffered by the fund.

The heavy bottom line is an O'Leary fund; The thin top line is a benchmark.

The above looks bad but losses are a part of investing. I can be forgiving. The O'Leary fund may recover. It's still too early for the definitive judgment. I believe what makes the O'Leary loss look so bad is the O'Leary name attached to the fund. On releasing his funds, O'Leary made a lot of what many would call promises and losses were not part of his promised game plan.

I'm retired. If I were interested at all in a mutual fund, my interest would lead me to look at the balanced yield funds. I compared the performance of the O'Leary Canadian Balanced Yield Fund Series A against my TD Monthly Income holdings. The OL fund is up only .85 percent, while my TD fund is up 3.57 percent over the same period.

We are comparing apples and oranges here, I admit. The TD fund really is a Canadian fund while the OL fund may hold up to 30 percent in foreign markets. But many investors looking for a pure Canadian play might be attracted to the OL fund seeing Canadian in its name.

I would never be attracted to the O'Leary fund. Its 2.52 percent MER sends me on my way. This MER is about a full percent higher than the TD Monthly Income fund. The high MER may be one reason the OL fund is struggling.

For some foreign equity exposure, one ETF that I own is First Trust Dow Jones Global Select Dividend Index Fund (FGD). It is 4-Star fund with a .6 percent MER. It pays a 4.82 percent dividend.
It is an American ETF and does carry some currency risk but I see that as a positive feature. And, check the graph, over the same time period it beat the O'Leary fund.

Oh well, if Kevin O'Leary is ever to become a billionaire (he's is not even close today) there must be some contributors to the cause. If you'd like to contribute to Mr. Wonderful's wealth, invest in an O'Leary fund. If you'd like to make yourself a little richer, find another place to park your money.

A link to an O'Leary fund criticism is broken, the post apparently taken down.

If this post seems a little weak on the condemnation of O'Leary funds, it's because when I followed the links to some of the attacks once posted to the Web I discovered that they had all been taken down. Why were the links found broken? I don't know. But . . .

Stay tuned. Stay patient and wait. Time will reveal the truth.