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September 6, 2005
So what's wrong with cash?, Tuesday, September 6, 2005, 8:59 AM
One of the most successful money managers ever in Canada was 80 pct in cash for many months before he left a leading Canadian Fund manager in May this year to set up his own Fund. His name is Larry Sarbit, and he's a controversial guy.
Through the bear market of 2000-2002, Larry was as high as 93 pct in cash, but his funds generated solid returns.
Here is the Aug-23 write-up by Morningstar re the new Sarbit Fund:
Larry Sarbit to launch U.S. equity fund
High-profile portfolio manager Larry Sarbit plans to launch his own U.S. equity fund later this year. Winnipeg-based Sarbit Asset Management Inc. filed a preliminary prospectus for Sarbit U.S. Equity Trust on August 19, 2005.
Initially, the new fund will charge a management fee of 2.25% for retail units and 1.25% for Class F units sold through fee-based advisors. The preliminary prospectus was filed in all provinces and territories except Quebec, and the fund's minimum initial investment will be $1,000.
Sarbit joined AIC Investment Services Inc. in 1999 after spending more than 10 years with I.G. Investment Management Ltd. His much-publicized departure from AIC earlier this year was surrounded by criticism and concerns about the high levels of cash held in AIC American Focused . The fund, which has a U.S. equity mandate, was eventually moved to the Specialty/Miscellaneous category because of its consistently high cash position and, consequently, its failure to meet the holdings criteria for the U.S. Equity category. After Sarbit left, the fund returned to the U.S. Equity group following new manager James Cole's commitment to reduce the cash position.
Based on the new fund's investment philosophy, as stated in the preliminary filing, it appears Sarbit intends to continue to practice the same deep-value investment style that made him so controversial at AIC. Capital preservation is the first objective outlined in the prospectus, which states that "the fund may own significant amounts of cash when management feels that opportunities to invest capital at advantageous prices are limited."
I don't know Sarbit personally, although I know a lot about him because for many years he was a Fund manager for the money management firm my brother works for (i.e., Investors Group). I'm not interested other than to point out that some highly successful Fund managers like Sarbit are inclined to go to cash when they believe the risks warrant doing so.
As I say, What's wrong with cash?"
If we were staring at hyper-inflation, I would probably think otherwise. But today, as you know, even Alan Greenspan is saying that the financial risks are higher than presently being priced into most securities and real estate assets, which is a situation he says "usually ends badly".
Perhaps the world's best-known investor, Warren Buffett, is also presently sitting on cash -- many billions of it. And if he could easily sell some of his equity positions to raise even more cash, he likely would.
Like Buffett, traders have to learn patience.
Posted by Posted by Bill Cara on September 6, 2005 08:59:18 AM | Category: Cara Today in the Market