BOSTON - TA Associates Inc. is hoping the newly appointed chief executive officer at Altamira Investment Services will boost sagging results of the once-stellar Toronto mutual fund company.
Expectations are high that Gordon F. Cheesbrough, president and chief executive, will be able to smooth the nerves of a firm frayed by an internal ownership fight, and put the company back on high footing in Canada.
Altamira has about U.S.$6.5 billion in mutual fund and closed-end fund assets under management; it also manages about U.S.$13 billion in Canadian pension fund assets.
Mr. Cheesbrough, formerly was chairman and chief executive for the brokerage firm ScotiaMcLeod and Scotia Capital Markets, the integration of the Bank of Nova Scotia's investment banking activities and ScotiaMcLeod. His appointment at Altamira takes effect at the end of the month.
"We'd like to see (the firm) aggressively grow beyond its entrepreneurial beginnings," said P. Andrew McLane, senior managing director of Boston-based TA Associates. He has been acting chairman, president and chief executive of Altamira since October. He will remain chairman of Altamira.
Altamira was a strong investment performer in the early 1990s. Its flagship mutual fund, Altamira Equity Fund, posted a return of 46.6% in 1993 when the median in Canada was about 35%, according to data from Donaldson Vincent Associates, North York, Ontario. The Altamira Income Fund returned 20.2% that year, several points ahead of the median.
But in 1996, an ownership battle raged between two owners, Altimiria Capital Corp. of Montreal and Manufacturers Life Insurance Co. Ltd., Toronto. Each held 30.5% of the firm; 28% was owned by Altamira management; and 11% by other investors.
Manulife tried to increase its stake in Altamira by buying out some of the other shareholders, offering C$32 per share. The move was opposed by Altimiria Chairman Ron Meade, who founded Altamira and was its chief executive. The fight went in and out of the courtroom, but took its most drastic toll on investment performance.
The Equity Fund's return in 1996 was 17%, well below the Canadian median of about 25%. In 1997, the fund posted a 4.1% return, vs. a median around 14%, according to Donaldson Vincent. Throughout 1996 and part of 1997, pension clients pulled accounts away.
"Their results went crashing through the median and into the first quartile," said Don Armstrong, Donaldson Vincent pension consultant. In addition to the internal strife, Equity Fund manager Frank Mersch was overweighted in resources such as gold, silver, mining, and oil and gas, Mr. Armstrong said. "Those didn't do well in Canada in recent years and did very badly in 1997."
The ownership battled ended last October when Manulife agreed to sell its holdings in Altamira to TA Associates for C$38 a share, or C$255 million.
"They were like a dysfunctional family, fighting," Mr. McLane said. "We were involved for about a year, went to all the parties separately and played the Henry Kissinger role. We were an impartial third party and not connected with the banks," as are many of Canada's mutual fund organizations. This is TA's first cross-border acquisition, and its only one to date.
Altamira now is owned 35% to 40% by TA Associates, 30% to 35% by Altimiria and the remainder is owned by individual investors and firm management, Mr. McLane said.
Mr. Meade agreed to step down as chairman and chief executive, making room for Messrs. McLane and Cheesbrough.