How is Charlie Aitkin doing at Aitkin Investment Management?

Back in 2016 I wrote an article on this site regarding Aitkin Investment Management (which you can read here).

I mentioned a few things in that article which (for me) I thought were red flags. I won’t repeat all of that again - you can read the original article for yourself. 

So, how is Aitkin Investment Management (AIM) doing? Well, not that great. The chart below from AIM shows the performance of the Global High Conviction Fund.

However, what is more worrying is the following table from AIM showing recent performance:

The calendar year performance of -12.6% is rather shocking against a backdrop of the ASX S&P200 return of +9.44% (as I write this) and the US S&P500 return of +10.56%. It means AIM has underperformed this year by 22-23%, which is a terrible result on any measure.  

Please don’t get me wrong, it’s quite ok to underperform an index, but to underperform by a large double digit amount can only indicate that stock selection has been very poor.

Charlie Aitkin made the following statement in the Switzer Super Report on 13 April 2017:

As you know I am broadly cautious on all things USA, but particularly the US Dollar and US equities. This year I am far more bullish on China, feeling Chinese economic growth is running ahead of bearish expectations.

Aitkin also stated (in the same article) that:

I warned that the “Trump trade” was in trouble and it clearly is.

But it wasn’t! Both of these statements were totally incorrect.

US equities have vastly outperformed Chinese equities since Aitkin made these comments. What’s even worse is that the Australian dollar has also dramatically depreciated against the US dollar. Those of us holding US dollar investments (or even just US dollars) are making sound returns on the depreciating Australian dollar (alone). The decision by Aitkin to be cautious on “all things USA” and instead buy Hong Kong listed stocks has cost his investors dearly.

On 21 April 2016 in the Switzer Super Report, Aitkin had the following to say about Telstra:

All in all I believe the worst is behind TLS on all fronts and, for the first time, my fund now owns TLS shares. I think they are now cheap and have dividend certainty. I also think they will outperform the ASX200 on a total return basis from this point.

Put it this way, if over the next 18 months the TLS share price did recover to $6.00, the capital gain would be +10% and 18 month dividend yield 8.8%ff. Add on the value of franking credits and there is the potential for a +20% total return in TLS over the next 18 months, if I am right and the recovery continues.

Of course, it all needs monitoring as we progress but I think this is a major turning point for TLS and I’ve put my fund’s money where my mouth is.

Once again, Aitkin was completely wrong. Telstra was trading at around $5.42 when the above statement was made and what did you get if you took his advice? You got around 42% of your capital incinerated. To be fair, I own Telstra as well, but I bought them at a much lower price than was being advocated by Aitkin back in 2016 (I still made a mistake though).

To try and be a bit balanced here, Aitkin has made some good calls. His advice to buy Washington H. Soul Pattinson (the Berkshire Hathaway of Australia) was great advice. He wrote a very good article about the company in the Switzer Super Report and we are now seeing the share price of Soul Pattinson (SOL.AX) starting to reflect its true value as one of the most outstanding companies on the ASX.

But in many ways, this is my point, so many “professional” fund managers in Australia are totally hit and miss with their stock picks. Because of this, there is no way I would pay their 1.5% fee for assets under management, plus the performance fees of 15% or so. You can see (above) from AIM’s own data that anyone holding a MSCI World Index ETF will have easily outperformed AIM’s Global High Conviction Fund. 

In Australia, when a new high fee fund manager sets up business, you can almost put money on the fact that they will have a few good years early on and then regress to below benchmark (index) performance. As I’ve said on this site previously, the fee structure of these funds basically guarantees below benchmark performance over the long-term because the stock picking skills of the individuals running them are not good enough to overcome the drag of the fees involved. Someone as eminent as Warren Buffett has commented on this at length and people don’t listen to him, it’s just staggering that investors don’t get this.

So, we will continue to watch the performance of AIM and hope for the sake of his investors that Charlie can reverse his form slump and not drop too many more catches (he loves his cricket metaphors).