Common Questions For Our Fund Managers

Is the Manager of The Investment Partners Fund registered with the Ontario Securities Commission?

Yes. JDM Investment Partners Ltd. is the Manager of the The Investment Partners Fund and we are registered with the Ontario Securities Commission (OSC) as an Investment Counsel and Portfolio Manager. Please visit the following OSC link for more information: http://www.osc.gov.on.ca/en/Investors_check-registration_index.htm.

You’ll find us listed as JDM Investment Partners Ltd.

Where are my assets being held?

Investment Partners Fund Management Ltd. has designated CIBC Mellon as the custodian of the Fund.

A custodian, is a financial institution responsible for safeguarding a firm’s or individual’s financial assets. CIBC Mellon holds all the assets of The Investment Partners Fund and records all the unitholders of the Fund.

What is the legal structure of the Investment Partners Fund?

The Investment Partners Fund is a pooled fund trust.

How do pooled funds differ from mutual funds?

Pooled funds and mutual funds are very similar in how they operate with a few small differences. A pooled fund is the grouping of investment savings that belong to many individuals who share the same investment goals. The ‘pool of funds’ is typically invested by an investment management firm in a well-diversified portfolio of securities. Each investor or unitholder, owns a share of the fund’s total assets (represented by units). Investment earnings are generated when the securities held in the fund, pay dividends or interest income. In addition, as the values of the securities in the fund rise or fall, each investor’s ‘unit price’ or value will change as well.

Are the financial statements of The Investment Partners Fund audited?

Yes. Financial statements are audited by an independent chartered accountant firm on an annual basis.

What is the minimum I need to invest in the Fund?

The minimum initial investment in the Investment Partners Fund is $150,000. Subsequent investments must be a minimum of $10,000, although smaller amounts may be accepted at the discretion of the Fund Manager
You can purchase or redeem units on the first business day of each month.

Can my wife and I combine our assets and contribute the $150,000 minimum together?

No. Regulations prohibit husbands and wives from combining assets to meet the $150,000 minimum. You can however combine multiple accounts including RRSP, LIRA, and non-registered to reach the minimum.

How many days notice do I need to give to purchase or redeem units in the Fund?

We need a minimum of 5 business days notice prior to the first business day of each month to purchase or redeem units.

If I need to sell my units in the Fund, will you charge me an early redemption fee like most mutual or hedge funds do?

No. You won’t be charged any commissions or early redemption fees when you sell your units in the Fund.

What fees will you charge me for investing in the Fund?

The only fee charged to unitholders of the Investment Partners Fund will be the management fee payable to the Manager which is based on the performance of the Fund. You won’t be charged any other fees or expenses.

What fees do I have to pay if the Fund earns less then 5% per year?

For units held from January 1st to December 31st (the “calendar year”), if the investment return (capital appreciation plus distributions) of the Fund is less than 5.0% for the calendar year, there will be no management fee charged.

What kind of fees do I have to pay if the Fund earns more then 5% per year?

If the investment return of the Fund exceeds 5.0% for the calendar year, the management fee will be 0.25% for each percentage rate of return or part thereof in excess of the 5.0%, plus applicable taxes in effect from time to time, applied to the total value of these units at December 31st.

Given your fee structure, how will you stay in business if you have several down years in a row which could happen given the long term focus?

Our business plan calls for a minimum commitment to finance the entire operations of the Fund for five years. Our business model is based on low operating overhead (we will not impress anyone with marble bathrooms or indoor waterfalls paid for with investor fees).

As for statistics, in the 39 years of data (1970-2008) for the Toronto Stock Exchange, there has never been a period in this time frame that experienced 3 consecutive years of performance less than +5% (our hurdle rate). There have been 2 periods where the return has been less than 5% for 2 consecutive years, 1973-1974 and 2001-2002. The calendar year performance following these 2 miserable periods were as follows, 1975 returned 18.5% and 2003 returned 26.7%. Of course, the future may be different than the past.

Are your fees pro-rated if I invest mid-year?

For units in the Fund purchased subsequent to January 1st and held to December 31st, the management fee will be calculated in the exact same manner as described above except that the investment return rate of 5.0% per calendar year before management fees will be charged, will be pro-rated based on the number of months that the units are held during the calendar year. The investment return of the Fund will be calculated based on the period the units are held during the year.

How do you calculate fees when I redeem my units in the Fund?

For units in the Fund that are redeemed, the management fee will be calculated in the exact same manner as described above except that the investment return rate of 5.0% per calendar year before management fees will be charged, will be pro-rated based on the number of months that the units are held during the calendar year. The investment return of the Fund will be calculated based on the period the units are held during the year. The management fee will be applied to the total value of these units at the time of redemption.

How are fees collected?

Management fees payable on December 31st will be paid in units. Management fees payable on units redeemed will be paid in cash. Any management fees payable on December 31st will become payable subsequent to any year end distribution. All management fees will be paid by the unitholder immediately upon becoming payable.

How large do you expect the Fund to get and will you close the Fund to new investors at that number?

As 100% of our investable net worth is in this Fund (and our units are exactly the same as the units our investors purchase, no special rights or any preferential treatment), we will be very much attuned to our ability to buy and sell in the quantities required to take meaningful positions in our best ideas. If we ever reach a point where one of our best ideas is unable to fit into the Fund because of the size of our assets under management, we will close the Fund (or if we have to reduce its size). Great investment ideas are too rare to pass up. Keep in mind that our fee structure is designed to reward successful investment performance and not asset gathering.

What is the Fund’s strategy for managing risk?

We believe risk management is best accomplished by the quality of our holdings. Five great businesses are much less risky than 125 mediocre businesses (contrary to academic theory).  The two professionals involved with the portfolio decision making will have 100% of our investable net worth in the Fund. If we lose money, not only do we work for free (in fact we pay to work) but our net worth will take the negative hit as well. We are very focused on the downside of our decisions.