Good afternoon. You
may have received a phone call and/or letter from The Yacktman Funds. That company runs one of the key mutual funds
in my Flex portfolios. They are
reorganizing the company and want fund shareholders to vote on it. Hence the calls and/or letters to individuals
like you, instead of to investment advisors like me.
This is legitimate, just unusual. Normally I handle "everything" for
my clients, but in this case you retain the right to vote and I am not able to
do it for you.
So, here is my brief explanation of what is going on at
Yacktman:
- Yacktman Asset Management (YAM) is the
investment advisor to the Yacktman Funds (the Yacktman Focused Fund is in my
Flex portfolios, so many of my clients own shares thereof); this means the
Yacktmans and their employees work for YAM, and their one job is to provide the
advisory/management services to the Yacktman mutual funds and "separately
managed accounts".
- YAM was founded by Don Yacktman about 20 years
ago, and he is 70 now. His son, Steven
(about age 40) and a fellow named Jason Subotky are the two other key people. They have a handful of assistants and junior
management types, totaling about 10 people.
Don, Steven, and Jason, and I believe one other fellow, are the "portfolio
managers", the ones who decide what to buy and sell in the mutual funds.
- Don seems to want to cash-out a little (a lot?)
and also make it easier to transfer ownership and/or control to Steven and
others (like Jason) whenever Don's time is up.
- YAM also wants to hand-off the administrative
and back-office workload and focus solely on investment selection and portfolio
management for the Yacktman Funds.
- So, the YAM folks have decided to sell 55% of
YAM to a firm called Affiliated Managers Group, Inc. (http://www.amg.com/Home/); this gives the
Yacktmans cash in lieu of some equity in the company, and it also, according to
the Yacktman employee I spoke with today, provides the right structure by which
the firm can transfer ownership/control to the next generations if/when Don
retires or dies.
- But now YAM only owns 45%, so how do we know
they are still calling the shots? Well,
we don't for sure, but there are good indicators.
A. For
one thing, each of the key Yacktman people have agreed to 10-yr contracts--Don plans
to be working at this until at least age 80, and I was told he only
half-jokingly said he wanted a 25-yr contract.
B. Another
thing is AMG's reputation; they have done this sort of "acquisition"
more than 25 times with other boutique investment advisors and the Yacktman
team thinks AMG's reputation is for leaving alone the companies they buy or
invest in and just let them continue the good work that attracted AMG to invest
in the first place.
Bottom line:
I am in favor of this
reorganization/sell-out, as the expectation is that there will be no adverse
changes to the Yacktman Focused Fund and there is potential for positive
changes (more resources, more time for portfolio managers to focus on investing
instead of business management). If you
want to have your say, you are welcome to call them at
877-536-1557 (tell them you are calling to vote on the Yacktman reorganization)
and vote Yes, No or Abstain.
Meanwhile, I will be monitoring the performance, people and
strategies of the Yacktman Focused Fund.
If they make changes that appear to be inconsistent with the reason I
"hired" them for the Flex portfolios (they are our best way to have
exposure to large, US-based companies with "value" characteristics),
I will take appropriate action and keep my clients posted.
Please contact me with any questions. Thank you!
--Gary
Financial Advisor & Owner
Potomac Wealth Strategies, LLC
1800 Diagonal Rd., Suite 600
PMB 12
Alexandria, Virginia 22314
(703) 746-8195
(855) 347-9483 fax
