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North Growth U.S. equity flies under the radar

I've just interviewed Rory North, a fund manager with Vancouver-based North Growth Management Ltd. I had approached Mr. North when I noticed his North Growth U.S. Equity Fund was the best performer among U.S. equity funds over 10 and 15 years, and yet I had never heard of him or the firm. His one-year return of 7.4 per cent at the end of Sept. 30 also ranks near the top of the performance heap.

How did he fly under the radar screen?

Mr. North and his firm never did any marketing or aggressively tried to distribute the fund widely because of a shareholder agreement his father Rudy had with Phillips Hager & North Investment Management Ltd.

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His father, who co-founded the Vancouver investment firm, had retired by 1998 but remained a shareholder. However, he wanted to take North Growth U.S. Equity - formerly known as PH&N U.S. Special Equity Fund - with him. Rudy had launched the fund in 1992, and it was his baby.

"We maintained a high minimum ($150,000) and focused primarily on our friends and family as far as our new client acquisition," Rory says.

Rudy had long been involved in running the core PH&N U.S. Equity Fund and had kept all his own money invested there until he discovered he enjoyed managing a separately managed account for a client even more, Rory explains. While this client's account was run with the same growth-at-a reasonable price mandate, it had a "slightly less institutional flavour" and did slightly better than the core fund.

"Rudy decided that was the way he wanted his own money to be managed so he moved it out of the PH&N U.S. Equity Fund, and used it to start this fund [now the North Growth U.S. Equity]" Rory says. "He was involved in managing the core PH&N U.S. Equity Fund until about 1995, and from then on he was managing this fund…"

The fund, which can invest in small and large company stocks, owned a number of technology stocks that rode the strong rally in the sector in late 1990s, but had exited those positions and was in largely in cash when the bubble burst, he says.

"Then we went into the bear market. We never went down during the previous bear market [2000-2002]so that was a big contributor to our performance."

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