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After 3-Year Test Run, Sycuan Markets Mutual Fund to All Investors

Daniel Tucker, chairman of the Sycuan Band of the Kumeyaay Nation, knows politics could end gaming, his bread and butter.

“With the swipe of a pen, Congress could kill off gaming,” said Tucker. “Diversification is where it’s at.”

So in 2003, the band launched the Sycuan U.S. Value Fund, the first mutual fund geared toward American Indians.

After a three-year test run, the tribe is marketing the fund to all investors with a goal of expanding business operations to minimize the political risks associated with gaming.

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“Nothing will take the place of gaming,” he said, explaining that the fund would give his members the opportunity to invest in a fund managed by the tribe.

Cody Martinez, 25, the tribal council treasurer and president of Sycuan Capital Management, is acting as the fund manager and adviser.

“Cody understands the numbers, knows what it takes to make a buck and can do it,” said Tucker. “He bought a house when he was 18 years old and has been an inspiration to the younger generation.”

Martinez said the fund remains relatively small, just $5.4 million in total assets as of Jan. 29.

“A lot of people have prerequisites before they invest their money,” said Martinez. “They want to know the size of the fund, the market adviser and his expertise and background in the industry.”


Under New Management

San Diego-based Brandes Investment Partners LP, an investment advisory firm, served as sub-adviser for the first two years.

“When we were with Brandes, the market wasn’t too great,” said Martinez, who said he had no complaints about Brandes’ early role as sub-adviser to the fund. “They were closing business much larger so we went where we could get more attention.”

A Brandes representative was unable to comment by press time.

The fund shifted sub-advisers in October 2005.

The fund’s trustees selected A.Q. Johnson & Co. Inc. as its new sub-adviser. Martinez said A.Q. Johnson manages $70 million in total assets compared with Brandes’ $117 billion.

Art Johnson, founder of investment adviser A.Q. Johnson, handles day-to-day activity in Sycuan’s fund without charge to help fuel the fund’s growth.

“A.Q. Johnson agreed to forgo being paid a sub-advisory management fee until (the fund) has sufficient assets to cover its operating expenses,” said Johnson in an e-mail.

“We did this as a sign of our long-term commitment to the fund,” Johnson continued, adding that he made a considerable personal investment in the fund as well.


Setting Its Sights On $10M

“He’s not taking a paycheck until we break even,” said Martinez. The tribe pays all of the expenses associated with the fund, but Johnson won’t be paid a management fee until the fund reaches $10 million in assets.

After Johnson took over in 2006, the fund experienced its highest year-to-date return, 15.1 percent , 1 percent below what the benchmark Standard & Poor’s 500 index returned for the same period.

For the last three years, fund returns were 7.1 percent, 3.3 percent less than the S & P; 500 return of 10.4 percent for the same period.

Mutual fund analyst John Coumarianos with Chicago-based research firm Morningstar Inc. was able to see a difference in strategy between 2004 and the following years without knowledge of a sub-adviser change.

“It looked like a traditional value fund in ’04, but now it’s going after more steady growth stocks.

“This is a move we see (value-investing managers) making now,” said Coumarianos.

He added that Cisco, Intel, Microsoft and Dell , all represented in the Sycuan fund’s portfolio , are stocks in an interesting place.

Johnson follows his old employer’s strategy, investing in public companies with large capitalization.

Almost 94 percent of the fund’s holdings are in stocks, of which 48 percent is invested in large-caps American International Group Inc., Bank of America Corp., Cisco Systems Inc., Exxon Mobil Corp., Intel Corp., Johnson & Johnson, Microsoft Corp., News Corp., Nike Corp. and Pfizer Inc.


A New Marketing Approach

Jeff Provence, treasurer of Sycuan Capital Management, said the arrival of 2007 marks the end of the fund’s “incubation period.” He said the tribe would roll out a three-pronged marketing plan to raise interest and investment in the fund.

“First, we went to work with other tribal governments; looking for investors from the recognized tribes in the U.S.,” said Provence. “Second, we approached the specific members of those tribes. Third, we’re going to approach the general public, individuals and corporations.”

“We have (a representative) feeling out interest in other tribes,” added Tucker. “Palm Springs tribes have been in business quite awhile, so we’ll open up the door to see what’s out there.”

Martinez said that the fund’s appeal is easy to see when compared with savings rates.

“As tribes develop holdings, they’ll find a place to invest in a large-cap value fund,” he said. “They’ll definitely get a better return than a money market account just sitting in a bank.”

See related stories:


Sycuan Tribe Seeking to Increase Slots to 5,000, Add Land to Reservation


Sycuan Marketing Director Books Shows That Appeal to the 40-65 Crowd

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