In 2008, Accilent Capital was a 6 year old Toronto investment firm that had a growing reputation for its fresh marketing and strong Portfolio Management strategies thanks to CEO and Portfolio Manager Dan Pembleton’s vision. In the early days Accilent was (and still is) registered with the Ontario Securities Commission as a Portfolio Manager (PM), Investment Fund Manager (IFM), Exempt Market Dealer (EMD) and a Commodity Trading Manager (CTM). But Pembleton had also been working on something since 2002 – Accilent’s inception – and that year, Pavilion Resource Fund, a Flow-Through Limited Partnership and Accilent’s first proprietary offering, was ready to launch.
With that launch, the course of Accilent changed forever, shifting predominantly into product development from its previous service based offerings. Pavilion Resource Fund quickly shone – fast becoming the brand that Accilent is best known for, and the fund that has impacted investors most with regard to repeat performance.
Why Flow-Through for that first offering? For Pembleton it was clear as day. “As a vehicle, a Flow-Through offers incredible tax advantages…and being able to harness that and make it into something unique that can help investors diversify… that was always the goal.”
Pavilion, as a Flow-Through is part of an over 60 year old Canadian government program, which uses a Limited Partnership (LP) structure to invest in Canadian resource companies, that can then literally ‘flow-through’ the tax deductions gained by Canadian Exploration Expenses (CEE) back to the LP and then again back to the investor based on their investment amount. This way, Pavilion has been crafted as an entry point for a diverse portfolio of resource investments designed to provide a return, while also sheltering and increasing retirement income, saving on taxes, and preventing clawbacks.
There are differences between other Flow-Throughs and Pavilion though – with most flow-through funds being short-term -between a year or two long- with all the assets then being rolled over into an open-ended mutual fund. After this rollover, the investor can continue holding the mutual fund with all the investments in it, or sell the mutual fund which means all the investments in it will be sold at once. This way investors lose the opportunity to maximize their gains on each individual company.
With Pembleton’s ’boutique fund’ design approach, Pavilion doesn’t rollover. Instead, right from the opening of the fund, each company is sold when the fund manager believes the time is appropriate, returning cash to investors along the way. This is obviously attractive to the investors but also allows smaller companies the time required to become more valuable, rather than just be a quick tax benefit to the investor.
“Pavilion is not a Flow-Through like any other Flow-Through,” says Pembleton. “As a boutique Flow-Through, I am actively managing and shares are sold when the time is right.. This flexibility-this ‘macro timing’ and the added ability to invest in micro and small-cap opportunities when they appear is really unique to us and sets us apart.”
Another thing that sets Pavilion apart?
Other flow-through funds invest not just in the exploration phases of Canadian resource companies but also in their production phase which actually detracts from their tax efficiency – production expenses are only deductible on a declining 30% basis.
Because Pembleton’s team at Accilent designed Pavilion to be as tax efficient as possible – it invests solely in the exploration phase. This means that investors in Pavilion are able to take advantage of the exploration deductions, known as Canadian Exploration Expenses (CEE) and now Mineral Exploration Tax Credits (METC). The exploration expenses are 100% deductible in the year of investment and the METC are up to 15% deductible, making Pavilion a tax efficient investment indeed- where investors can immediately put their money to use.
Pavilion’s multi-faceted benefits and boutique differentiation definitely offer insights as to why the fund is seen branded with a gem – or is that a diamond? – as its logo. Performance-wise the diamond definitely fits.
Since that first in 2008, 20 funds have been successfully launched and managed, through some of the most difficult economic & resource cycles recorded, and in the years since its inception, Pavilion funds have held the number one position in terms of unit values more often than any other Flow-Through fund available*. Also since its inception, Pavilion has been the top-performing flow-through fund in more years than any of its competitors.
The real milestone moment?
To date, the 2008 Pavilion fund ended up having the highest return to investors of all flow-through funds in the market*, returning 136.8% on money invested, even before taking tax benefits into consideration.
Pembleton confidently keeps steering ahead.
“I see opportunities everywhere I look. I want to share that with investors and I want to help them with the tax advantage strategies that I know are going to be useful for them. I’ve always felt passionately about Canadian resources so I knew Pavilion was the path. That was my goal when I first launched Pavilion… 15 years later I am looking at performance, looking at all the different times when the economy taught us to be patient, or taught us to move quickly. 15 years of Pavilion performance. That’s pretty amazing.”
Yes it is, Dan. Here’s to 15 more.
*Based on data compiled by Accilent Capital Management Inc. from publicly available sources believed to be accurate including; news releases; issuer web sites and; SEDAR filings.