Ronald G. Olin, president of Deep Discount Advisors of Asheville, N.C., has been in several well-publicized proxy fights with closed-end funds over the past few years. In his attempt to reorganize the funds he invests in, Olin has sought the ouster of money managers and board members - even a former Australian prime minister from one fund. And while much has been written about Olin, the shareholder bulldog, little has been written about Olin himself.
Although he declined to comment on specific shareholder fights he has been involved in on the advice of his lawyers, Olin spoke to Larry Rulison, a free-lance writer for Mutual Fund Market News, about his background and how he came to be a thorn in the side of many closed-end funds.
Born in Reading, Pa., Olin was raised in Houston, Texas where he lived until 1992. Olin and his wife now live in Asheville, N.C. They have one daughter who is a writer in New York City. Deep Discount manages approximately $180 million for its clients.
MFMN: What is your educational background, and when did you get into investment management? I understand you worked for IBM at one point.
OLIN: I received a bachelor's and master's degree in electrical engineering at Rice University in Houston, Texas. While my studies focused on electrical engineering and applied mathematics, my other interests included the stock market and poker. Poker winnings paid my living expenses while in college.
After getting a masters degree in 1967, I went to work for the IBM Federal Systems Division at the NASA Johnson Spacecraft Center just outside of Houston where I was employed until 1985. While working for IBM, I continued my poker activities and also became a card-counter and consistently won money during occasional trips to Las Vegas to play computer-based systems.
During my IBM career, I rose to a senior level manager with several organizations of programmers reporting to me that were working on Space Shuttle and DOD satellite tracking software in contracts with NASA and the government. While at IBM, I expanded my interest in the stock market, with a focus on closed-end funds and exploiting the inefficiencies represented by the discounts.
Eventually, this interest in closed-end funds replaced poker and blackjack as a major source of additional income. I was doing so well in closed-end investments that I left IBM in 1985 to devote myself full-time to the stock market.
Eventually, friends asked me to invest for them as well, and this formed the basis for Deep Discount Advisors and Ron Olin Investment Management Co., both of which are registered investment advisors.
MFMN: What types of clients do these companies have and what do they do?
OLIN: Both companies are registered investment advisors that invest exclusively in closed-end portfolios on behalf of their clients. Most clients are wealthy individuals or their associated company pension and profit-sharing plans or IRAs. Our fees are based on the performance of the client's accounts. No profit for clients means we don't get paid, and we are generally paid in proportion to how well the client account does. This keeps everybody focused on the bottom line. Fortunately, everyone has done well.
MFMN: Is Asheville a likely place for a money management company that is investing in funds around the world?
OLIN: We started in Houston, where many of our clients still reside. We moved to Asheville in 1992 because it's a lovely place to live. There are four moderate seasons. The people are very nice. It is beautiful, and the slower small-town pace gives you time to smell the roses.
MFMN: What do you do in your free time?
OLIN: My wife and I like to travel the world when I can get away from the office. We also get to New York a lot on business, and the stores know us very well on Fifth Avenue. I recently have taken up golf - a big mistake - and renewed an earlier interest in tennis. I try to exercise as much as I can.
MFMN: What is the perfect fund and how should it be run in your opinion?
OLIN: I believe that the closed-end structure is superior to the open-end structure for long-term investors if it is really run to benefit the shareholders. Expenses can be substantially lower, a stable pool of capital should allow the investment adviser to maximize his added value, and fund purchases of its own shares when they sell at a discount enhance returns without adding risk. We like to encourage all closed-end funds to operate this way. The bottom line is that funds need to be run exclusively for the benefit of shareholders and not for the benefit of the fund's investment adviser.
MFMN: Are you friends with Philip Goldstein [president of Opportunity Partners of Pleasantville, N.Y. and a closed-end fund activist], and what do you think of what he's trying to do as an active shareholder?
OLIN: I like Phil and think he has a positive influence on closed-end funds. We generally find ourselves on the same side of many issues relating to closed-end funds. However, we differ in one very important respect. I believe there is value in perpetuating the closed-end structure because the long-term benefits to shareholders can outweigh the quick gains from immediately delivering net asset value and destroying the fund. A single, concentrated focus on simply delivering NAV as soon as possible provides quick profits for short-term speculators and arbs but leaves most shareholders with cash and tax bills, or an open-end fund that will likely under-perform an equivalent, properly-managed closed-end fund.
MFMN: What do you tell prospective clients about what you can do for them?
OLIN: We promise them all our expertise in extracting the maximum long-term return from the efficiencies in closed-end funds. We tell them that we believe this is the safest, most productive way to beat the markets.
MFMN: Do you enjoy what you do? Would you do anything else?
OLIN: I enjoy it immensely. Whether it is poker, blackjack, or the stock market, I love to beat the system. If I devoted considerable time to anything else, it would need to have the same characteristic.
MFMN: You have tried to get some important people off fund boards, i.e., the former prime minister of Australia. Is that hard for you to do?
OLIN: I have nothing against any of the individuals who happen to be directors of closed-end funds with big discounts and poor performance. I am sure they are very nice and distinguished people. But they are not doing their job. When someone is not doing their job, and it is costing the shareholders money, they need to be replaced. Some directors in the industry are starting to get the message and are starting to do the right things. They will have our support. (See related story p.14 Shareholdler Activists Will Leave Board)