It’s rare when every fund within a family merits consideration. But that’s the case here.
There are several good boutique fund comnpanies in Canada. One of my favorites is Saxon which offers some of the best performers in the industry plus the important advantage of a low cost structure and no load charges. That’s a combination that’s hard to beat and Saxon has always had a reputation for fair-dealing and integrity.
Last year, control of the company was assumed by MD Management, however the Saxon management team of Richard Howson and Bob Tattersall continues to manage the portfolios and their value style is producing fine results. Howson handles the flagship Saxon Stock Fund along with the High Income and Balanced entries while Tattersall looks after Saxon Small Cap and Saxon World Growth. Both managers take a long-term, buy-and-hold approach to portfolio-building so there is not a lot of turnover.
I think every one of the five funds in the group is a winner and is worth considering, depending on your needs and priorities. All the Saxon funds are sold on a no-load basis if purchased directly from the manager (1-888-287-2966). Minimum initial investment is $5,000.
Here are quick reviews of each entry.
Saxon Stock Fund (Recent NAV $25.31). This is an all-cap fund that includes big blue-chip stocks as well as small, unknown companies in the portfolio. Howson combines top-down economic analysis with bottom-up stock selection based on fundamentals in making his picks. At present, the portfolio is heavily concentrated in four sectors: industrial products, financial services, metals and minerals, and oil and gas. Large holdings include Teck Cominco, Barrick Gold, Nu-Gro, and CIBC.
The performance record of this fund is outstanding, both long and short term, and give full credit to Howson for the results because he has been running it since 1989. Over the 15 years to the end of March, the average annual compound rate of return was 11.7%. This is a fund with staying power! Over the most recent three years, the average annual return was 13.7%, compared to an average of only 4.8% for the Canadian equity category. As for risk, consider this: the fund did not lose money in a single calendar year during the bear market. The MER is a bargain at 1.87%, well below the norm for a fund of this type.
Saxon Small Cap Fund (Recent NAV $20.76). In a small family, there is sometimes a lot of overlap between funds. That is not the case here. This one is run by Tattersall and, while he too is a value manager, his portfolio is very different from that of Saxon Stock Fund. Right now, he favours stocks like Aur Resources, Canadian Western Bank, Charming Shoppes, and Transat, the discount airline company.
Recent results have been outstanding. The fund gained 65% in the year to March 31, well above average for the Canadian Small Capitalization category. Over 15 years, the average annual return was 12.2%. As a rule, small-cap funds are expected to be more volatile than large-cap or all-cap entries so it is something of a surprise to find that this fund has not recorded a losing calendar year going back to 1996. During the bear market, the worst performance came in 2002 when the fund gained 4.7%. If you want a Canadian small-cap entry for your fund portfolio, look no farther.
Saxon Balanced Fund (Recent NAV $18.45). The last time this fund recorded a calendar year loss was back in 1998, when it dropped 1.3%. Since then, it’s been all profits. The current weighting is heavily towards stocks, which account for almost two-thirds of the portfolio. Bonds and cash make up the rest.
Results are above average over all time periods. The five-year average annual compound rate of return to the end of March was 12% compared to an average of about 5% for the Canadian Balanced category. It’s a bit surprising to see that the risk level is slightly higher than the norm for a fund of this type, but it’s not out of line when compared to the strong results.
Saxon World Growth Fund (Recent NAV $17.01). This fund has had more ups and downs than the others in the family. It recorded small losses in 1998, 2000, and 2002, although none was greater than 5%. Those setbacks were more than offset by double-digit gains in the years preceding and following them. The net result is a five-year average annual compound rate of return of 11.5%. The average Global Equity fund sold in Canada barely managed to break even during that period.
International funds are notorious for having high management expense ratios, sometimes in excess of 3.00. In this case, the MER is a very modest 1.87%, which of course puts more of the profit into your pocket. About half the portfolio is in the U.S. and there is currently a large cash allocation of just under 20%. This is a hot fund right now with a one-year gain of 43%.
Saxon High Income Fund (Recent NAV $11.65). This fund focuses on income trusts to generate good income for its investors. As a result, it has taken a hit recently as a result of the pull-back in the sector. However, longer-term results are very good with an average annual gain of 15.5% over five years (to March 31). The fund also offers good cash flow for income-oriented investors along with some tax advantages.
It’s rare when every fund within a family merits consideration. But that’s the case here. In my 2004 Buyer’s Guide to Mutual Funds, every fund in this group rates $$$ or $$$$ (the top level). Take a look for yourself.
Adapted from an article that originally appeared in The MoneyLetter, published by MPL Communications. For subscription information go to http://www.adviceforinvestors.com/cart_subs.phtml?add=PAPRCQCQ&submit_pay=1