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Consider solid, low-key Franklin Bissett Canadian Equity Fund a core holding
8/22/2017 4:54:31 PM
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DUE DILIGENCE
Objective research, analysis, and insight on investment funds in Canada from an acknowledged industry expert



By Dave Paterson  | Wednesday, July 19, 2017


 



Calgary, Alberta-based Franklin Bissett is one of those investment shops you don’t hear a lot about. Yet every day, they quietly go about their business of building quality-focused, high-conviction, active portfolios for investors. The Franklin Bissett Canadian Equity Fund is the firm’s flagship and is a three-time FundGrade A+® Award winner.

The fund has been around for a long time. The Series F was launched in March 1983, and the Series A debuted in November 2000. The fund is managed using a bottom-up, fundamentally-driven, growth-at-a-reasonable price (GARP) approach that looks for well-managed companies offering sustainable profitability, strong earnings and cash flow growth, a durable business model, and a management team with a history of sound capital allocation decisions.

To find these companies, managers Garey Aitken and Tim Caulfield use a multi-step process. The first step is to identify potential investment candidates, looking for businesses with high levels of return on invested capital that are trading at a discount. They will then learn about the business, industry, and management. Next, they conduct their own analysis to determine a company’s intrinsic value, using very conservative assumptions. Finally, if appropriate, it will be added to the portfolio.

Their approach is very patient, which is evidenced by their very low levels of portfolio turnover, which has averaged less than 20% for the past five years. The portfolio holds approximately 50 names, with the top 10 making up just less than 50% of portfolio weight.

As of June 30, the fund’s top holdings included a 6.6% allocation to Brookfield Asset Management Inc. (TSX: BAM.A), 5.9% in Canadian National Railway Co. (TSX: CNR), 5.3% to Restaurant Brands International Inc. (TSX: QSR), 5.1% in Royal Bank of Canada (TSX: RY), and 4.8% to Toronto-Dominion Bank (TSX: TD).

Sector mix is the byproduct of the available opportunities, and can often look much different than index. At the end of June, the fund had significant exposure to financials, energy and industrials. It was underweight utilities, information technology, and real estate.

Performance has been solid, modestly outperforming the index, with marginally less volatility. The fund posted a 5-year average annual compounded rate of return of 10% to June 30, with the 3-year return posted at 2.6%, and the 12-month return at 11.1%. This is impressive, given the fund’s hefty 2.46% MER, which is around the category average.

I consider this a core Canadian equity fund holding, and is definitely worth taking a look at.

Franklin Bissett Canadian Equity Fund
Fund company:
Franklin Templeton Investments
Fund type:
Canadian Equity
FundGrade™ Rating: B (June)
FundGrade A+® Award: 2012, 2013, 2014
Style: Large Cap GARP
Prospectus risk level: Low to Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Garey Aitken since Jan. 2002; Tim Caulfield since Jan. 2011
MER: 2.46%
Fund code: TML202 (front-end load)
Minimum investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2017 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 
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