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Norrep US Dividend Plus Class offers alternative to passive equity exposure
6/18/2018 1:42:33 PM
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By Dave Paterson  | Wednesday, September 13, 2017


The S&P 500 Composite Index is one of the most difficult indices to beat, which is why you’re usually better off using a low-cost, passive strategy. In some cases however, a fund can offer something different, making it an interesting way to access U.S. equities. The Norrep US Dividend Plus Class is an example.

Manager Kamran Khan uses a unique approach that incorporates a traditional long-only, bottom-up, value-focused process, with a conservative option-writing strategy designed to protect capital and generate income. He has built a concentrated portfolio of U.S.-based companies that have strong fundamentals, good earnings and price momentum, and that are trading at an attractive level.

Khan looks for companies of any size, but currently favours more small- and mid-capitalization names. He prefers the small names because there are more opportunities to add alpha compared with the large-cap space. He will typically hold 25 to 30 stocks, with the sector mix being the result of the available opportunities. Khan is somewhat active in his approach, and will trade out of names based on conviction and valuation. Annual portfolio turnover has been in the 70% to 90% range.

Top holdings as of July 31 included business services firm Convergys Corp. (NYSE: CVG), healthcare plan provider CVS Health Corp. (NYSE: CVS), sporting goods retailer Dick’s Sporting Goods Inc. (NYSE: DKS), discount retailer Dollar General Corp. (NYSE: DG), and chemical firm Eastman Chemical Co. (NYSE: EMN).

The option-writing strategy is two-pronged. Cash-covered puts are written on stocks the managers are interested in buying, but at a lower price. Writing puts generates premium income, and if the puts are exercised, the stock will usually be added to the portfolio as it is one the managers were watching. Covered calls are written on stocks that are approaching full valuation. This also creates premium income, and if a call is exercised, it is likely to be on a stock they were planning to sell anyway.

I expect this fund to lag in a rising market but to hold up better than its peers when things get rocky, making this an attractive option. I’m still likely to favour a low-cost passive option for my U.S. equity exposure, but if you’re looking for something different, this is one fund worth talking to your advisor about.

Norrep US Dividend Plus Class
Fund company:
Norrep Investments
Fund type:
U.S. Equity
FundGrade Rating: C (August)
Style: Mid-Cap Value
Risk level: Medium - High
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Kamran Khan since Aug. 2006
MER: 2.68% (Series A)
Fund code: (NRP602 – low load)
Minimum investment: $5,000

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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