Last updated: Dec-13-2018

NEI Ethical Canadian Equity Fund one of the best-managed SRI funds
12/13/2018 10:09:11 PM
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By Dave Paterson  | Wednesday, October 18, 2017


Ethical, or socially responsible, investing has been growing in popularity recently as more people look to do the right thing with their investment dollars. The NEI Ethical Canadian Equity Fund, managed by Calgary based QV Investments, is one of the oldest, and best-managed funds currently available in the socially-responsible investing space. Here’s a look at what makes this fund tick.

Managers Darren Dansereau and Joe Jugovic of QV run this fund pretty much the same way that QV runs all its equity mandates, with an investment process that focuses on strong companies with strong management.

QV takes a long-term view when analyzing a company, and looks for companies with strong balance sheets, excellent cash flow, sustainable barriers to entry, and competitive strengths. They like to see management teams that have a stake in the business, as this helps to better align their interests with their investors. Once they have identified a potential investment, NEI will review to make sure it meets their criteria for Sustainable Investing.

The sector mix, perhaps surprisingly, isn’t a lot different than many more traditional funds. It has nearly 17% invested in energy, which may surprise some. However, the firms they invest in take a responsible approach in the space. For example, Suncor is focused on climate change, while AltaGas is working with first nations in a very inclusive way. As you’d expect with a fund from this company, the fund’s overall MSCI ESG score comes in at a solid 6.2/10, compared with an average 5.2/10.

Top holdings as of Sept. 30 included Loblaw Cos. Ltd. (TSX: L), Canadian Imperial Bank of Commerce (TSX: CM), Bank of Nova Scotia (TSX: BNS), Power Financial Corp. (TSX: PWF), and Canadian National Railway Co. (TSX: CNR).

Performance has been strong, with a 5-year average annual compounded rate of return of 8.7%, outpacing the S&P/TSX Composite Index. It has lagged of late, on its underweight cyclical holdings. Volatility has been less than the broader market, however, and the downside protection has been strong.

This fund is a great example that SRI investing doesn’t have to mean sub-par investment performance.

NEI Ethical Canadian Equity Fund
Fund company: NEI Investments
Fund type:
Canadian Equity
FundGrade™ Rating: C (September)
Style: Large Cap Value
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Manager: QV Investments: Darren Dansereau and Joe Jugovic, both since June 2009
MER: 2.59%
Fund code: NWT072 (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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