Even with this higher fee, the Manulife World Investment Class is
consistently one of the stronger international equity funds around.
However, even strong funds run into a rough patch, and 2016, specifically
the second half of the year, was a rough one for this fund (and for the
Mawer offering as well). In the fourth quarter, it was off by 6.4%,
compared with the MSCI EAFE Index, which was up by 1.7%, in Canadian dollar
terms. For the full year, it was down 4.4%. But things have since turned
around nicely, and in 2017 year to date to the end of September, the fund
is ahead 15.5%, and is up 8.1% for the 12 months ending September 30.
The fund is managed by Mawer’s
David Ragan and Peter Lampert using a highly disciplined, research-driven, bottom-up
process and long-term holding period. The managers search for companies
with excellent management teams and add to the portfolio at only when they
believe the shares are trading at a discount to the company’s intrinsic
Geographically, the fund is weighted heavily to the United Kingdom, with a
25% allocation as of Aug. 31. The next highest allocation is to Japan at
9%. By sector, the fund is overweighted to financials at 23% of portfolio
allocation, with industrials at 16% and consumer staples at 14%. The fund
is underweight in telecommunications and real estate.
Top holdings as of Aug. 31 included certification and testing company
Intertek Plc (LON: ITRK), Chinese internet giant
Tencent Holdings Ltd. (HKG: 0700), insurance broker
Aon Plc (NYSE: AON), Japanese drug store chain operator
Tsuruha Holdings (TYO: 3391), and French multinational industrial gas giant
Air Liquide SA (EPA: AI).
In its recent third-quarter commentary Mawer noted that international
equity returns continued to advance in local currency terms despite being
masked by the strong Canadian dollar. Mawer’s managers believe the market
continues to reward companies that meet lofty expectations as investors
trade off the risk of potentially higher discount rates for expected higher
future cash flows.
However, Mawer also adds a cautionary note, pointing out that there’s very
little room for error with current high equity valuations and that those
companies that fail to deliver are often harshly punished.
Looking ahead, I believe Mawer’s disciplined investment process will help
to deliver above-average returns over the long term. As with any fund that
follows a disciplined approach, there will be periods where the performance
diverges significantly from the benchmark and the peer group, as happened
in 2016. However, the fund has recovered from the slump and has delivered
strong performance so far in 2017.
Manulife World Investment Class
Large Cap Blend
David Ragan since August 2013; Peter Lampert
MMF4336 (front-end load)
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
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.
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only and is not intended as personalized investment advice.