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For advisors: Manulife World Investment Class stages strong turnaround in 2017
12/13/2018 10:16:27 PM
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By Dave Paterson  | Tuesday, October 31, 2017


Subadvised by Calgary-based Mawer Asset Management, The Manulife World Investment Class is basically the same fund as the highly regarded Mawer International Equity Fund but in a different wrapper. The key difference between the two is that the Manulife offering is targeted at investment advisors, carrying both a higher management fee and embedded dealer compensation. This fund has an MER of 2.55%, which is higher than Mawer’s version.

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 value.

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
Fund company:
Manulife Investments
Fund type:
International Equity
FundGrade™ Rating: B
Style: Large Cap Blend
Risk Level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Manager: David Ragan since August 2013; Peter Lampert
MER: 2.55%
Fund code: MMF4336 (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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