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Patience a watchword at Award-winner Mawer Canadian Equity Fund
12/12/2017 9:25:39 AM
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DUE DILIGENCE
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By Dave Paterson  | Wednesday, December 06, 2017


 



Mawer Canadian Equity Fund has very simply been one of my favourite funds in the Canadian Equity category for some time now, with Mawer’s disciplined, research-driven approach being one of the main reasons why. The fund ranks consistently in Fundata’s monthly FundGrade™ A ratings, and has won the FundGrade A+® Award every year since the Award’s debut.

Managed by Jim Hall and Vijay Viswanathan of Calgary-based Mawer Investments, the investment process is a fundamental, bottom-up, approach using a growth-at-a-reasonable price (GARP) approach that looks for wealth-creating companies trading at a discount to what they believe it to be worth. They take a very long-term, patient approach. Their culture is research-focused, and all assumptions made in the investment process are put through a rigorous stress test and scenario analysis before any decision is made.

The managers are benchmark agnostic, with the sector mix being the result of the stock selection process. The fund will often look much different than the S&P/TSX Composite. At the end of September it was underweight consumer staples and consumer discretionary, materials, and telecommunications.

The fund is well-diversified, holding just over 40 names, with the top 10 making up just under 40% of the fund. While it has a large-cap focus, about a third of the fund is in small- and mid-cap names.

Top holdings recently included Royal Bank of Canada (TSX: RY), Toronto-Dominion Bank (TSX: TD), Bank of Nova Scotia (TSX: BNS), Brookfield Asset Management Inc. (TSX: BAM.A), and Canadian National Railway Co. (TSX: CNR).

Performance has been excellent, with a 5-year average annual compounded rate of return of 13.6% to Oct. 31, compared with 8.4% for the index. Shorter-term the fund is no less of a powerhouse, returning 13.2% for the 12 months ending Oct. 31, compared with 11.5% for the S&P/TSX Composite.

Mawer Canadian Equity Fund has also been less volatile than both the index and peer group, with a 3-year average standard deviation of 7.5% for a Fundata Volatility Ranking of 5/10. It has done an excellent job in protecting capital in down markets. The downside capture ratio for the past three and five years was 40% and 33% respectively. This means that on average, the fund experienced much less downside than the index.

There is a lot to like about this fund. It has an excellent management team, using a disciplined, repeatable, and risk-focused investment process. Combined, this is an excellent core holding that has the potential to continue to deliver above-average returns.

Mawer Canadian Equity Fund
Fund company:
Mawer Investment Management
Fund type:
Canadian Equity
FundGrade Rating: A (October)
FundGrade A+ Awards: 2012-2026
Style: GARP
Risk level: Medium to High
Load status: No load
RRSP/RRIF suitability: Excellent
Manager: Jim Hall since December 1999; Vijay Viswanathan since September 2011
MER: 1.22%
Fund code: MAW106 (no 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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