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FundGrade A+® winner Mackenzie Canadian Growth Fund stays ahead of the pack
4/19/2018 5:33:23 PM
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By Dave Paterson  | Wednesday, March 28, 2018


 



In the first two tumultuous months of the year, Mackenzie Canadian Growth Fund posted a 2.86% return, compared with a loss of 4.37% for the S&P/TSX Composite Index. And for the 12 months ending Feb. 28, the fund was up 14.69% compared with 3.23% for the index. This outperformance is not a fluke, judging from the longer-term numbers posted by the Mackenzie team headed by Dina DeGeer. For the five years ending Feb. 28, it posted a very respectable 15.6% average annual compounded rate of return, while the S&P/TSX Composite returned 6.9% for the same period. That type of consistent performance has merited the FundGrade A+ Award for three straight years from 2015 to 2017.

The team looks to build a concentrated portfolio of 30 to 35 businesses of any size that are growing faster than the economy and their competition. The managers look for well-managed niche players with unique competitive advantages, and a history of strong free cash flow generation.

Once a potential investment candidate is found, the team creates a valuation model based on free cash flow. This model is used to help determine the estimated fair value for the company, and before any security is added to the portfolio, it must be trading at a minimum of 10% below the managers’ estimate of fair value. This step is in place to help make sure they don’t overpay for future growth.

The portfolio is well diversified, and looks nothing like its benchmark. It is overweight in financials, energy, information technology, and consumer staples – and but lighter in energy, industrials, and telecommunication services. The fund can invest up to 49% outside of Canada, and at the end of February was taking advantage of that, with 38% in the U.S. Currency is opportunistically hedged.

As of Feb. 28, top holdings included CCL Industries (TSX: CCL.A), Royal Bank of Canada (TSX: RY), Telus Corp. (TSX: T), Metro Inc. (TSX: MRU), and Stryker Corp. (NYSE: SYK).

Performance has been above average, but so too has volatility, with a 3-year average standard deviation of 8.76%. Still, the excess return generated has more than offset the higher risk.

Looking ahead, the investment process used by the management team for the Mackenzie Canadian Growth Fund is well defined and repeatable. I doubt the absolute levels of return are sustainable, but I would expect this fund to continue to be able to deliver strong relative risk-adjusted returns over the long-term.

Mackenzie Canadian Growth Fund
Fund Company:
Mackenzie Investments
Fund Type: Canadian Focused Equity
FundGrade Rating: A
FundGrade A+ Awards: 2017, 2016, 2015
Style: Large Cap Growth
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Excellent
Manager: Dina DeGeer since August 1995; David Arpin since January 2013
MER: 2.46%
Fund code: MFC650 (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

© 2018 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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