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
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
Mackenzie Canadian Growth Fund
Canadian Focused Equity
FundGrade A+ Awards:
2017, 2016, 2015
Large Cap Growth
Dina DeGeer since August 1995; David Arpin since January 2013
MFC650 (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.