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Trimark’s emerging markets FundGrade A+® winner not a traditional value fund
7/16/2018 2:34:20 AM
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By Dave Paterson  | Wednesday, April 25, 2018


 

 

With valuation levels in developed markets trading well above historical averages, emerging markets look downright cheap in comparison. Factor in positive demographics, less dependence on commodities, and increasing investor interest and the case for adding emerging markets exposure becomes very strong. And the FundGrade A+ Award -winning Trimark Emerging Markets  Class is one of the most attractive funds in the space.

It is managed much like other Trimark funds where managers view investing not as if they are merely trading stocks but rather as taking an ownership interest in those companies.

Managers Jeff Feng and Matt Peden focus on identifying well-managed, high quality companies using a process that is fundamentally-driven and bottom-up. They look for companies that they believe can generate and grow above-average levels of free cash flow, that are growing organically, that can generate a high return on invested capital through a full market cycle, and that have a sustainable competitive advantage.

Valuation is important, but this is not a value fund in the traditional sense, as the managers are willing to pay a higher price for an exceptional business. Currently there is a consumer focus to the portfolio, with 45% invested in the consumer-goods and consumer services sectors. Feng and Peden like these areas because as the emerging markets evolve, there will be a growing middle class that will increase its spending. Another 26% is allocated to financial services, for much the same reason.

Top holdings at the end of March included Ping An Insurance Group Co. China Ltd., Vipshop Holdings Ltd., Naspers Ltd., Liberty Latin America Ltd., and Alibaba Group Holding Ltd.

Performance has been excellent, and the has outpaced both its benchmark and peers on both an absolute and risk adjusted basis with first-quartile performance over the longer term. The 3-year average annual compounded rate of return to March 31 is 11.1%, while the 5-year return is 12.9%. Volatility has been in line with the index and category average, with a 3-year average standard deviation of 13.2%, but given the quality focus of the portfolio, this has the potential to decline over time.

My biggest concern is the cost of the fund, which posts an MER of 2.79% for the Series A units, which is above the category average. If you are buying the fee-based or the do-it-yourself units, the cost is lower, coming in a 1.68%, and 1.67% respectively.

Trimark Emerging Markets Class
Fund company:
Invesco Canada
Fund type:
Emerging Markets Equity
FundGrade: A (March)
FundGrade A+ Award: 2016, 2017
Style: Large Cap Growth
Risk level: Medium to High
Load status: Optional
RRSP/RRIF suitability: Fair
Manager: Jeff Feng since April 2013; Matt Peden since April 2013
MER: 2.79%
Fund code: AIM2141 (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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