These factors include valuation, market cap, momentum, and return on
invested capital, which includes dividends, share buybacks, and debt
repayments. Stocks are scored on these factors, and then ranked from most
attractive to least attractive. The portfolio is then built from the 150
top-rated names. The focus tends to be more on mid-cap names.
The fund targets a 20% weighting in U.S. stocks, and any currency exposure
is typically fully hedged back to Canadian dollars. At the end of May,
about 18% was invested in the U.S. This is not a sector-neutral fund, as it
will be overweight and underweight sectors based on their relative
attractiveness. At the end of June, the fund was underweight energy and
telcos, while maintaining an overweight to financial services and basic
As of May 31, top holdings included
Sun Life Financial Inc. (TSX: SLF),
Teck Resources Ltd. (TSX: TECK.B),
Methanex Corp. (TSX: MX),
Express Scripts Holding Co. (NASDAQ: ESRX), and
Air Canada (TSX: AC.B).
Valuation numbers are very attractive, with the fund trading well below the
index and peer group, and showing decent growth prospects. Performance over
the past five years has been roughly in line with the category average,
with an average annual compounded rate of return of 8.2%, compared with
9.3% from the S&P/TSX Composite.
Volatility has been roughly in line with the index and peer group, but the
managers have done a decent job protecting capital in down markets of late.
For the past five years, the fund has captured 90% of the upside, yet
participated in only 60% of the downside.
There are three reasons to like this fund:
– It has an MER of 1.54%, which is well below the category average.
– The disciplined, repeatable, and transparent stock selection process has
worked over the long-term.
3. Portfolio positioning
– It has a decided value tilt, and as market fundamentals begin to play a
key role in driving share prices, this fund is likely to benefit.
While not my top pick, it is a Canadian-focused equity fund that is worth a
look, particularly for do-it-yourself investors looking for Canadian equity
RBC O’Shaughnessy Canadian Equity Fund Series A
RBC Global Asset Management
Canadian Focused Equity
C (June 2018)
Mid Cap Blend/Systematic
Jim O’Shaughnessy since 1997
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.
Notes and Disclaimer
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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
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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.