For some, this will be their first year of eligibility. Funds need two
years of history to be included in the FundGrade calculation and a year’s
worth of FundGrade ratings to be eligible for an A+ award. While for
others, although they have been eligible for a number of years but unable
to make the cut, their exceptional risk-adjusted performance has finally
landed them in the upper echelon of Canadian investment funds. In either
case, the following funds are on track to earn their first FundGrade A+
Awards, but will require a strong finish to the year in order seal the
BMO U.S. Dividend Fund
debuted in November 2014. The fund is managed by Ernesto Ramos of BMO Asset
Management Corp., who combines bottom-up fundamental analysis with a
top-down macro strategy. The portfolio consists of U.S. dividend-paying
equities that the manager believes are undervalued compared with their
fundamentals. The current top holdings include names such as Microsoft
Corp., Pfizer Inc., and Chevron Corp. Information Technology makes up the
largest sector allocation at around 20%, followed by Financials and Health
BMO U.S. Dividend Fund narrowly missed out on the FundGrade A+ Award last
year but is again looking to earn its first Award in 2018. Over 1 and 3
years, the fund is a first quartile performer with 12-month returns of
16.2% and a 3-year average annual compounded rate of return of 12.4%. But
more importantly, the fund has managed to outperform while keeping
volatility well below the category average. The average 3-year annualized
standard deviation (SD) is just 9.9% compared with the group average of
11%. And over the past three years, the maximum drawdown is just 7.4%,
while the average U.S. Equity fund is closer to 10%. This value-oriented,
low-volatility style should bring comfort to investors who fear the bull
market may be running out of steam.
The fund is available in a variety of purchase options, with the Advisor
series carrying an MER of 1.97%.
For the past 10 years
Dynamic European Equity Fund
has dominated the European Equity category in outright performance. It has
the highest 3-, 5-, and 10-year average annual compounded returns in the
category at 11.0%, 14.0%, and 6.9%, respectively. But the highly volatile
nature of this fund has kept it from maintaining a monthly A Grade, thus
excluding it from the A+ Awards. This year, however, the magnitude of the
outperformance is making up for the higher volatility numbers, and the fund
is on pace to earn its first FundGrade A+ Award. Over the past two years
this fund has posted an average annual compounded return of 23.3%, which 8
percentage points higher than its closest rival. And although its 2-year SD
is one of the highest in the group at 11.1%, its Sharpe ratio is still
0.54, which is almost double the category average.
The fund is managed by Benjamin Zhan and invests in businesses that stand
to benefit from the “economic rationalization of the European markets.” Top
holdings include Swatch Group Ltd., Burberry Group PLC, and LVMH Moët
Hennessy Louis Vuitton SA. The highest geographic exposure is France at
24%. The next two highest are United Kingdom at 22% and Germany at 18%.
Consumer Goods and Services make up close 50% of the sector allocation,
with Technology next at 22%.
This fund is also available in a variety of purchase options and the
Advisor series has am MER of 2.52%
An ETF looking to earn its first FundGrade A+ Award in its first year of
PowerShares FTSE RAFI Global Small-Mid Fundamental ETF CAD (TSX:
PZW). The ETF was launched in April 2015 and has consistently performed at the
top of its peer group. It has the second-highest 3-year average annual
compounded return at 11.6% and fourth-highest 2-year annualized return at
19.1% in the Global Small Mid Cap Equity category. In addition, this fund
is one of the least volatile funds in the group over the past three years.
PZW invests in two underlying US-listed ETFs: PowerShares FTSE RAFI
Developed Markets ex-US Small-Mid ETF (PDN) and PowerShares FTSE RAFI US
1500 Small Mid ETF (PRFZ). Each of the underlying ETFs tracks a rules-based
indexes that focuses on book value, cash flow, sales, and dividends.
Equities in the indices are ranked and weighted based on the fundamental
strength of these measures. What you end up with is an extremely diverse
portfolio of around 3,000 securities, made up of roughly 50% U.S. equities
and 50% international equities.
If you invest in U.S. dollars or if you are worried about currency
exposure, a U.S. dollar version (PZW.U) and a CAD Hedged version (PZW.F),
are also available. The MER of the main series is 0.62%.
Brian Bridger, CFA, FRM, is Vice President, Analytics & Data at Fundata Canada Inc. and is a
member of the
Canadian Investment Funds Standards Committee.
Notes and Disclaimers
© 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 mutual 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. The foregoing is for general information purposes only and is the
opinion of the writer. No guarantee of performance is made or implied. This
information is not intended to provide specific personalized advice
including, without limitation, investment, financial, legal, accounting or