The managers at Trimark Canadian Opportunity Class use the famously disciplined Trimark approach with a bottom-up, fundamentally-driven stock selection process. That’s paid off for this 13-year-old fund, which posted a benchmark-beating first-quartile 5-year average return of 11.6% as of July 31. Can they keep the momentum?
For its Canadian equity portfolio, the managers look for companies that have a defendable competitive advantage, opportunities for long-term growth, and strong management. The company also must be trading at a discount to what they believe is its true value. In his 2013 year-end report, lead manager Alan Mannick put it this way: “We’re trying to generate superior risk-adjusted returns over a five-year basis, with risk being defined as the permanent loss of capital rather than volatility. We believe the best way to do this is to have a concentrated portfolio of roughly 30 companies, to monitor those investments closely and to look for new investments in out-of-favour parts of the market.”
The fund’s managers tend to take a longer-term view, and as a result, portfolio turnover tends to be relatively modest. However, portfolio turnover was sharply higher for the year ending March 2013, which is likely the result of a manager shuffle, with Jason Whiting stepping in to take over from Richard Nield and Jason Holzer. It certainly looks as though turnover has returned to more normalized levels this year.
True to its mandate, the portfolio is concentrated, holding about 30 names, with the top 10 making up more than 40% of the fund. Surprisingly, it is populated with a number of familiar names including Toronto-Dominion Bank (TSX: TD), Brookfield Asset Management Inc. (TSX: BAM.A), Power Corp. of Canada (TSX: POW), and the Bank of Nova Scotia (TSX: BNS). On a sector basis, the portfolio is dramatically different from the index, with no exposure to consumer defensive, utilities, or communications, and only very little exposure to materials. It is overweight in financials, energy, and industrials. It currently holds about 12% of the fund in cash.
Performance looks to have turned the corner. For the year ending July 31, it has gained more than 24.6%, roughly matching the return of the S&P/TSX Composite Index. Volatility has been generally in line with the index, but I would expect that it has the potential to move higher, with its concentrated all-cap portfolio. The average market cap is less than half that of the broader market.
On balance, I like this fund. My only concern is that it appears to be a much different fund than it was a couple of years ago. While Jason Whiting has a good track record on the other funds he is managing, I would still like to see another couple of quarters on this mandate before I recommend it. But, if you currently own it, it’s a keeper.
Fund company: Invesco Canada Ltd.
Fund type: Canadian Equity
Fundata FundGrade® Rating: B
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Fair
TFSA suitability: Fair
Managers: Ian Hardacre since October 2001; Alan Mannik since December 2010; Jason Whiting since April 2012
Code: Front-end: AIM4313; low-load: AIM4315; DSC: AIM4311
Minimum investment: $500
See the Fundata Fund Snapshot for more details.
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 and Mutual Fund and ETF Update, 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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