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By Dave Paterson  | Wednesday, October 29, 2014


Although the Mawer Global Small Cap Fund debuted only in 2007, it has more than held its own, both when compared with the MSCI World Small Cap Index and its peer group. For the five years ending September 30, it has earned an annualized return of 19.5%, handily outpacing both the index and its peer group. As impressive as the returns have been, the results from Mawer’s emphasis on risk management have been even more so. The fund has a level of volatility that is lower than its peer group, while holding up very well when markets are in decline.

This is because the management team led by Paul Moroz uses a research-focused, bottom-up investment process that looks for companies with strong business models that earn a high return on capital, largely because of a sustainable competitive advantage. They also spend a great deal of time focusing on the company’s management. Once they have identified a potential investment candidate, they build out and stress-test financial models under a number of different scenarios. They are also careful to make sure that they are buying a company at a level that is well below their estimate of its true worth.

This approach has consistently delivered first-quartile performance in both calendar year and compounded annual returns, earning the fund a regular monthly Fundata FundGrade® "A" rating, as well as the Fundata FundGrade A+ Awards every year since 2011, when the A+ awards debuted.

The fund’s managers use the same portfolio management process that is used on other Mawer funds, so while the Global Small Cap Fund may not have as lengthy a track record as some of the other Mawer offerings, I am more than comforted by the fact that the same disciplined portfolio approach is used.

Like other Mawer funds, the Global Small Cap is dramatically different from its benchmark. At the end of September, it was overweight in technology and industrials, but neutral or underweight in most other sectors. The portfolio is well diversified, holding nearly 80 names, with the top 10 making up over a third of the fund. Because of this positioning, it is highly likely that the fund may experience period of time where its performance is disconnected from both the index and the peer group.

I don’t expect that the fund can continue to deliver the same level of absolute returns for investors. It was launched at a great time for small-cap stocks, and valuations have largely caught up to their large-cap brethren. Still, I expect this fund to continue delivering returns that outpace both the index and the peer group, and to do so with much less volatility over time, making it a great option for those investors looking for some global small-cap exposure within their portfolio.

Fund company: Mawer Investment Management
Fund type: Global Small/Mid Cap Equity
Fundata FundGrade Rating: A; FundGrade A+ Award 2011-13
Style: Blend
Risk level: Medium
Load status: No load
RRSP/RRIF suitability: Excellent
TFSA suitability: Excellent
Manager: Paul Moroz since October 2007
MER: 1.78%
Code: MAW150 (no load)
Minimum investment: $5,000

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.

Notes and Disclaimer

© 2014 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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