Resilience in 2020: FundGrade A+® Award winners

02-17-2021
Resilience in 2020: FundGrade A+® Award winners

Superior performance in the face of adversity

 

Every year, Fundata hosts an “Evening of Excellence” to acknowledge those Canadian investment funds that have maintained an exceptional performance rating over the entire previous calendar year. Because of pandemic-related restrictions on gatherings, Fundata instead held a virtual Celebration of Excellence on Jan. 22 this year to honour winners of the 2020 FundGrade A+ Awards. In total, there were 347 award winners in 2020, including 185 mutual funds, 55 ETFs, 104 segregated funds, and 3 Responsible Investing funds.

The FundGrade methodology incorporates up to 10 years of performance history to rank funds within their categories as set out by the Canadian Investment Funds Standards Committee (CIFSC). However, short-term performance, especially during periods of high volatility, can have a big impact on longer-term performance. So this year’s results were heavily influenced by how funds performed during the selloff in early 2020 and the subsequent recovery. Funds that were able to navigate this challenging year most effectively had a much better chance of earning an A+ award. Let’s look at some of this year’s winners.

Fidelity Global Innovators Class is a first time A+ Award winner. The fund is managed by Mark Schmehl and invests globally across developed and emerging markets, looking for “innovative and disruptive companies.” Top holdings include Square Inc., Roku Inc., and Tesla Inc. Over 80% of the portfolio is invested in U.S. equities and about a quarter of the fund is invested in the technology space.

The fund debuted in November 2017, making 2020 its first year of eligibility for the A+ Award. It is a first-quartile fund over the past 3 years and is the eleventh-best-performing commission-based fund in the Global Equity category, which includes close to 1,000 eligible funds. Yet despite this outstanding performance, this fund is not for the faint of heart. The 3-year standard deviation sits at 23%, well above the category average of 14%. This volatility was on full display over the past 12 months. From Feb. 19 until March 16, this fund lost close to 30% of its value, only to rally 135% the rest of the year, finishing 2020 up 92%.

Fidelity Global Innovators Class has a risk rating of Medium to High and a B series MER of 2.3%

Desjardins Overseas Equity Growth Fund is a 2020 A+ Award winner adding to its A+ Award in 2018. Managed by Desjardins Global Asset Management Inc., this fund was launched in March 2010 and is sub-advised by Baillie Gifford Overseas Ltd. They use a bottom-up stock selection approach and look for companies that are growing both earnings and cash flows. About half of the portfolio is invested in European equities and 30% in Asian equities. Technology is the largest sector exposure at close to 30%.

Despite this being only its second A+ Award, this fund is the top-ranked commission based International Equity fund over 10 years, with an average annual compounded rate of return of 14.9%. However, the fund is also highly volatile. Its 3-year standard deviation of more than 17% is much higher than the category average, which is less than 14%. Yet despite the higher volatility, the fund had a smaller drawdown in 2020 than the average International Equity fund. From Feb. 12 to March 16, it fell over 21%, faring much better than its peers, which lost an average of 27%. And for the remainder of the year, Desjardins Overseas Equity Growth Fund gained 105%, finishing 2020 up over 95%.

This fund is rated Medium risk and the A series has an MER of 2.38%.

NBI Quebec Growth Fund has now won the A+ Award for seven consecutive years. The fund is managed by Marc Lecavalier of Fiera Capital Corp. It invests primarily in companies whose head office is in Quebec or who do a substantial part of their business in Quebec. Top holdings include WSP Global Inc., GDI Integrated Facility Services Inc., and Richelieu Hardware Ltd.

The fund debuted in July 1999 and has consistently been one of the top-ranked funds in the Canadian Small/Mid Cap Equity category. Its 10-year average annual compounded rate of return of 12.8 % is almost double the category average. And although this fund is generally less volatile than the category average, its drawdown in 2020 was slightly more. From Feb. 6 to March 23, this fund lost over 39%, compared with the average Canadian Small/Mid Cap Equity fund loss of 35%. But the NBI Quebec Growth Fund bounced back and gained 80% the rest of the year to finish 2020 up 15%.

This fund has a Medium risk rating and an Advisor series MER of 2.52%.

Brian Bridger, CFA, FRM, is Senior Vice President, Analytics & Data, at Fundata Canada Inc. and is a member of the Canadian Investment Funds Standards Committee.

Notes and Disclaimers

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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 tax advice.