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Analysis: If you are not familiar with this small fund it’s worth your time to find out about it. It was a closed-end fund until May 2011 but it is now a regular mutual fund with an initial investment requirement of only $500. The numbers it has been posting are eye-popping, to say the least. As of mid-October, the A units had gained an astonishing 25.5% for 2011, making the fund far and away the top performer in the North American Equity category. That came on top of profits of 18.3% in 2010 and 36.1% in 2009, all first quartile finishes.
This fund wasn’t always a winner. In fact, it was something of a dog in its early years and posted three consecutive years of double-digit losses from 2006 to 2008. But since then it has been shooting out the lights and it is now available to all fund investors.
The mandate is to invest in a diversified portfolio of North American stocks and manager Jeff Burchell also has leeway to take short positions if the situation warrants. The company clearly states in its marketing materials that the fund will not track the TSX or any other index and the composition of the portfolio confirms that. As of July 22 (the latest date for which the company had posted data at the time of this review), the number one holding was SunCoke Energy, North America’s leading producer of metallurgical coke. Other large positions included Macy’s Inc., Express Inc., Sysco Corp., and Crocs Inc. But by far the biggest single holding was cash at 56% of total assets. Clearly, Mr. Burchell was hunkering down and waiting for the market slide to bring opportunities.
Despite this defensive posture, the company warns that this fund is only suitable for investors who can handle the ups and downs of the stock market. It rates the risk level as medium but based on past history, including a loss of 45.5% in the 12 months ending March 31/09, we rate it as high.
One other point worth noting: unlike most equity funds, this one pays monthly distributions that have recently been running at $0.0458 per unit. So it’s a suitable choice for those who want steady cash flow.
Fund units are available on a front-end load basis (maximum 5% commission) or low-load DSC, starting at 3%. There are also F units and corporate class units.