| Fund Company | RBC Global Asset Management Inc. |
| Fund Type | Canadian Focused Equity |
| Rating | $ – Mutual Fund Update F – Paterson |
| Style | Value / Growth Blend |
| Risk Level | Medium |
| Load Status | Optional front or back-end load |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | James O’Shaughnessy – since inception (1997) |
| MER | 1.52% |
| Code | RBF 550 |
| Minimum Investment | $500 |
Analysis: Like the other O’Shaughnessy Funds, the RBC O’Shaughnessy Canadian Equity Fund uses a quantitatively driven stock selection process that is highlighted in the manager’s book “What works on Wall Street”. Essentially the manager employs various screens looking for stocks that have a history of above average sales, above average trading value and above average cash flow. The manager will then pick the highest ranked 50 stocks for inclusion in the portfolio on an equally weighted basis. The screens are run several times a year, with the end portfolio being made up of between 150 and 200 stocks. The Fund will be fully invested at all times.
The focus of the fund is inCanadahowever the manager does have the ability to invest inU.S.and international equities. Any foreign exposure will be hedged back to Canadian dollar terms, which will help boost returns in periods of rising currency and hurt returns in a declining currency relative to funds which do not hedge their currency exposure.
The Fund was reopened to new investors in November 2009, after having been closed in January 2007.
While we like the transparency of the process and the fund’s relatively low MER, the fund’s performance simply does not justify recommending it to investors. As of September 30, the fund had a 1 year return of -7.6%, while during the same period, the S&P/TSX Composite Total Return Index (which includes reinvested dividends) returned -3.6%.
For investors who are seeking a fundamental index type of product such as this, they may want to consider the Claymore Canadian Fundamental Index ETF if they purchase ETF products, or if they wish to stay within a mutual fund product, the PowerShares FTSE RAFI Canadian Fundamental Index Class A. Both of these funds offer a similar product with relatively low costs, yet with better risk adjusted performance.