Dynamic Focus+ Resource

Analysis: With industry heavyweight Ned Goodman at the helm, investors can rest assured that they have a quality manager behind their fund. Mr. Goodman uses what is called a “patient and common sense approach” to investing, focusing on the long term business prospects of a resource company, rather than the short term stock market prospects.

Over the long term, this approach has paid off. For the 10 years ending February 29, the fund returned 20% per year, handily outpacing the index and leaving all of its competitors, with the exception of the Front Street Special Opportunities Fund in the dust. The short term numbers are less impressive, with a 1 year loss of 12.3%. When the fund wins, it tends to win BIG. For example, in 2009, the average return of all resource funds in Canada was a staggering 61%. This fund blew the doors off of that with a mind blowing 113%.

With numbers like that, it is obvious that this is a volatile fund. The monthly standard deviation is above the category average. The manager states that they are patient in managing the fund and portfolio turnover numbers would back up this statement. For the most recent five year period, the average portfolio turnover has been less than 50%, which is low for a typical sector fund.

From a portfolio positioning standpoint, the fund tends to be relatively concentrated, despite holding more than 100 names. The manager takes big bets on the stocks he likes, with the top 10 names making up roughly 40% of the fund. As of February 29, the fund held 11% cash, had 30% in gold stocks, 28% energy and 19% in metals. This represents an overweight position to materials and an underweight exposure to energy.

While the performance of this fund has been very strong over the long term, the biggest risk that we see going forward is key person and manager risk. While there are several capable managers at Dynamic / GCIC who can step up to manage the fund, the departure of Mr. Goodman will have a meaningful impact on the fund.

We see this as a good fund for high risk investors looking for resource exposure in their portfolios. For investors who are not as comfortable with the higher volatility of this fund may want to consider a fund such as the CI Signature Canadian Resource Fund, or the AGF Global Resources Class Fund, both of which are solid offerings with lower levels of volatility. Regardless, exposure within a well diversified portfolio should be capped in the 10% range for higher risk investors.