| Fund Company | Dynamic Mutual Funds |
| Fund Type | Real Estate Equity |
| Rating | $$$ |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Oscar Belaiche since January 1999 Tom Dicker since April 2011 |
| MER | 2.46% |
| Code | DYN 085 – Front End Units DYN 785 – DSC Units DYN 685 – Low Load Units |
| Minimum Investment | $500 |
Analysis: This fund, which until December 2009 was known as the Dynamic Focus+ Real Estate Fund is one of our favourite picks in the real estate sector. Managed by the team of Oscar Belaiche and Tom Dicker, it invests in REITs and other companies that are actively involved in the real estate. They look for “best in class” businesses that have strong balance sheets, are industry leaders, and have management teams that hold a significant ownership stake in the business. The investment philosophy tilts towards value using their “Quality at a Reasonable Price” process.
The portfolio has a go anywhere mandate, but is currently heavily invested in North America. As of April 30, the fund’s Canadian holdings were just under 63%, while the U.S. was 25%. It invests quite heavily in REITs, which made up 62% of the fund, while Canadian equities made up 21%. The portfolio is concentrated, holding approximately 60 names with the top 10 making up about half the fund. The manager has been very active in implementing their strategy of late, with portfolio turnover well in excess of 100% per year. The fund, with its 2.46% MER is one of the lowest in the category.
The fund has performed well, on both an absolute and relative basis. For the ten year period ending April 30, the fund has gained 8.45% per year, which has outpaced the Dow Jones Global Select Real Estate Index’s 5.68% gain, quite handily. The absolute numbers aren’t as impressive for the past five year, gaining 0.18%, which was much better than the loss of 5.4% that was posted by the benchmark.
Looking ahead, the managers have recently stated that they are fairly bullish on the Canadian real estate sector for the next year or so. They believe that the low interest rate environment, combined with investors’ insatiable appetite for yield will help boost the sector. However, given real estate’s reliance on financing, any fallout from Europe’s debt crisis or a slowdown in China that slows credit availability in Canada has the potential to hurt this fund.
The fund’s volatility profile is one of the lowest in the category, making it a good choice for investors who are looking for real estate exposure in their portfolio. Given the narrowness of the sector exposure, we would suggest that investors keep their exposure modest, with 10% being our recommended maximum for high risk investors, and adjusted down for more conservative investors.