| Fund Company | CIBC Securities Inc. |
| Fund Type | Real Estate Equity |
| Rating | $$$ |
| Style | Bottom Up Growth |
| Risk Level | High |
| Load Status | No Load |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Charles Dillingham since September 1997 |
| MER | 2.96% |
| Code | CIB 506 – No load units |
| Minimum Investment | $500 |
Analysis: Many view real estate as an attractive asset class that can provide diversification within a portfolio due to its relatively low correlation to the equity markets. With real estate funds however, the diversification benefits may not be quite as high as many expect given that most will have significant holdings in REITs, which are often traded on the equity markets. Because of this, the correlation benefits may not be as high as investors may anticipate.
One such fund in the CIBC Canadian Real Estate Fund which invests in a mix of REITs and real estate operating companies. Managed by Charles Dillingham of Morguard Investments since 1997, the fund invests in undervalued securities. The process is very much a bottom up approach that analyzes the quality of the properties and the track record of management.
It is heavily invested in REITs. As of June 30, 63% was held in REITs, 15% in operating companies, 8% in cash, with the balance in other equities. The portfolio is concentrated, holding 43 names with the top ten making up more than half of the fund. It is also very Canada focused, with only 21% invested outside our borders.
Performance has been strong, gaining an annualized 9.85% for the 10 years ending July 31, outpacing broader equities by a significant margin. Many believe that real estate is less volatile than the markets, and while in some cases that may be true, it is not with this fund, which has shown a level of volatility that is in line with the broader market. The historic argument for real estate was that it was countercyclical to equities. While this may be true for standalone real estate, it is not the case with this fund. During the 2008 crisis, it lost nearly 40%, a larger drop than the S&P/TSX Composite, which lost 33%.
Unlike many other real estate funds, this one does not pay a regular monthly distribution. It is also very expensive, with an MER of 2.96%, which is well above the category average and most Canadian equity funds.
We believe that this fund is a good option for investors looking for exposure to the real estate sector in Canada. That said, it is not our top pick in the real estate category. Despite the stronger absolute performance, we favour the Sentry REIT Fund. We like its manager, the higher yield of the underlying portfolio and its lower cost.