| Fund Company | CI Investments Inc. |
| Fund Type | U.S. Equity |
| Rating | F |
| Style | Large Cap Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | William Priest since August 2002 David Pearl since August 2002 |
| MER | 2.42% |
| Code | CIG 7500 – Front End Units CIB 7505 – DSC Units |
| Minimum Investment | $500 |
Analysis: If you were to only judge this fund by its 2012 performance, it would be very difficult to make a case for including it in any portfolio. For the year, it gained 7.3% compared with the S&P 500, which gained 13.2%. But despite this underperformance, we believe that the managers are following a very sound investment process that will reward investors over the long term.
While the fund may be called the CI American Value Fund, the managers follow a more blended approach. Rather than focusing on valuation relative to growth prospects, they focus on companies that can maximize shareholder yield. This includes dividends, share buybacks and debt repayment. They look for companies with management teams that have a history of generating consistent free cash flow, and have shown that they can use that cash flow for the benefit of the shareholders.
With this emphasis on cash flow and shareholder yield, it is not surprising to see the portfolio made up of such well known blue chips such as Apple, Microsoft and Abbott Labs. In looking at the current environment, they believe that those companies that can maximize shareholder yield will outperform in the future. They don’t believe that the current environment is conducive to multiple expansion, which means that any share returns must be driven by strong company fundamentals.
While the short term performance has been disappointing, the longer term numbers are considerably more encouraging. For the ten years ending January 31, the fund has gained 4.1%, outpacing not only the majority of its peer group, but also the S&P 500. The firm’s investment approach has resulted in a portfolio that has exhibited significantly lower volatility than the peer group, and is comparable to that of the index.
Epoch Investment Partners, the management group running the fund was recently acquired by rival TD Bank. While both CI and TD have said that it is business as usual, it is possible that the CI may make a manager change in the future. Should this occur, we will reevaluate our opinion of the fund. In the interim, we do believe that this can be a solid core US equity fund for most investors. However, more cost conscious investors may want to look at a lower cost index fund or ETF, which will provide comparable exposure at a lower cost.