| Fund Company | Dynamic Funds |
| Fund Type | U.S. Equity |
| Rating | D |
| Style | Larch Cap Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | David Fingold since September 2005 |
| MER | 2.45% |
| Code | DYN 041 – Front End Units DYN 741 – DSC Units |
| Minimum Investment | $500 |
Analysis: Manager David Fingold takes a fundamentally driven, bottom up value focused approach to securities selection, buying stocks trading at a significant discount to their intrinsic value and selling when they become fully priced. The portfolio is quite concentrated, typically holding about 30 names and he places large bets on stocks he likes. As of November 30, the top 10 holdings make up 36% of the fund.
The manager has a flexible cap structure, meaning that he can invest in any size company – small caps, mid caps, or large caps – wherever the best opportunity for the fund lies. The fund is still small enough at $527 million where the manager can still take a meaningful position in a small or mid cap stock in the portfolio. However, for all practical purposes, the focus of the fund will be in the large cap names. Currency is tactically managed to help protect against the impact of a rising Canadian dollar.
The manager is very active, with portfolio turnover averaging more than 130% for the past five years. They are not afraid to use periods of elevated volatility as an opportunity to reposition the portfolio with attractively priced names.
The manager does a stellar job in managing volatility. The fund has delivered a level of volatility that is significantly below the category average and roughly in line with the benchmark.
While the long-term performance numbers have been strong, short-term numbers have lagged. Much of this can be attributed to the manager’s defensive positioning in late 2011 and early 2012. During that period, the fund held close to 40% in cash, which acted as a significant drag in a rising market environment. The fund was also underweight in healthcare and financials, two of the better performing sectors of the market. They have been adding to their healthcare positions of late. With the financials, they believe that there is far too much risk in the banks and insurers, and have instead been focusing on REITs.
Despite the short-term underperformance, we like this fund for the long term. The manager’s focus on managing volatility combined with his active management style lead us to believe that this fund will be a solid performer going forward. Like other conservative positioned funds we would expect that it would underperform in a sharply rising market, but believe that over the long term, it will deliver strong risk adjusted returns for investors.